<PAGE>
MARKED TO INDICATE CHANGES FROM PEA #42
As filed with the Securities and Exchange Commission on January 3, 1997
- --------------------------------------------------------------------------------
Investment Company Act of 1940 File No. 811-5683
Securities Act File No. 33-25355
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 43 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 45 /X/
--------------
UAM FUNDS, INC.
(FORMERLY THE REGIS FUND, INC.)
(Exact Name of Registrant as Specified in Charter)
One International Place, Boston, MA 02110
(Address of Principal Executive Office)
Registrant's Telephone Number (617) 330-8900
Karl O. Hartmann, Assistant Secretary
c/o Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
--------------
Copy to:
Audrey C. Talley, Esq.
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
--------------
It is proposed that this filing become effective:
(check appropriate box)
[X] immediately upon filing pursuant to Paragraph (b)
[ ] on (date) pursuant to Paragraph (b)
[ ] 60 days after filing pursuant to Paragraph (a)
[ ] 75 days after filing pursuant to Paragraph (a)
[ ] on (date) pursuant to Paragraph (a) of Rule 485
Registrant has previously elected to and hereby continues its election to
register an indefinite number of shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant filed its Rule 24f-2
Notice for the fiscal year ended October 31, 1996 on December 27, 1996.
<PAGE>
UAM FUNDS, INC.
(FORMERLY THE REGIS FUND, INC.)
CROSS REFERENCE SHEET
FILE NOS. 33-25355/811-5683
<TABLE>
<CAPTION>
PART A OF FORM N-1A LOCATION IN PROSPECTUS
- ------------------- ----------------------
<S> <C> <C>
Item 1. Cover Page............................................... Cover Page
Item 2. Synopsis................................................. Fund Expenses; Prospectus Summary
Item 3. Condensed Financial Information.......................... Financial Highlights
Item 4. General Description of Registrant........................ Prospectus Summary; Investment
Objectives; Investment Policies; Other
Investment Policies; Investment Limitations
Item 5. Management of the Fund................................... Investment Adviser; Administrative
Services; Distributor; Portfolio Transactions
Item 5A. Management's Discussion
of Fund Performance...................................... Included in the Registrant's Annual
Report to Shareholders dated October 31,
1996
Item 6. Capital Stock and Other Securities....................... Purchase of Shares; Redemption of Shares;
Valuation of Shares; Dividends, Capital
Gains Distributions and Taxes; General
Information
Item 7. Purchase of Securities
Being Offered............................................ Cover Page; Purchase of Shares
Item 8. Redemption or Repurchase................................. Redemption of Shares
Item 9. Pending Legal Proceedings................................ Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B OF FORM N-1A LOCATION IN STATEMENT
- ------------------- OF ADDITIONAL INFORMATION
-------------------------
<S> <C> <C>
Item 10. Cover Page........................................... Cover Page
Item 11. Table of Contents.................................... Cover Page
Item 12. General Information and History...................... General Information
Item 13. Investment Objective and Policies.................... Investment Objective and Policies; Investment Limitations
Item 14. Management of the Fund............................... Management of the Fund; Investment Adviser
Item 15. Control Persons and Principal
Holders of Securities................................ Management of the Fund
Item 16. Investment Advisory and
Other Services....................................... Investment Adviser
Item 17. Brokerage Allocation and
Other Practices...................................... Portfolio Transactions
Item 18. Capital Stock and Other
Securities........................................... General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered.......................... Purchase of Shares; Redemption of Shares
Item 20. Tax Status........................................... General Information
Item 21. Underwriters......................................... Not Applicable
Item 22. Calculation of Performance Data...................... Performance Calculations
Item 23. Financial Statements................................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item so numbered in Part C to this Registration Statement.
<PAGE>
UAM FUNDS, INC.
(FORMERLY THE REGIS FUND, INC.)
POST-EFFECTIVE AMENDMENT NO. 43
PART A
The following Prospectuses are included in this Post-Effective Amendment No. 43
. Acadian Portfolios Institutional Class Shares
. C & B Equity, C & B Balanced, C & B Equity Portfolio for Taxable
Investors, and C & B Mid Cap Equity Portfolios Institutional Class
Shares
. DSI Portfolios Institutional Class Shares
. DSI Disciplined Value Portfolio Institutional Service Class Shares
. FMA Small Company Portfolio Institutional Class Shares
. FMA Small Company Portfolio Institutional Service Class Shares
. ICM Fixed Income Portfolio Institutional Class Shares
. ICM Equity and ICM Small Company Portfolios Institutional Class Shares
. McKee Portfolios Institutional Class Shares
. NWQ Portfolios Institutional Class Shares
. NWQ Portfolios Institutional Service Class Shares
. Rice, Hall, James Portfolios Institutional Class Shares
. SAMI Preferred Stock Income Portfolio Institutional Class Shares
. Sirach Portfolios Institutional Class Shares
. Sirach Portfolios Institutional Service Class Shares
. Sterling Partners' Portfolios Institutional Class Shares
. Sterling Partners' Portfolios Institutional Service Class Shares
. TS&W Portfolios Institutional Class Shares
The following Prospectus is also incorporated herein by reference to Post-
Effective Amendment No. 25 filed on December 23, 1993:
. Cambiar Anticipation Portfolio Institutional Class Shares (This
Portfolio and class of shares is not yet operational.)
The following Prospectus is also incorporated herein by reference to Post-
Effective Amendment No. 21 filed on August 30, 1993:
. HJMC Equity Portfolio Institutional Class Shares (This Portfolio and
class of shares is not yet operational.)
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
Acadian Emerging
Markets Portfolio
&
Acadian International
Equity Portfolio
Institutional
Class Shares
P R O S P E C T U S
January 3, 1997
<PAGE>
LOGO
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
ACADIAN EMERGING MARKETS PORTFOLIO &
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: ACADIAN ASSET MANAGEMENT, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company,
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios") each of which has different investment objectives and policies.
The Acadian Portfolios currently offer only one class of shares. The securi-
ties offered in this Prospectus are Institutional Class Shares of two no-load
Portfolios of the Fund managed by Acadian Asset Management, Inc.: the Acadian
Emerging Markets Portfolio, a non-diversified Portfolio and the Acadian Inter-
national Equity Portfolio, a diversified Portfolio.
ACADIAN EMERGING MARKETS PORTFOLIO. The objective of the Acadian Emerging
Markets Portfolio (the "Emerging Markets Portfolio") is to seek long-term cap-
ital appreciation by investing primarily in common stocks of emerging country
issuers.
Investment in emerging country and emerging market equity securities in-
volves certain risk considerations which are not normally involved in invest-
ment in securities of U.S. companies.
ACADIAN INTERNATIONAL EQUITY PORTFOLIO. The objective of the Acadian Inter-
national Equity Portfolio (the "International Equity Portfolio") is to provide
maximum long-term total return consistent with reasonable risk to principal
that is superior over the long term to the performance of the Benchmark Index
(Morgan Stanley Capital International Index for Europe, Australia and the Far
East or "EAFE") by investing in a diversified portfolio of equity securities
of primarily non-United States issuers.
There can be no assurance that either Portfolio will meet its stated objec-
tive.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" (SAI)
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI,
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECU-RITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-TRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fund Expenses............................................................... 1
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 4
Financial Highlights........................................................ 5
Investment Objectives....................................................... 7
Investment Policies......................................................... 7
Other Investment Policies................................................... 18
Investment Limitations...................................................... 23
Purchase of Shares.......................................................... 24
Redemption of Shares........................................................ 27
Shareholder Services........................................................ 29
Valuation of Shares......................................................... 29
Performance Calculations.................................................... 30
Dividends, Capital Gains Distributions and Taxes............................ 31
Investment Adviser.......................................................... 32
Administrative Services..................................................... 35
Distributor................................................................. 36
Portfolio Transactions...................................................... 36
General Information......................................................... 37
UAM Funds -- Institutional Class Shares..................................... 39
</TABLE>
<PAGE>
FUND EXPENSES
ACADIAN INSTITUTIONAL CLASS
The following table illustrates expenses and fees that a shareholder of the
Portfolios would incur. Transaction fees may be charged if a broker-dealer or
other financial intermediary deals with the Fund on your behalf. (See "PUR-
CHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
EMERGING INT'L
MARKETS EQUITY
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Sales Load Imposed on Purchases.......................... NONE NONE
Sales Load Imposed on Reinvested Dividends............... NONE NONE
Deferred Sales Load...................................... NONE NONE
Redemption Fees.......................................... 1%* 1%*
Exchange Fees............................................ NONE NONE
</TABLE>
- -----------
* A 1% redemption fee is charged on shares held less than 90 days.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
EMERGING INT'L
MARKETS EQUITY
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Investment Advisory Fees........................... 1.00 % 0.75 %*
Administrative Fees................................ 0.21 % 0.79 %
12b-l Fees......................................... NONE NONE
Distribution Costs................................. NONE NONE
Other Expenses..................................... 0.60 % 0.75 %
Advisory Fees Waived and Expenses Assumed.......... 0.00% (1.29)%
Total Operating Expenses (After Fee Waiver and
Expenses Assumed)................................ 1.81 %+ 1.00 %**+
</TABLE>
- -----------
* The Adviser's fee is as follows: 0.75% for the first $50 million in net as-
sets, 0.65% for the next $50 million, 0.50% for the next $100 million and
0.40% over $200 million.
** Absent fee waivers and expenses assumed by the Adviser, annualized Total
Operating Expenses of the International Equity Portfolio for the fiscal
year ended October 31, 1996 would have been 2.29%.
+ The Total Operating Expenses includes the effect of expense offsets. If ex-
pense offsets were excluded, Total Operating Expenses of the Emerging Mar-
kets and International Equity Portfolios would be 1.81% and 1.01%, respec-
tively.
1
<PAGE>
This table shows the various expenses and fees an investor would bear di-
rectly or indirectly. The expenses and fees set forth above are based on the
Portfolios' operations during the fiscal year ended October 31, 1996, except
that Advisory Fees Waived and Expenses Assumed have been restated to reflect
the Portfolios' current expense caps and Administrative Fees have been re-
stated to reflect current fees. (See "ADMINISTRATIVE SERVICES" herein and in
the SAI.)
The Adviser has agreed to waive all or part of its advisory fee and to as-
sume expenses otherwise payable by the Portfolios to reduce operating expenses
for the Emerging Markets Portfolio to keep total annual operating expenses
from exceeding 2.5% of average daily net assets. Effective January 1, 1996 un-
til further notice, the Adviser has voluntarily agreed to waive all or part of
its advisory fee and to assume operating expenses to keep the International
Equity Portfolio's total annual operating expenses from exceeding 1.00% of its
average daily net assets. The Fund will not reimburse the Adviser for advisory
fees waived or expenses that the Adviser may bear on behalf of the Portfolios
for a given fiscal year.
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio................... $19 $57 $99 $214
International Equity Portfolio............... $10 $32 $55 $123
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Acadian Asset Management, Inc. (the "Adviser"), an investment counseling
firm founded in 1986, serves as investment adviser to the Fund's Acadian
Emerging Markets Portfolio and the Acadian International Equity Portfolio. The
Adviser presently manages approximately $3 billion in assets for primarily in-
stitutional clients. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of the Portfolios are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment for each Portfolio is $100,000. The minimum for
subsequent investments is $1,000. Certain exceptions to the initial and mini-
mum investment amounts may be made by the officers of the Fund. (See "PURCHASE
OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in the form of annual dividends. Any realized net capital gains
will also be distributed annually. Distributions will be reinvested in the
Portfolios' shares automatically unless an investor elects to receive cash
distributions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time at the net asset value
of the Portfolio next determined after receipt of the redemption request.
Shares held 90 days or more may be redeemed without cost. Shares held less
than 90 days will be subject to a 1% redemption fee which is retained by the
Fund for the benefit of the remaining shareholders and is intended to encour-
age long-term investment in the Portfolios, to avoid transaction and other ex-
penses caused by early redemption and to facilitate portfolio management. The
redemption price may be more or less than the purchase price. (See "REDEMPTION
OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares will fluctuate in response to changes in
market and economic conditions as well as the financial conditions and pros-
pects of the issuers in which the Portfolios invest. Prospective investors
should consider the following: (1) The Portfolios will invest in foreign secu-
rities which may involve greater risks than investing in domestic securities
such as foreign currency risks. (See "FOREIGN INVESTMENTS"); (2) The Emerging
Markets Portfolio may invest in securities rated lower than Baa by Moody's In-
vestor Services, Inc. or BBB by Standard & Poor's Corporation. These securi-
ties carry a high degree of credit risk, are considered speculative by the ma-
jor credit rating agencies, and are sometimes referred to as "junk bonds". The
International Equity Portfolio may not buy junk bonds but may hold previously
higher rated bonds which are downgraded after purchase by the Portfolio, if
the Adviser believes it advisable. (See "INVESTMENT POLICIES"); (3) The Port-
folios may engage in various strategies to seek to hedge their investments
against movements in the equity markets, interest rates and currency exchange
rates by using derivative instruments and transactions, such as foreign cur-
rency exchange contracts, options, futures contracts and options, and swap
transactions. Such hedging strategies may be unsuccessful. Options and futures
transactions in foreign markets are also subject to the risk factors associ-
ated with foreign investments generally. There can be no assurance that a liq-
uid secondary market for options and futures contracts will exist at any spe-
cific time. (See "INVESTMENT POLICIES"); (4) The Emerging Markets Portfolio is
"non-diversified" for purposes of the Investment Company Act of 1940, as
amended (the "1940 Act"), meaning that it may invest more than 5% of its as-
sets in the securities of one or more issuers. (See "INVESTMENT POLICIES");
(5) In general, the Portfolios will not trade for short-term profits, but when
circumstances warrant, investments may be sold without regard to the length of
time held. High rates of portfolio turnover may result in additional transac-
tion costs and the realization of capital gains. (See "INVESTMENT POLICIES");
(6) The Portfolios may use various investment practices that involve special
considerations, including investing in repurchase agreements, when-issued,
forward delivery and delayed settlement securities and lending of securities.
(See "OTHER INVESTMENT POLICIES")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide selected per share information for a share out-
standing throughout the periods presented for the Portfolios. The tables are
part of the Portfolios' Financial Statements, which are included in the Port-
folios' 1996 Annual Reports to Shareholders. The Financial Statements are in-
corporated into the Portfolios' SAI. The Portfolios' Financial Statements have
been audited by Price Waterhouse LLP. Their unqualified opinion on the Finan-
cial Statements is also incorporated into the Portfolios' SAI. Please read the
following information in conjunction with the Portfolios' 1996 Annual Reports
to Shareholders.
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
MARCH 29, 1993** YEARS ENDED
TO OCTOBER 31,
OCTOBER 31, -------------------------
1993 1994 1995 1996
---------------- ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $10.00 $11.77 $12.37 $ 11.54
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss............... (0.04) (0.04) (0.01) 0.17
Net Realized and Unrealized Gain
(Loss)........................... 1.81 0.95 (0.56) 1.44
Total from Investment Operations.. 1.77 0.91 (0.57) 1.61
DISTRIBUTIONS:
Net Realized Gain................. -- (0.31) (0.26) (0.21)
Net Asset Value, End of Period.... $11.77 $12.37 $11.54 $ 12.94
TOTAL RETURN+...................... 17.70% 8.02% (4.58)% 14.13%
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD
(THOUSANDS)....................... $2,264 $2,427 $2,475 $17,079
Ratio of Expenses to Average Net
Assets........................... 2.50%* 2.50% 2.54%# 1.06%
Ratio of Net Investment Income
(Loss) to Average Net Assets..... (0.76)%* (0.38)% (0.11)% 1.87%
Portfolio Turnover Rate........... 44% 56% 76% 80%
Average Commission Rate#.......... N/A N/A N/A $0.0043
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per
Share............................ $ 0.14 $ 0.21 $ 0.46 $ 0.11
Ratio of Expenses to Average Net
Assets Including Expense
Offsets.......................... N/A N/A 2.50% 1.05%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain fees not been waived and ex-
penses assumed by the Adviser during the periods.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
JUNE 17, 1993** YEARS ENDED
TO OCTOBER 31,
OCTOBER 31, ----------------------------
1993 1994 1995 1996
--------------- ------ ------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $10.00 $11.34 $ 14.00 $ 11.23
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).... (0.01) (0.03) 0.05 0.13
Net Realized and Unrealized Gain
(Loss)......................... 1.35 2.74 (2.82) 0.84
Total from Investment
Operations..................... 1.34 2.71 (2.77) 0.97
DISTRIBUTIONS:
Net Investment Income........... -- -- -- (0.02)
Net Realized Gain............... -- (0.05) -- (0.06)
Total Distributions............. -- (0.05) -- (0.08)
Net Asset Value, End of Period... $11.34 $14.00 $ 11.23 $ 12.12
TOTAL RETURN..................... 13.40 %+ 23.97 %+ (19.79)%+ 8.72%
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).................... $3,927 $5,558 $33,944 $69,649
Ratio of Expenses to Average Net
Assets ........................ 2.43 %* 2.07 % 1.78 % 1.79%
Ratio of Net Investment Income
(Loss) to Average Net Assets .. (0.37)%* (0.25)% 0.86 % 1.29%
Portfolio Turnover Rate......... 2 % 9 % 21 % 11%
Average Commission Rate # ....... N/A N/A N/A $0.0004
Voluntary Waived Fees and
Expenses Assumed by the Adviser
Per Share....................... $ 0.04 $ 0.12 $ 0.02 N/A
Ratio of Expenses to Average Net
Assets Including Expense
Offsets......................... N/A N/A 1.77% 1.79%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
6
<PAGE>
INVESTMENT OBJECTIVES
EMERGING MARKETS PORTFOLIO. The objective of the Emerging Markets Portfolio
is to seek long-term capital appreciation by investing primarily in common
stocks of emerging country issuers.
INTERNATIONAL EQUITY PORTFOLIO. The objective of the International Equity
Portfolio is to provide maximum long-term total return consistent with reason-
able risk to principal that is superior over the long term to the performance
of the Benchmark Index (Morgan Stanley Capital International Index for Europe,
Australia and the Far East or "EAFE") by investing in a diversified portfolio
of equity securities of primarily non-United States issuers.
THE INVESTMENT OBJECTIVES OF EACH PORTFOLIO ARE FUNDAMENTAL AND MAY NOT BE
CHANGED WITHOUT SHAREHOLDER APPROVAL. THERE CAN BE NO ASSURANCE THAT A PORTFO-
LIO WILL ACHIEVE ITS STATED OBJECTIVE.
INVESTMENT POLICIES
EMERGING MARKETS PORTFOLIO. The Portfolio seeks to achieve its investment
objective by investing primarily in common stocks of emerging country issuers.
Common stocks for this purpose include common stock and equivalents, such as
securities convertible to common stocks and securities having common stock
characteristics, such as rights and warrants to purchase common stocks. Under
normal conditions, at least 65% of the Portfolio's total assets will be in-
vested in emerging country equity securities. As used in this Prospectus, the
term "emerging country" applies to any country which, in the opinion of the
Adviser, is generally considered to be an emerging or developing country by
the international financial community, including the International Bank for
Reconstruction and Development (the World Bank) and the International Finance
Corporation. There are over 130 countries which, in the opinion of the Advis-
er, are generally considered to be emerging or developing countries by the in-
ternational financial community, approximately 40 of which currently have
stock markets. These countries generally include every nation in the world ex-
cept the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western Europe. Investing in many emerging countries is not feasi-
ble or may involve unacceptable political risks. The Portfolio will focus its
investments on those emerging market countries in which it believes the econo-
mies are developing and in which the markets are becoming more sophisticated.
The Portfolio intends to invest primarily in some or all of the following
countries:
7
<PAGE>
Argentina Ireland Poland
Botswana Jamaica Portugal
Brazil Jordan Singapore
Chile Kenya South Africa
China Korea Sri Lanka
Colombia Luxembourg Taiwan
Czech Republic Malaysia Thailand
Egypt Mexico Turkey
Greece Nigeria Venezuela
Hungary Pakistan Zimbabwe
India Peru
Indonesia Philippines
The Portfolio will generally invest in a representative portfolio within
each country rather than attempting to predict the relative performance of one
security over another within each country. As markets in other countries
develop, the Portfolio expects to expand and further diversify the emerging
countries in which it invests. The Portfolio does not intend to invest in any
security in a country where the currency is not freely convertible to United
States dollars, unless the Portfolio has obtained the necessary governmental
licensing to convert such currency or other appropriately licensed or sanc-
tioned contractual guarantee to protect such investment against loss of that
currency's external value, or the Portfolio has a reasonable expectation at
the time the investment is made that such governmental licensing or other ap-
propriately licensed or sanctioned guarantee would be obtained or that the
currency in which the security is quoted would be freely convertible at the
time of any proposed sale of the security by the Portfolio.
An emerging country security is one issued by a company that, in the opinion
of the Adviser, has one or more of the following characteristics: (i) its
principal securities trading market is in an emerging country, (ii) alone or
on a consolidated basis it derives 50% or more of its annual revenue from ei-
ther goods produced, sales made or services performed in emerging countries,
or (iii) it is organized under the laws of, and has a principal office in, an
emerging country. The Adviser will base determinations as to eligibility on
publicly available information and inquiries made to the companies. (See "FOR-
EIGN INVESTMENTS").
To the extent that the Portfolio's assets are not invested in emerging coun-
try common stocks, the remainder of the assets may be invested in (i) debt se-
curities denominated in the currency of an emerging country or issued or guar-
anteed by an emerging country company or the government of an emerging coun-
try, (ii) equity or debt securities of corporate or governmental issuers lo-
cated in industrialized countries, and (iii) short-term and medium-term debt
securities of the type described below under "Temporary Investments."
The Portfolio's assets may be invested in debt securities when the Adviser
believes that such debt securities offer opportunities for long-term capital
apprecia-
8
<PAGE>
tion. In making such investment decisions, the Adviser considers, generally,
the relative potential for capital appreciation of equity securities, interest
rate levels, economic trends, currency trends and prospects, and, specifical-
ly, the prospects for appreciation of selected debt issues. It is likely that
many of the debt securities in which the Portfolio will invest will be
unrated, and whether or not rated, such securities may have speculative char-
acteristics. When deemed appropriate by the Adviser, the Portfolio may invest
up to 10% of its total assets (measured at the time of the investment) in
lower quality debt securities. Lower quality debt securities, also known as
"junk bonds," are often considered to be speculative and involve greater risk
of default or price changes due to changes in the issuer's creditworthiness.
The market prices of these securities may fluctuate more than those of higher
quality securities and may decline significantly in periods of general eco-
nomic difficulty, which may follow periods of rising interest rates. Securi-
ties in the lowest quality category may present the risk of default, or may be
in default. When economic or market conditions are such that the Adviser deems
a temporary defensive position to be appropriate, the Portfolio may invest
less than 65% of its total assets in emerging country equity securities in
which case the Portfolio may invest in other equity securities without regard
to whether they qualify as emerging country or emerging market equity securi-
ties or in debt securities of the kind described under "Temporary Investments"
below.
The Portfolio may invest directly in securities of emerging country issuers
through sponsored or unsponsored American Depositary Receipts ("ADRs"). ADRs
may not necessarily be denominated in the same currency as the underlying se-
curities into which they may be converted. In addition, the issuers of the
stock of unsponsored ADRs are not obligated to disclose material information
in the United States and, therefore, there may not be a correlation between
such information and the market value of the ADR.
The Portfolio intends to purchase and hold securities for long-term capital
appreciation and normally does not expect to trade for short-term gain. Ac-
cordingly, it is anticipated that the annual portfolio turnover rate normally
will not exceed 100%, although in any particular year, market conditions could
result in portfolio activity at a greater or lesser rate than anticipated. The
rate of portfolio turnover will not be a limiting factor when the Portfolio
deems it appropriate to purchase or sell securities. However, the U.S. federal
tax requirement that the Portfolio derive less than 30% of its gross income
from the sale or disposition of securities held less than three months may
limit the Portfolio's ability to dispose of its securities.
Investment Funds. Some emerging countries have laws and regulations that
currently preclude direct foreign investment in the securities of their compa-
nies. However, indirect foreign investment in the securities of companies
listed and traded on the stock exchanges in these countries is permitted by
certain emerging
9
<PAGE>
countries through investment funds which have been specifically authorized.
The Portfolio may invest in these investment funds subject to the provisions
of the 1940 Act and other applicable law as discussed below under "Investment
Restrictions." If the Portfolio invests in such investment funds, the Portfo-
lio's shareholders will bear not only their proportionate share of the ex-
penses of the Portfolio (including operating expenses and the fees of the Ad-
viser), but also will indirectly bear similar expenses of the underlying in-
vestment funds.
Forward Foreign Currency Exchange Contracts. The Portfolio may enter into
forward foreign currency exchange contracts. Forward foreign currency exchange
contracts provide for the purchase or sale of an amount of a specified foreign
currency at a future date. The general purpose of these contracts is both to
put currencies in place to settle trades and to generally protect the United
States dollar value of securities held by the Portfolio against exchange rate
fluctuation. While such forward contracts may limit losses to the Portfolio as
a result of exchange rate fluctuation, they will also limit any gains that may
otherwise have been realized. The Portfolio will enter into such contracts
only to protect against the effects of fluctuating rates of currency exchange
and exchange control regulations. (See "Investment Objectives and Policies--
Forward Foreign Currency Exchange Contracts" in the SAI).
Foreign Currency Futures Contracts and Options. As another means of reducing
the risks associated with investing in securities denominated in foreign cur-
rencies, the Portfolio may enter into contracts for the future acquisition or
delivery of foreign currencies and may purchase foreign currency options.
These investment techniques are designed primarily to hedge against antici-
pated future changes in currency prices which otherwise might adversely affect
the value of the Portfolio's portfolio securities. The Portfolio will incur
brokerage fees when it purchases or sells futures contracts or options, and it
will be required to maintain margin deposits. As set forth below, futures con-
tracts and options entail risks, but the Adviser believes that use of such
contracts and options may benefit the Portfolio by diminishing currency risks.
The Portfolio will not enter into any futures contract or option if immedi-
ately thereafter the value of all the foreign currencies underlying its
futures contracts and foreign currency options would exceed 10% of the value
of its total assets. In addition, the Portfolio may enter into a futures con-
tract only if immediately thereafter not more than 5% of its total assets are
required as deposit to secure obligations under such contracts.
Writing Covered Options. The Portfolio is authorized to write (i.e., sell)
covered call options on the securities in which it may invest and to enter
into closing purchase transactions with respect to certain of such options. A
covered call option is an option where the Portfolio in return for a premium
gives another party a right to buy specified securities owned by the Portfolio
at a specified future date and price set at the time of the contract.
10
<PAGE>
The Portfolio also may write covered put options which give the holder of
the option the right to sell the underlying security to the Portfolio at the
stated exercise price. The Portfolio maintains liquid securities with its Cus-
todian equal to or greater than the exercise price of the underlying security.
The Portfolio will receive a premium for writing a put option which increases
the Portfolio's return. The Portfolio will not write put options if the aggre-
gate value of the obligations underlying the put shall exceed 50% of the Port-
folio's net assets.
Purchasing Options. The Portfolio is authorized to purchase put options to
hedge against a decline in the market value of its securities. By buying a put
option the Portfolio has a right to sell the underlying security at the exer-
cise price, thus limiting the Portfolio's risk of loss through a decline in
the market value of the security until the put option expires. The Portfolio
will not purchase options on securities (including stock index options dis-
cussed below) if as a result of such purchase, the aggregate cost of all out-
standing options on securities held by the Portfolio would exceed 5% of the
market value of the Portfolio's total assets.
Stock Index Options and Futures. The Portfolio may engage in transactions in
stock index options and futures and related options on such futures. The Port-
folio may purchase or write put and call options on stock indices to hedge
against the risks of market-wide stock price movements in the securities in
which the Portfolio invests. Options on indices are similar to options on se-
curities except that on exercise or assignment, the parties to the contract
pay or receive an amount of cash equal to the difference between the closing
value of the index and the exercise price of the option times a specified mul-
tiple. The Portfolio may invest in stock index options based on a broad market
index, or based on a narrow index representing an industry or market segment.
The Portfolio may also purchase and sell stock index futures contracts
("futures contracts") as a hedge against adverse changes in the market value
of its portfolio securities as described below. A futures contract is an
agreement between two parties which obligates the purchaser of the futures
contract to buy and the seller of a futures contract to sell a security for a
set price on a future date. Unlike most other futures contracts, a stock index
futures contract does not require actual delivery of securities, but results
in cash settlement based upon the difference in value of the index between the
time the contract was entered into and the time of its settlement. The Portfo-
lio may effect transactions in stock index futures contracts in connection
with equity securities in which it invests.
The Portfolio may sell futures contracts in anticipation of or during a mar-
ket decline to attempt to offset the decrease in market value of the Portfo-
lio's securities that might otherwise result. When the Portfolio is not fully
invested in the securities markets and anticipates a significant market ad-
vance, it may purchase futures in
11
<PAGE>
order to gain rapid market exposure that may in part or entirely offset in-
creases in the cost of securities that the Portfolio intends to purchase. As
such purchases are made, an equivalent amount of futures contracts will be
terminated by offsetting sales. The Adviser does not consider purchases of
futures contracts to be a speculative practice under these circumstances. It
is anticipated that, in a substantial majority of these transactions, the
Portfolio will purchase such securities upon termination of the long futures
position, whether the long position is the purchase of a futures contract or
the purchase of a call option or the writing of a put option on a future, but
under unusual circumstances (e.g., the Portfolio experiences a significant
amount of redemptions), a long futures position may be terminated without the
corresponding purchase of securities.
The Portfolio also has authority to purchase and write call and put options
on futures contracts and stock indices in connection with its hedging activi-
ties. Generally, these strategies are utilized under the same market and mar-
ket sector conditions (i.e., conditions relating to specific types of invest-
ments) in which the Portfolio enters into futures transactions. The Portfolio
may purchase put options or write call options on futures contracts and stock
indices rather than selling the underlying futures contract in anticipation of
a decrease in the market value of its securities. Similarly, the Portfolio may
purchase call options, or write put options on futures contracts and stock in-
dices, as a substitute for the purchase of such futures to hedge against the
increased cost resulting from an increase in the market value of securities
which the Portfolio intends to purchase.
The Portfolio may engage in options and futures transactions on U.S. and
foreign exchanges and in options in the over-the-counter markets ("OTC op-
tions"). Exchange-traded contracts are third-party contracts (i.e., perfor-
mance of the parties' obligations is guaranteed by an exchange or clearing
corporation) which, in general, have standardized strike prices and expiration
dates. OTC options transactions are two-party contracts with price and terms
negotiated by the buyer and seller. (See "Restrictions on OTC Options.")
Swap Transactions. The Portfolio may enter into interest rate and equity in-
dex swaps. The Portfolio expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its port-
folio or to protect against any increase in the price of securities the Port-
folio anticipates purchasing at a later date. The Portfolio intends to use
swap transactions as a hedge and not as a speculative investment (See "Invest-
ment Objectives and Policies -- Swap Contracts" in the SAI.) The risk of loss
with respect to interest rate swaps is limited to the net amount of interest
payments that the Portfolio is contractually obligated to make.
In a standard equity index swap, one party agrees to pay another party the
return on a stock index in return for a specified interest rate, usually a
floating rate
12
<PAGE>
based on the London Interbank Offered Rate ("LIBOR"). The Portfolio expects to
enter into these transactions primarily to gain exposure to markets where
there are limitations on direct foreign ownership or to minimize transaction
costs in illiquid markets. By entering into an equity swap as the index re-
ceiver, the Portfolio can gain exposure to the stocks making up an index of
securities in a foreign market without actually purchasing those stocks. An
equity index swap involves not only the risk associated with investment in se-
curities represented on an index, but also the risk that the performance of
such securities, including dividends, will not exceed the return on the inter-
est rate that a Portfolio will be committed to pay.
There is no assurance that swap contract counterparties will be able to meet
their obligations pursuant to swap contracts or that, in the event of default,
the Portfolio will succeed in pursuing contractual remedies. Generally, swap
agreements have a fixed maturity date that will be agreed upon by the parties.
The agreement can be terminated prior to the maturity date only under limited
circumstances, such as upon default by one of the parties or insolvency, among
others, and can be transferred by a party only with the prior written consent
of the other party. The Portfolio bears the risk of loss of the amount ex-
pected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Portfolio will enter into
swap transactions only with counterparties deemed by the Adviser to be credit-
worthy under procedures adopted by the Fund's Board of Directors.
The use of swaps may involve investment techniques and risks different from
those associated with other portfolio transactions. If the Adviser is incor-
rect in its forecast of market values, interest rates and other applicable
factors, the investment performance of the Portfolio would diminish compared
to what it would have been if this investment technique was never used.
Certain restrictions imposed on the Portfolio by the Internal Revenue Code
may limit the Portfolio's ability to use swap agreements. Generally, swap
agreements are illiquid. The Portfolio will not invest in swaps, if as a re-
sult, the total value of such investments together with that of all other il-
liquid assets which the Portfolio owns would exceed 15% of the Portfolio's net
assets.
Non-Publicly Traded Securities, Private Placements and Restricted Securi-
ties. The Portfolio may invest in securities that are neither listed on a
stock exchange nor traded over-the-counter including privately-placed securi-
ties. Such unlisted emerging country equity securities, including investments
in new and early stage companies, may involve a high degree of business and
financial risk that can result in substantial losses. As a result of the ab-
sence of a public trading market for these securities, they may be less liquid
than publicly traded securities. Although these securities may be resold in
privately negotiated transactions, the prices real-
13
<PAGE>
ized from these sales could be less than those originally paid by the Portfo-
lio or less than what may be considered the fair value of such securities.
Further, companies whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements which might be
applicable if their securities were publicly traded. If such securities are
required to be registered under the securities laws of one or more jurisdic-
tions before being resold, the Portfolio may be required to bear the expenses
of registration.
As a general matter, the Portfolio may not invest more than 15% of its net
assets in illiquid securities, including securities for which there is no
readily available secondary market. Nevertheless, to the extent it can do so,
consistent with the foregoing limit, the Portfolio may invest up to 25% of its
total assets in non-publicly traded securities, including securities that are
not registered under the Securities Act of 1933 but that can be offered and
sold to qualified institutional buyers under Rule 144A under that Act. The
Fund's Board of Directors may adopt guidelines and delegate to the Adviser the
daily function of determining and monitoring the liquidity of 144A securities.
Restrictions on OTC Options. The Portfolio will engage in OTC options, in-
cluding over-the-counter stock index options, over-the-counter foreign cur-
rency options and options on foreign currency futures, only with member banks
of the Federal Reserve System and primary dealers in United States Government
securities or with affiliates of such banks or dealers that have capital of at
least $50 million or whose obligations are guaranteed by an entity having cap-
ital of at least $50 million or any other bank or dealer having capital of at
least $150 million or whose obligations are guaranteed by an entity having
capital of at least $150 million. The Portfolio will acquire only those OTC
options for which the Adviser believes the Portfolio can receive on each busi-
ness day at least two independent bids or offers (one of which will be from an
entity other than a party to the option) or which can be sold at a formula
price provided for in the OTC option agreement.
The staff of the Securities and Exchange Commission (the "SEC") has taken
the position that purchased OTC options and the assets used as cover for writ-
ten OTC options are illiquid securities. Therefore, the Portfolio has adopted
an investment policy pursuant to which it will not purchase or sell OTC op-
tions (including OTC options on futures contracts) if, as a result of such
transaction, the sum of the market value of OTC options currently outstanding
which are held by the Portfolio, the market value of the underlying securities
covered by OTC call options currently outstanding which were sold by the Port-
folio and margin deposits on the Portfolio's existing OTC options on futures
contracts exceed 15% of the net assets of the Portfolio, taken at market val-
ue, together with all other assets of the Portfolio which are illiquid or are
not otherwise readily marketable. However, if the OTC option is sold by the
Portfolio to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and the Portfolio has the
14
<PAGE>
unconditional contractual right to repurchase such OTC option from the dealer
at a predetermined price, then the Portfolio will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price less
the amount by which the option is "in-the-money" (i.e., current market value
of the underlying security minus the option's strike price). The repurchase
price with the primary dealers is typically a formula price which is generally
based on a multiple of the premium received for the option, plus the amount by
which the option is "in-the-money." This policy as to OTC options is not a
fundamental policy of the Portfolio and may be amended by the Directors of the
Fund without the approval of the Portfolio's shareholders. However, the Port-
folio will not change or modify this policy prior to the change or modifica-
tion by the SEC of its position.
Futures and Options Risk Considerations. The primary risks associated with
the use of futures and options are (i) the failure to predict accurately the
direction of stock prices, interest rates, currency movements and other eco-
nomic factors, (ii) the failure as hedging techniques in cases where the price
movements of the securities underlying the options and futures do not follow
the price movements of the portfolio securities subject to hedge, (iii) the
potentially unlimited loss from investing in futures contracts, and (iv) the
likelihood of the Portfolio being unable to control losses by closing its po-
sition where a liquid secondary market does not exist. The risk that the Port-
folio will be unable to close out a futures position or options contract will
be minimized by the Portfolio only entering into futures contracts or options
transactions on national exchanges and for which there appears to be a liquid
secondary market. (See "Investment Objectives and Policies" in the SAI.)
Temporary Investments. During periods in which the Adviser believes changes
in economic, financial or political conditions make it advisable, the Portfo-
lio may for temporary defensive purposes reduce its holdings in equity and
other securities and invest in certain short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity) debt secu-
rities or may hold cash. The short-term and medium-term debt securities in
which the Portfolio may invest consist of (a) obligations of the United States
or emerging country governments, their respective agencies or instrumentali-
ties; (b) bank deposits and bank obligations (including certificates of depos-
it, time deposits, and bankers' acceptances) of United States or emerging
country banks denominated in any currency; (c) floating rate securities and
other instruments denominated in any currency issued by international develop-
ment agencies; (d) finance company and corporate commercial paper and other
short-term corporate debt obligations of United States and emerging country
corporations meeting the Portfolio's credit quality standards; and (e) repur-
chase agreements with banks and broker-dealers with respect to such securi-
ties. The Portfolio intends to invest only in short-term and medium-term debt
securities that the Adviser believes to be of high quality i.e., subject to
relatively
15
<PAGE>
low risk of loss of interest or principal. There is currently no rating system
for debt securities in most emerging countries.
Non-Diversification. The Portfolio is classified as a "non-diversified"
portfolio under the 1940 Act. This means that it will be able to invest more
than 5% of its assets in the obligations of a single issuer. Additionally, the
Portfolio will be subject to the diversification limits of the Internal Reve-
nue Code of 1986, as amended, (the "Internal Revenue Code") which require
that, as of the close each fiscal quarter, (i) no more than 25% of the Portfo-
lio's total assets may be invested in the securities of a single issuer (ex-
cept for U.S. Government securities) and (ii) with respect to 50% of its total
assets, no more than 5% of such assets may be invested in the securities of a
single issuer (except for U.S. Government securities) or invested in more than
10% of the outstanding voting securities of a single issuer. Due to its non-
diversified status, the Portfolio may invest a greater portion of its assets
in the securities of a smaller number of issuers, and, as a result, will be
subject to greater risk with respect to its portfolio securities. The Portfo-
lio, however, intends to comply with the diversification requirements imposed
by the Internal Revenue Code for qualification as a regulated investment com-
pany. (See "FEDERAL TAXES.")
INTERNATIONAL EQUITY PORTFOLIO. The Portfolio seeks to achieve its invest-
ment objective by investing in a diversified portfolio of equity securities of
primarily non-United States issuers. Under normal circumstances, the Portfolio
will invest at least 65% of its assets in equity securities of foreign compa-
nies representing at least three countries other than the United States. The
Portfolio will invest in securities of primarily non-U.S. issuers mainly by
direct investment in overseas markets and also in, from time to time, the form
of sponsored or unsponsored American Depositary Receipts, European Depositary
Receipts or similar securities representing interests in the securities of
foreign issuers.
The Adviser's investment process synthesizes a number of key elements, in-
cluding proprietary databases, systematic country valuation, disciplined stock
selection, portfolio optimization, a careful quality control review and cost-
effective trading. The Adviser believes that its investment process will pro-
duce incremental returns above the EAFE Benchmark Index over an extended pe-
riod of time.
The Adviser, in managing the Portfolio, may invest in securities and hold-
ings within countries that are not included in the Benchmark Index. The allo-
cation of the Portfolio's investments among countries may deviate materially
from time to time from the allocation reflected in the Benchmark Index with
significant underweights or overweights depending on the changing investment
outlook. Under certain market conditions, the Portfolio may invest in coun-
tries, such as Canada and the United States, as well as emerging equity mar-
kets that are not included in the Benchmark Index.
16
<PAGE>
In selecting securities for the Portfolio, the Adviser will consider many
factors, including (i) the country valuation rating, (ii) the ratios between
price and (a) earnings, (b) book value and (c) sales, (iii) recent changes in
securities analysts' earnings forecasts, (iv) price momentum characteristics
and (v) dividend-discount model valuations.
Although the Portfolio invests primarily in securities denominated in for-
eign currencies, the Portfolio values its securities and other assets in U.S.
dollars. As a result, the net asset value of the Portfolio's shares will fluc-
tuate with U.S. dollar exchange rates as well as with price changes of the
Portfolio's securities in the various local markets and currencies. When it is
appropriate, the Portfolio intends to hedge against a decline in the U.S. dol-
lar value of the currencies of countries in which it has equity investments,
and may elect to do so at any time. Hedging against a decline in the value of
a currency will not eliminate fluctuations in the prices of the underlying
portfolio securities. The Portfolio may also actively invest in foreign cur-
rencies when it believes such investments will be an advantageous way to help
achieve its investment objective.
Generally, the Portfolio will invest in equity securities of established
companies listed on U.S. or foreign securities exchanges but may also invest
in securities traded over-the-counter. Although larger, more seasoned or es-
tablished companies will be emphasized, investments will include companies of
varying size as measured by assets, sales or capitalization. The Portfolio may
also invest in convertible bonds, convertible preferred stocks, non-convert-
ible preferred stock, and fixed income securities of governments, government
agencies, supranational agencies and companies. These debt securities include
those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P") or those of equivalent quality as determined by the
Adviser. Although bonds rated Baa or BBB may possess speculative characteris-
tics and may be more sensitive to changes in the economy and the financial
condition of issuers than higher rated bonds. The Adviser reserves the right
to retain securities which are downgraded by one or both of the rating agen-
cies, if in the Adviser's judgement, the retention of securities is warranted.
Fixed income securities also may be held for temporary defensive purposes when
the Adviser believes market conditions so warrant and for temporary invest-
ment. Similarly, the Portfolio may invest in cash equivalents (including for-
eign money market instruments, such as bankers' acceptances, certificates of
deposit, commercial paper, short-term government and corporate obligations and
repurchase agreements) for temporary defensive purposes and for liquidity. The
Portfolio may invest in closed-end investment companies holding foreign secu-
rities. The Portfolio may purchase and sell options on any of these securi-
ties.
The Portfolio seeks to invest in companies the Adviser believes will benefit
from global trends, promising business or product developments and specific
country opportunities resulting from changing economic, social and political
trends. It
17
<PAGE>
is expected that investments will be diversified throughout the world and
within markets to minimize specific country and currency risks. While invest-
ments will be made primarily in securities of companies domiciled in developed
countries, investments will also be made in developing countries as well.
The Portfolio, to a limited extent, may enter into futures contracts and may
purchase put options and write covered put and call options on securities in
which it may invest, futures contracts and stock indices, including those
traded over-the-counter, only for hedging purposes, and only if consistent
with its investment objective and policies. The Portfolio will maintain assets
sufficient to meet its obligations under such contracts in a segregated ac-
count with the Fund's custodian bank. The Portfolio may also enter into for-
ward foreign currency exchange contracts for hedging purposes and purchase
foreign currencies in the form of bank deposits. The Portfolio may also enter
into interest rate and equity index swap transactions. A discussion of these
investment policies and respective limitations may be found above under the
Emerging Markets Portfolio and in the SAI. For a more complete description of
special considerations and risks associated with investments in foreign is-
sues. (See "FOREIGN INVESTMENTS.")
Temporary and Defensive Strategy. When the Adviser determines that market
conditions warrant a defensive position, up to twenty percent (20%) of the
Portfolio's assets may be held in cash or short-term securities. However, the
Adviser has discretion in extraordinary circumstances to increase such defen-
sive position to up to one hundred percent (100%) of the Portfolio's assets.
The types of short-term instruments in which the Portfolio may invest for tem-
porary defensive purposes include short-term money market securities in vari-
ous currencies (such as securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities), repurchase agreements, certificates of
deposit, time deposits and bankers' acceptances of certain qualified financial
institutions, corporate commercial paper and master demand notes (See "SHORT-
TERM INVESTMENTS and REPURCHASE AGREEMENTS.")
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, each Portfolio may invest a por-
tion of its assets in domestic and foreign money market instruments including
certificates of deposit, bankers' acceptances, time deposits, U.S. Government
obligations, U.S. Government agency securities, short-term corporate debt se-
curities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corpora-
tion or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated,
determined by the Adviser to be of comparable quality.
18
<PAGE>
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 15% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price. The Sub-Administrator and the Adviser will mark
to market daily the value of the securities purchased. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause a Portfolio to experience a loss or delay in the liquida-
tion of the collateral securing the repurchase agreement. The Portfolio might
also incur disposition costs in liquidating the collateral. While the Fund's
management acknowledges these risks, it is expected that they can be con-
trolled through stringent security selection criteria and careful monitoring
procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in
19
<PAGE>
repurchase agreements on a joint basis. By entering into joint repurchase
agreements, a Portfolio may incur lower transaction costs and earn higher rates
of interest on joint repurchase agreements. Each Portfolio's contribution would
determine its return from a joint repurchase agreement. (See "SHORT TERM IN-
VESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities to
the extent that greater than one-third of its assets at fair market value would
be committed to loans. During the term of a loan, the Portfolio is subject to a
gain or loss depending on any increase or decrease in the market price of the
securities loaned. Lending of securities is subject to review by the Fund's
Board of Directors. All relevant facts and circumstances, including the credit-
worthiness of the broker, dealer or institution, will be considered in making
decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs af-
fecting an investment on loan, the loan must be called and the securities vot-
ed.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It
is possible that the market price of the securities at the time of delivery may
be higher or lower than the purchase price. Each Portfolio will maintain a sep-
arate account of cash or, liquid securities at least equal to the value of pur-
chase commitments until payment is made. Typically, no income accrues on secu-
rities purchased on a delayed delivery basis prior to the time delivery is made
although the Portfolios may earn income on securities it has deposited in a
segregated account.
Each Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices -- not to increase
its investment leverage.
20
<PAGE>
PORTFOLIO TURNOVER
Portfolio turnover for each Portfolio is not anticipated to exceed 100%. In
addition to Portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" for more information on taxation.) The Portfolios
will not normally engage in short-term trading, but each reserves the right to
do so. The tables set forth in "Financial Highlights" present the Portfolios'
historical portfolio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN INVESTMENTS
Investment in obligations of foreign issuers and in foreign branches of do-
mestic banks involves somewhat different investment risks than those affecting
obligations of United States domestic issuers. There may be limited publicly
available information with respect to foreign issuers, and foreign issuers are
not generally subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to domestic companies. There
may also be less government supervision and regulation of foreign securities
exchanges, brokers and listed companies than in the United States. Many for-
eign securities markets have substantially less volume than United States na-
tional securities exchanges, and securities of some foreign issuers are less
liquid and more volatile then securities of comparable domestic issuers. Bro-
kerage commissions and other transaction costs on foreign securities exchanges
are generally higher than in the United States. Dividends and interest paid by
foreign issuers may be subject to withholding and
21
<PAGE>
other foreign taxes which may decrease the net return on foreign investments
as compared to dividends and interest paid by domestic companies. Additional
risks include future political and economic developments, the possibility that
a foreign jurisdiction might impose or change withholding taxes on income pay-
able with respect to foreign securities, and the possible adoption of foreign
governmental restrictions such as exchange controls.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other emerg-
ing countries. Foreign ownership limitations also may be imposed by the char-
ters of individual companies in emerging countries to prevent, among other
concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some emerg-
ing countries. A Portfolio could be adversely affected by delays in or a re-
fusal to grant any required governmental registration or approval for such re-
patriation. Any investment subject to such repatriation controls will be con-
sidered illiquid if it appears reasonably likely that this process will take
more than seven days.
The economies of individual emerging countries may differ favorably or unfa-
vorably from the United States economy in such respect as growth of gross do-
mestic product, rate of inflation, currency depreciation, capital reinvest-
ment, resource self-sufficiency and balance of payments position. Further, the
economies of developing countries generally are heavily dependent upon inter-
national trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may con-
tinue to be adversely affected by economic conditions in the countries with
which they trade.
With respect to any emerging country, there is the possibility of national-
ization, expropriation or confiscatory taxation, political changes, governmen-
tal regulation, social instability or diplomatic developments (including war)
which could adversely affect the economies of such countries or the value of a
Portfolio's investments in those countries. In addition, it may be difficult
to obtain and enforce a judgement in a court outside of the United States.
Investments in securities of foreign issuers are frequently denominated in
foreign currencies, and since the Portfolios may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the value of each Portfolio's
assets as measured in United States dollars may be affected favorably or unfa-
vorably by changes in currency rates and in exchange control regulations and
the Portfolio may incur costs in connection with conversions between various
currencies.
22
<PAGE>
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Fund's Directors
may change such policies without an affirmative vote of a "majority of the
outstanding voting securities of a Portfolio," as defined in the 1940 Act.
INVESTMENT LIMITATIONS
The Emerging Markets Portfolio will not:
(a) with respect to 50% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 50% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
The International Equity Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
In addition, each Portfolio will not:
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 33
1/3% of the Portfolio's gross assets valued at the lower of market or
cost, and (ii) a Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
23
<PAGE>
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment objectives of the Portfolios are fundamental and with respect
to each Portfolio may be changed only with the approval of the holders of a
majority of the outstanding shares of such Portfolio. Except for limitations
(a) and (b) with respect to International Equity Portfolio, and limitations
(d), (e) and (f)(i), the Portfolios' investment limitations and policies de-
scribed in this Prospectus and in the SAI are not fundamental and may be
changed by the Fund's Board of Directors. If a percentage limitation on in-
vestment or utilization of assets as set forth above is adhered to at the time
an investment is made, a later change in percentage resulting from changes in
the value or total cost of the Portfolios' assets will not be considered a vi-
olation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission, at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "VALUATION OF SHARES.") The minimum initial
investment required for each Portfolio is $100,000. Certain exceptions may be
made by the officers of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled to receive compensation for selling or servicing Portfolio shares may
receive different compensation with respect to one particular class of shares
over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior
24
<PAGE>
to the close of its business day to receive that day's share price. Proper
payment for the order must be received by the Sub-Transfer Agent no later than
the time when the Portfolio is priced on the following business day. Service
Agents are responsible to their customers and the Fund for timely transmission
of all subscription and redemption requests, investment information, documen-
tation and money.
INITIAL INVESTMENT
BY MAIL
. Complete and sign an Application, and mail it, together with a check
payable to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (monies
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, the Portfolio selected, the amount being wired and the name of the
bank wiring the funds. An account number will then be provided to you.
Next,
. Instruct your bank to wire the specified amount to:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $1,000. Shares may be purchased at net asset value by mailing a
25
<PAGE>
check to UAM Funds Service Center (payable to UAM Funds) at the above address
or by wiring monies to the Custodian Bank using the instructions outlined
above. When making additional investments, be sure that your account number,
account name, and the Portfolio to be purchased are specified on the check or
wire. Prior to wiring additional investments, notify the UAM Funds Service
Center by calling the telephone number on the cover of this Prospectus. Mail
orders should include, when possible, the "Invest by Mail" stub which accompa-
nies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. Eastern Time (ET) (the close of the NYSE)
will be invested at the share price calculated after the NYSE closes on that
day. Investments received after the close of the NYSE will be executed at the
price computed on the next day the NYSE is open. The Fund reserves the right,
in its sole discretion, to suspend the offering of shares of each Portfolio or
to reject purchase orders when, in the judgment of management, such suspension
or rejection is in the best interests of the Fund. Purchases of a Portfolio's
shares will be made in full and fractional shares of the Portfolio calculated
to three decimal places. Certificates for fractional shares will not be is-
sued. Certificates for whole shares will not be issued except at the written
request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining to such securities shall become the property of the Portfolio and must
be delivered to the Fund by the investor upon receipt from the issuer. Securi-
ties acquired through an in-kind purchase will be acquired for investment and
not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are liquid securities and not subject to any restric-
tions upon their sale by the Portfolio under the Securities Act of
1933, or otherwise; and
26
<PAGE>
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
at the net asset value next determined after receipt of the redemption re-
quest. Any redemption may be more or less than the purchase price of your
shares depending on the market value of the investment securities held by the
Portfolios. Shares held 90 days or more may be redeemed without cost. Shares
held less than 90 days will be subject to a 1% redemption fee which is re-
tained by the Fund for the benefit of the remaining shareholders and is in-
tended to encourage long-term investment in the Portfolio, to avoid transac-
tion and other expenses caused by early redemption and to facilitate portfolio
management.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
In order to make a redemption request by telephone, you must:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
27
<PAGE>
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and the Fund's Sub-Transfer Agent will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and they
may be liable for any losses if they fail to do so. These procedures include
requiring the investor to provide certain personal identification at the time
an account is opened as well as prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instruction
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under this pro-
cedure within one business day of and no more than seven days after receipt of
the request, or earlier if required under applicable law. The Fund may suspend
the right of redemption or postpone the date at times when both the NYSE and
Custodian Bank are closed, or under any emergency circumstances as determined
by the SEC.
28
<PAGE>
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities so received in pay-
ment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus). Exchange requests should
be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES BY TELEPHONE". An exchange
into another UAM Funds Portfolio is a sale of shares and may result in a gain
or loss for income tax purposes. The Fund may modify or terminate the exchange
privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
a Portfolio's assets, less any liabilities, by the total number of shares out-
standing of the Portfolio. The net asset value per share of each Portfolio is
determined as of the close of the NYSE on each day that the NYSE is open for
business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the
29
<PAGE>
valuation date for which market quotations are readily available are valued
neither exceeding the current asked prices nor less than the current bid pric-
es. Quotations of foreign securities in a foreign currency are converted to
U.S. dollar equivalents. The converted value is based upon the bid price of
the foreign currency against U.S. dollars quoted by any major bank or by a
broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost, when the Board of
Directors determines that it reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Fund's Board of Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in a Portfolio over a
given period of time, expressed as an annual percentage rate. Yields are cal-
culated according to a standard that is required for all bond funds. As this
differs from other accounting methods, the quoted yield may not equal the in-
come actually paid to shareholders.
Total return is the change in value of an investment in a Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Reports to Shareholders for the most recent fiscal
year end contain additional performance information that includes comparisons
with appropriate indices. The Annual Reports are available without charge. To
receive an Annual Report, contact the UAM Funds Service Center at the address
or phone number on the cover of this Prospectus.
30
<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in annual dividends. If any net
capital gains are realized, each Portfolio will normally distribute them annu-
ally.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares unless the Fund is notified in writing that the
shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify each year as a "regulated investment com-
pany" under subchapter M of the Internal Revenue Code, as amended, for federal
income tax purposes and to meet all other requirements that are necessary for
it (but not its shareholders) to be exempt from federal taxes on income and
gains paid to shareholders in the form of dividends. To do this, each Portfo-
lio must, among other things, distribute substantially all of its ordinary in-
come and net capital gains on a current basis and maintain a portfolio of in-
vestments which satisfies certain diversification criteria.
Dividends paid by a Portfolio from net investment income, whether in cash or
reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS taxpayer identification
regulations. To avoid this withholding requirement, you must certify that your
Social Security or Taxpayer Identification Number provided is correct and that
either you are not currently subject to backup withholding, or you are exempt
from backup withholding. This certification must be made on the Application or
on a separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
31
<PAGE>
INVESTMENT ADVISER
Acadian Asset Management, Inc. is a Massachusetts corporation formed in 1986
and is located at Two International Place, Boston, Massachusetts 02110. The
Adviser is a wholly-owned subsidiary of United Asset Management Corporation
("UAM") and provides investment management services to corporations, pension
and profit-sharing plans, 401(k) and thrift plans, trusts, estates and other
institutions and individuals. As of the date of this Prospectus, the Adviser
had approximately $3 billion in assets under management. For further informa-
tion on Acadian Asset Management Inc.'s investment services, please call (617)
946-3500.
Acadian Asset Management, Inc.'s team of investment professionals is as fol-
lows:
DR. GARY L. BERGSTROM -- President -- Purdue University, B.S., M.S., 1963;
M.I.T. (Sloan School of Management), Ph.D, 1968; founder of Acadian Asset Man-
agement, Inc. in 1977.
RONALD D. FRASHURE -- Executive Vice President -- Massachusetts Institute of
Technology (Sloan School of Management), B.S., 1964; Harvard University,
M.B.A., 1970; Portfolio Manager and Investment Officer, Acadian Asset Manage-
ment, Inc., 1988 -- Present.
CHURCHILL G. FRANKLIN -- Senior Vice President -- Middlebury College, B.A.,
1971; Primary Client Liaison and Marketing Officer, Acadian Asset Management,
Inc., 1986 -- Present.
RICHARD O. MICHAUD -- Senior Vice President -- Northeastern University,
B.A., 1963; University of Pennsylvania, M.A., 1966; Boston University, M.A.,
1969; Boston University, Ph.D, 1971; Quantitative Strategist, Acadian Asset
Management, Inc., 1991 -- Present.
JOHN R. CHISHOLM -- Senior Vice President -- Massachusetts Institute of
Technology, B.S., 1984 and M.S., Business Administration, 1987; Portfolio Man-
ager and Quantitative Research Analyst, Acadian Asset Management, Inc.,
1984 --Present.
STELLA M. HAMMOND -- Senior Vice President -- Stanford University, B.S.,
1966; Yale University, M. Phil., 1972; Portfolio Manager, Acadian Asset Man-
agement, Inc., 1989 -- Present.
MATTHEW V. PIERCE -- Senior Vice President -- Harvard University, B.A.,
1983, Chief Financial Officer, Acadian Asset Management, Inc., 1990 -- Pres-
ent.
BRIAN K. WOLAHAN -- Senior Vice President -- Lehigh University, B.S., 1980;
M.I.T. (Sloan School of Management), M.S., Business Administration, 1987;
32
<PAGE>
Portfolio Manager and Quantitative Research Analyst, Acadian Asset Management,
Inc. 1990 -- Present.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day operations of the Portfolios are: Ronald Frashure, Richard
Michaud, John Chisholm, Stella Hammond and Brian Wolahan.
Under Investment Advisory Agreements (the "Agreements") with the Fund, dated
as of February 19, 1993, the Adviser manages the investment and reinvestment
of each Portfolio's assets. The Adviser must adhere to the stated investment
objectives and policies of the Portfolios, and is subject to the control and
supervision of the Fund's Board of Directors.
As compensation for the services rendered by the Adviser under the Agree-
ments, the Portfolios pay the Adviser an annual fee, in monthly installments,
calculated by applying the following annual percentage rates to each of the
Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Emerging Markets Portfolio........................... 1.00%
International Equity Portfolio....................... 0.75% first $50 million
0.65% next $50 million
0.50% next $100 million
0.40% over $200 million
</TABLE>
Although the advisory fee rates payable by the Portfolios are higher than
the rates payable by most mutual funds, the Fund believes they are comparable
to the rates paid by many other funds with similar investment objectives and
policies and are appropriate for these Portfolios in light of their investment
objectives.
The Adviser has agreed to waive all or part of its advisory fee and to as-
sume operating expenses otherwise payable by the Emerging Markets Portfolio to
keep total annual operating expenses from exceeding 2.5% of its average daily
net assets. Effective January 1, 1996 until further notice, the Adviser has
voluntarily agreed to waive all or part of its advisory fee and to assume op-
erating expenses otherwise payable by the International Equity Portfolio, if
necessary, in order to keep total annual operating expenses from exceeding
1.00% of its average daily net assets. The Fund will not reimburse the Adviser
for advisory fees waived or expenses that the Adviser may bear on behalf of
the Portfolios for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their
affiliates, may, at its own expense, compensate a Service Agent or other
person for marketing, shareholder servicing, record-keeping and/or other
services performed with respect
33
<PAGE>
to the Fund, a Portfolio or any Class of Shares of a Portfolio. Payments made
for any of these purposes may be made from its revenues, its profits or any
other source available to it. When such service arrangements are in effect,
they are made generally available to all qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADVISER'S HISTORICAL PERFORMANCE
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, poli-
cies and strategies as those of the International Equity Portfolio. The in-
vestment returns of the International Equity Portfolio may differ from those
of the separately managed investment returns of the International Equity Port-
folio may differ from those of the separately managed accounts because such
separately managed accounts may have fees and expenses that differ from those
of the International Equity Portfolio. Further, the separately managed ac-
counts are not subject to investment limitations, diversification requirements
and other restrictions imposed by the Investment Company Act of 1940 and In-
ternal Revenue Code; such conditions, if applicable, may have lowered the re-
turns for separately managed accounts. The results presented are not intended
to predict or suggest the return to be experienced by the Portfolio or the re-
turn an investor might achieve by investing in the International Equity Port-
folio.
ACADIAN ASSET MANAGEMENT, INC. -- INTERNATIONAL CORE STRATEGY
(Percentage returns of Net of Management Fees)
<TABLE>
<CAPTION>
MORGAN STANLEY CAPITAL
ACADIAN ASSET INTERNATIONAL
TIME PERIODS AND CALENDAR YEARS MANAGEMENT EAFE
- ------------------------------- ------------- ----------------------
<S> <C> <C>
9 months to 12/31/88...................... 11.00% 11.30%
1989...................................... 11.80% 10.50%
1990...................................... (24.00)% (23.40)%
1991...................................... 4.40% 12.10%
1992...................................... (15.00)% (12.20)%
1993...................................... 37.80% 32.60%
1994...................................... 5.90% 7.80%
1995...................................... 14.00% 11.20%
Year to Date through 9/30/96.............. 8.50% 4.40%
Annualized................................ 4.97% 5.20%
Cumulative................................ 51.07% 53.87%
Seven-Year Mean (1/1/89-12/31/95)......... 4.99% 5.51%
Value of $1 invested during 8 1/2 years
(4/1/88-9/30/96)........................ $ 1.51 $ 1.54
</TABLE>
34
<PAGE>
Notes:
1. The annualized return is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods set
forth by the Association for Investment Management Research, the Bank Ad-
ministration Institute, and the Investment Counsel Association of America.
Market Value of the account was the sum of the account's total assets, in-
cluding cash, cash equivalents, short term investments, and securities val-
ued at current market prices.
2. The cumulative return means that $1 invested in the composite account on
April 1, 1988 had grown to $1.51 by September 30, 1996.
3. The seven-year mean is the arithmetic average of the annual returns for the
calendar years listed.
4. The Morgan Stanley Capital International EAFE Index is an unmanaged index
which assumes reinvestment of dividends and is generally considered repre-
sentative of securities similar to those invested in by the Adviser for the
purpose of the composite performance numbers set forth above.
5. The Adviser's average annual management fee over the eight and a half-year
period (4/1/88-9/30/96) was .60% or 60 basis points. During the period,
fees on the Adviser's individual accounts ranged from .40% to .75% (40 ba-
sis points to 75 basis points). Net returns vary depending on the manage-
ment fee.
ADMINISTRATIVE SERVICES
United Asset Management Fund Services, Inc., ("UAMFSI"), a wholly-owned sub-
sidiary of United Asset Management Corporation, is responsible for performing
and overseeing administrative, fund accounting, dividend disbursing and trans-
fer agent services provided to the Fund and its portfolios. UAMFSI's principal
office is located at 211 Congress Street, Boston, MA 02110. UAMFSI has subcon-
tracted some of these services to Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, by a Mutual Funds Service
Agreement dated April 15, 1996. CGFSC is located at 73 Tremont Street, Boston,
MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of
aggregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Emerging Markets Portfolio............................................. 0.06%
International Equity Portfolio......................................... 0.06%
</TABLE>
35
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, MA 02110, distributes shares of the Fund. Under the Distribution
Agreement (the "Agreement"), the Distributor, as agent of the Fund, agrees to
use its best efforts as sole distributor of Fund shares. The Distributor does
not receive any fee or other compensation under the Agreement with respect to
the Institutional Class Shares offered in this Prospectus. The Agreement con-
tinues in effect as long as it is approved at least annually by the Fund's
Board of Directors. Those approving the Agreement must include a majority of
Directors who are neither parties to the Agreement nor interested persons of
any such party. The Agreement provides that the Fund will bear costs of regis-
tration of its shares with the SEC and various states as well as the printing
of its prospectuses, its SAIs and its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Fund's Acadian Portfolios and direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to
all transactions for the Portfolios. The Adviser may, however, consistent with
the interests of the Portfolios, select brokers on the basis of the research,
statistical and pricing services they provide to the Portfolios. Information
and research received from such brokers will be in addition to, and not in
lieu of, the services required to be performed by the Adviser under the In-
vestment Advisory Agreements. A commission paid to such brokers may be higher
than that which another qualified broker would have charged for effecting the
same transaction, provided that such commissions are paid in compliance with
the Securities Exchange Act of 1934, as amended, and that the
36
<PAGE>
Adviser determines in good faith that such commission is reasonable in terms
either of the transaction or the overall responsibility of the Adviser to the
Portfolios and the Adviser's other clients.
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities consistent with the investment policies
of a Portfolio and one or more of these other clients served by the Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reason-
able by the Adviser. Although there is no specified formula for allocating
such transactions, such allocations are subject to periodic review by the
Fund's Board of Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Board of Directors to issue three billion shares of common
stock, with an $.001 par value. The Directors have the power to designate one
or more series ("Portfolios") or classes of shares of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. The Board of Directors may create ad-
ditional Portfolios and Classes of shares of the Fund in the future at its
discretion.
The shares of each Portfolio and Class of the Fund are fully paid and nonas-
sessable and have no preference as to conversion, exchange, dividends, retire-
ment or other features and have no pre-emptive rights. The shares of each
Portfolio and Class have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors
can elect 100% of the Directors. As of December 6, 1996, UNISYS, Blue Bell, PA
held of record 61% of the outstanding shares of the Emerging Markets Portfolio
Institutional Class Shares. Also, as of December 6, 1996, Bankers Trust Compa-
ny, as Trustee for Premark International Master Pension Trust, Jersey City, NJ
held of record 83.3% of the outstanding shares of the International Equity
Portfolio Institutional Class Shares. The persons or organizations owning 25%
or more of the outstanding shares of a Portfolio may be presumed to "control"
(as that term is defined in the 1940 Act) such Portfolio. As a result, those
persons or organizations could have the ability to vote a majority of the
shares of the Portfolio on any matter requiring the approval of shareholders
of such Portfolio. A shareholder is entitled to one vote for each full share
held (and a fractional vote for each fractional share held), then standing in
his name on the books of the Fund. Annual meetings will not be held
37
<PAGE>
except as required by the 1940 Act and other applicable laws. The Fund has un-
dertaken that its Directors will call a meeting of shareholders if such a
meeting is requested in writing by the holders of not less than 10% of the
outstanding shares of the Fund. The Fund will assist shareholder communica-
tions in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
38
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
39
<PAGE>
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
40
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Acadian Asset Management, Inc.
Two International Place, 26th Floor
Boston, MA 02110
(617) 946-3500
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
The C & B Portfolios
Institutional Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
THE C & B PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: COOKE & BIELER, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series of shares
(known as "Portfolios") each of which has different investment objectives and
policies. The C&B Portfolios currently offer only one class of shares. The se-
curities offered in this Prospectus are Institutional Class Shares of four di-
versified, no-load Portfolios of the Fund managed by Cooke & Bieler, Inc.
C & B EQUITY PORTFOLIO. The objective of the C & B Equity Portfolio ("Equity
Portfolio") is to provide maximum long-term total return with minimal risk to
principal by investing in common stocks which have a consistency and predict-
ability in their earnings growth. Research by Cooke & Bieler's internal secu-
rities analysts will be relied upon to identify these companies.
C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS. The objective of the C & B Eq-
uity Portfolio for Taxable Investors (the "Taxable Equity Portfolio") is maxi-
mum long-term, after-tax total return, consistent with minimizing risk to
principal. The Portfolio seeks this objective by investing in common stocks of
companies which have a consistency and predictability in their earnings
growth. Research by Cooke & Bieler's internal securities analysts will be re-
lied upon to identify such companies. The Adviser will employ investment tech-
niques designed to minimize tax consequences within the Portfolio, such as the
management of portfolio turnover to minimize the distribution of realized
gains to investors. The Portfolio may be appropriate for investors who seek
total return and whose tax status under federal and state regulations increase
the importance of such strategies.
C & B MID CAP EQUITY PORTFOLIO. The objective of the C & B Mid Cap Equity
Portfolio (the "Mid Cap Portfolio") is maximum long-term total return, consis-
tent with minimizing risk to principal. The Portfolio seeks this objective by
investing in common stocks of companies which have a consistency and predict-
ability in their earnings growth. The anticipated range of market capitaliza-
tions for the holdings in this Portfolio is between $500 million and $5 bil-
lion, with an anticipated average market capitalization of $3 billion or less.
Research by Cooke & Bieler's internal securities analysts will be relied upon
to identify these companies.
<PAGE>
C & B BALANCED PORTFOLIO. The objective of the C & B Balanced Portfolio
("Balanced Portfolio") is to provide maximum long-term total return with mini-
mal risk to principal by investing in a combined portfolio of common stocks
which have a consistency and predictability in their earnings growth and in-
vestment grade fixed income securities.
There can be no assurance that the Portfolios will achieve their stated ob-
jective.
Keep this Prospectus, for future reference. It contains information you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 2, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI,
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 6
Investment Policies........................................................ 7
Other Investment Policies.................................................. 9
Purchase of Shares......................................................... 14
Redemption of Shares....................................................... 17
Shareholder Services....................................................... 18
Valuation of Shares........................................................ 19
Performance Calculations................................................... 20
Dividends, Capital Gains Distributions and Taxes........................... 20
Investment Adviser......................................................... 21
Administrative Services.................................................... 23
Distributor................................................................ 24
Portfolio Transactions..................................................... 24
General Information........................................................ 25
UAM Funds -- Institutional Class Shares.................................... 27
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Portfolios would incur. However, transaction fees may be charged if a bro-
ker-dealer or other financial intermediary deals with the Fund on your behalf.
(See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
TAXABLE
EQUITY BALANCED EQUITY MID CAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases....... NONE NONE NONE NONE
Sales Load Imposed on Reinvested
Dividends........................... NONE NONE NONE NONE
Deferred Sales Load................... NONE NONE NONE NONE
Redemption Fees....................... NONE NONE NONE NONE
Exchange Fees......................... NONE NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C> <C> <C> <C>
Investment Advisory Fees................. 0.625% 0.625 % 0.625 %* 0.625 %*
Administrative Fees...................... 0.140% 0.390 % 0.196 %* 0.196 %*
12b-1 Fees............................... NONE NONE NONE NONE
Distribution Costs....................... NONE NONE NONE NONE
Other Expenses........................... 0.055% 0.275 % 0.332 %* 0.332 %*
Advisory Fees Waived..................... -- (0.290)% (0.153)%* (0.153)%*
----- ------ ------ ------
Total Operating Expenses (After Fee
Waiver): 0.820%* 1.00 %* 1.00%* 1.00%*
</TABLE>
- -----------
* Absent the Adviser's fee waiver, annualized Total Operating Expenses of the
Balanced Portfolio for the fiscal year ended October 31, 1996 would have
been 1.31%. The annualized Total Operating Expenses includes the effect of
expense offsets. If expense offsets were excluded, annualized Total Operat-
ing Expenses of the Equity Portfolio would be 0.83%, and annualized Total
Operating Expenses of the Balanced Portfolio would not be affected. The Ad-
viser has voluntarily agreed to waive a portion of its advisory fees and to
assume as the Adviser's own expense operating expenses otherwise payable by
the Portfolios, if necessary, in order to keep each Portfolio's total annual
operating expenses from exceeding 1.00% of its average daily net assets. The
Fund will not reimburse the Adviser for any advisory fees that are waived or
Portfolio expenses that the Adviser may bear on behalf of the Portfolios for
a given fiscal year. The amounts have been restated to reflect current Ad-
ministrative Fees.
1
<PAGE>
The table above shows the expenses that an investor in the Portfolios would
bear directly or indirectly. For the Equity and Balanced Portfolios, the ex-
penses and fees listed are based on the Fund's operations during the fiscal
year ended October 31, 1996, except that Administrative Fees have been re-
stated to reflect current fees. (See "ADMINISTRATIVE SERVICES" herein and in
the SAI). As the Taxable Equity and Mid Cap Portfolios have not yet begun op-
erations, the expenses are based on estimates. For purposes of calculating the
fees set forth above, the table assumes the Taxable Equity and the Mid Cap
Portfolios' average daily assets will be $ million. The Adviser has volun-
tarily agreed to waive a portion of its advisory fees and to assume as the Ad-
viser's own expense operating expenses otherwise payable by the Portfolios, if
necessary, in order to keep each Portfolio's total annual operating expenses
from exceeding 1.00% of its average daily net assets. The Fund will not reim-
burse the Adviser for any advisory fees that are waived or Portfolio expenses
that the Adviser may bear on behalf of the Portfolios for a given fiscal year.
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Fund charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Portfolio............................. $ 8 $26 $46 $102
Balanced Portfolio........................... $10 $32 $55 $123
Taxable Equity Portfolio..................... $10 $32 * *
Mid Cap Portfolio............................ $10 $32 * *
</TABLE>
- -----------
* As the Taxable Equity and Mid Cap Portfolios have not yet begun opera-
tions, the Fund has not projected expenses beyond the three-year period
shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Cooke & Bieler, Inc. (the "Adviser"), an investment counseling firm founded
in 1951, serves as investment adviser to four of the Fund's Portfolios. The
Adviser presently manages over $6 billion in assets for institutional clients
and high net worth individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor") at net asset value without a sales commission. Share pur-
chases may be made by sending investments directly to the Fund. The minimum
initial investment is $2,500. The minimum for subsequent investments is $100.
The minimum initial investment for IRA accounts is $500. Minimum initial in-
vestment for spousal IRA accounts is $250. Certain exceptions to the initial
or minimum investment amounts may be made by officers of the Fund. (See "PUR-
CHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will automatically be rein-
vested in Portfolio shares unless an investor elects to receive cash distribu-
tions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of both Portfolios may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolio's shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolio invests. Prospective
investors should consider the following: (1) The Balanced Portfolio may invest
in securities rated lower than Baa by Moody's Investors Services, Inc. or BBB
by Standard & Poor's Corporation. These securities carry a high degree of
credit risk, and are considered speculative by the major credit rating agencies
and are sometimes referred to as "junk bonds". (See "INVESTMENT POLICIES"); (2)
The fixed income securities held by the Balanced Portfolio will be affected by
general changes in interest rates that result in increases or decreases in
their value. The value of securities held by the Portfolio can be expected to
vary inversely with changes in interest rates; as interest rates decline, mar-
ket value tends to increase and vice versa; (3) Each Portfolio may invest a
portion of its assets in derivatives including futures contracts and options.
(See "FUTURES CONTRACTS AND OPTIONS"); (4) Each Portfolio may use various in-
vestment practices, including investing in repurchase agreements, when-issued,
forward delivery and delayed settlement securities and lending of securities.
(See "OTHER INVESTMENT POLICIES"); (5) Common stocks of companies which have
smaller or medium-sized market capitalizations may exhibit greater market vola-
tility than common stock of companies which have larger capitalizations.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables show selected per share information for a share out-
standing throughout each period presented for the Portfolios. These tables are
part of the Portfolios' Financial Statements, which are included in the Port-
folios' 1996 Annual Reports to Shareholders. The Annual Reports are incorpo-
rated into the Portfolios' SAI. The Portfolios' Financial Statements have been
audited by Price Waterhouse LLP. Their unqualified opinion on the Financial
Statements is also incorporated into the SAI. Please read the following infor-
mation in conjunction with the Portfolios' 1996 Annual Reports to Sharehold-
ers.
C&B EQUITY PORTFOLIO
<TABLE>
<CAPTION>
MAY 15,**
1990 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, -----------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996
----------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $ 9.13 $ 12.33 $ 13.29 $ 13.06 $ 13.13 $ 15.68
------ ------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS.............
Net Investment
Income................ 0.08 0.25 0.29 0.28 0.31 0.34 0.36
Net Realized &
Unrealized Gain
(Loss) on
Investments........... (0.89) 3.20 1.02 0.24 0.28 2.55 2.94
------ ------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS.......... (0.81) 3.45 1.31 0.52 0.59 2.89 3.30
------ ------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment
Income................ (0.06)+ (0.25)+ (0.30) (0.26) (0.30) (0.34) (0.35)
Net Realized Gain...... -- -- (0.05) (0.49) (0.18) (0.74)
In Excess of Net
Realized Gain......... -- -- -- -- (0.04) -- --
------ ------- -------- -------- -------- -------- --------
Total Distributions.. (0.06) (0.25) (0.35) (0.75) (0.52) (0.34) (1.09)
------ ------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 9.13 $ 12.33 $ 13.29 $ 13.06 $ 13.13 $ 15.68 $ 17.89
====== ======= ======== ======== ======== ======== ========
TOTAL RETURN............ (8.17)%++ 38.04%++ 10.68% 4.05% 4.67% 22.28% 21.99%
====== ======= ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of
Period (Thousands).... $4,582 $50,321 $112,763 $209,153 $208,937 $245,813 $169,044
Ratio of Expenses to
Average Net Assets+... 1.00%* 1.00% 0.83% 0.82% 0.82% 0.79% 0.81%
Ratio of Net
Investment Income to
Average Net Assets.... 3.21%* 2.65% 2.27% 2.28% 2.39% 2.35% 1.92%
Portfolio Turnover
Rate.................. 0% 7% 45% 21% 46% 42% 29%
Average Commission
Rate#................. N/A N/A N/A N/A N/A N/A $ 0.0508
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... N/A N/A N/A N/A N/A 0.78% 0.80%
</TABLE>
- -----------
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees of $.01 and $.001 per share for the period
ended October 31, 1990 and the year ended October 31, 1991, respectively.
++ Total return would have been lower if certain fees and expenses had not
been waived during the period indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
C&B BALANCED PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 29,**
1989 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, ------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996
-------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $ 9.44 $ 11.88 $ 12.57 $ 12.68 $ 11.86 $ 13.13
------ ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income................ 0.34 0.40 0.46 0.45 0.48 0.52 0.45
Net Realized &
Unrealized Gain
(Loss) on
Investments........... (0.59) 2.45 0.79 0.40 (0.39) 1.51 1.29
------ ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS.......... (0.25) 2.85 1.25 0.85 0.09 2.03 1.74
------ ------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment
Income................ (0.31) (0.40) (0.46) (0.44) (0.47) (0.52) (0.45)
Net Realized Gain...... -- (0.01) (0.10) (0.30) (0.44) (0.24) (1.48)
------ ------- ------- ------- ------- ------- -------
Total Distributions.. (0.31) (0.41) (0.56) (0.74) (0.91) (0.76) (1.93)
====== ======= ======= ======= ======= ======= =======
NET ASSET VALUE, END OF
PERIOD................. $ 9.44 $ 11.88 $ 12.57 $ 12.68 $ 11.86 $ 13.13 $ 12.94
====== ======= ======= ======= ======= ======= =======
TOTAL RETURN............ (2.62)%+ 30.50 %+ 10.72 % 7.01 % 0.74 %+ 17.83 %+ 14.70 %+
====== ======= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of
Period (Thousands).... $8,634 $26,346 $35,326 $42,974 $32,077 $24,146 $22,629
Ratio of Expenses to
Average Net Assets.... 1.00 % 1.00 %# 0.91 % 0.90 % 1.00 % 1.00 % 1.00 %
Ratio of Net
Investment Income to
Average Net Assets.... 4.61 %* 4.07 % 3.78 % 3.65 % 3.84 % 3.80 % 3.51 %
Portfolio Turnover
Rate.................. 2 % 11 % 12 % 22 % 24 % 22 % 21 %
Average Commission
Rate #................ N/A N/A N/A N/A N/A N/A $0.0511
Voluntary Waived Fees
and Expenses Assumed
by the Adviser Per
Share................. $ 0.03 $ 0.01 N/A N/A $ 0.001 $ 0.004 $ 0.037
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... N/A N/A N/A N/A N/A 1.00 % 1.00 %
</TABLE>
- -----------
* Annualized.
**Commencement of Operations.
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is re-
quired to disclose the average commission rate per share it paid for portfo-
lio trades on which commissions were charged.
INVESTMENT OBJECTIVES
The Portfolios maintain different investment policies while pursuing similar
investment objectives: to provide maximum long-term total return consistent
with minimal risk to principal. There can be no assurance that a Portfolio will
achieve its stated objective.
6
<PAGE>
C & B EQUITY PORTFOLIO. The objective of the Equity Portfolio is to provide
maximum long-term total return with minimal risk to principal by investing pri-
marily in common stocks of companies with strong financial positions, consis-
tent and predictable earnings growth and in the Adviser's opinion, are under-
valued at the time of purchase.
C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS. The objective of the Equity
Portfolio is maximum long-term, after-tax total return, consistent with mini-
mizing risk to principal. The Adviser will employ investment techniques de-
signed to minimize tax consequences within the Portfolio, such as the manage-
ment of portfolio turnover to minimize the distribution of realized gains to
investors. The Portfolio may be appropriate for investors who seek total return
and whose tax status under federal and state regulations increase the impor-
tance of such strategies.
C & B MID CAP EQUITY PORTFOLIO. The objective of the Mid Cap Portfolio is
maximum long-term total return, consistent with minimizing risk to principal.
The Portfolio seeks to achieve its objective by investing in companies which
have market capitalizations generally between $500 million and $5 billion, with
an anticipated average market capitalization of $3 billion or less.
C & B BALANCED PORTFOLIO. The objective of the Balanced Portfolio is to pro-
vide maximum long-term total return with minimal risk to principal by investing
primarily in securities consisting of investment grade bonds and common stocks
which show consistent and predictable earnings growth. The proportion of the
Portfolio's assets invested in fixed income securities or common stocks will
vary as market conditions warrant. A typical asset mix for the Portfolio, is
expected to be 60% common stocks and 40% fixed income securities. The Portfo-
lio's total return will consist of both income and capital return, the relative
proportions of which will vary according to the Portfolio's mix of underlying
investments.
The Portfolios have distinct investment policies as set forth below.
INVESTMENT POLICIES
C & B EQUITY PORTFOLIO. The Equity Portfolio seeks to achieve its objective
by investing primarily in common stocks which have consistent and predictable
earnings growth. It may also invest in convertible bonds or convertible pre-
ferred stocks.
Security selection for the Equity Portfolio is based on analysis of a
company's financial characteristics, an assessment of the quality of a
company's management, and the implementation of valuation discipline. Companies
acceptable for investment in the Portfolio are determined by screening criteria
such as high return on equity, strong balance sheets, and consistency and pre-
dictability in the growth of earnings and dividends. Intensive on-site re-
search, including interviews with top management, is undertaken by the Adviser
to identify companies with strong man
7
<PAGE>
agement, further narrowing the universe of acceptable investments. Dividend
discount analysis is utilized to determine those stocks with the most attrac-
tive returns from this universe. A stock is sold when a more attractive alter-
native is discovered.
Cash reserves may be held from time to time in the Portfolio when stocks are
sold due to the unattractiveness of their returns, compared to risk free in-
vestment alternatives. Market timing is not a part of the Adviser's investment
strategy.
C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS. The Taxable Equity Portfolio
may invest in companies with any size of market capitalization from very small
companies to very large companies. In addition, the Taxable Equity Portfolio
attempts to minimize portfolio turnover. The portfolio turnover rate reflects
the frequency with which securities are purchased and sold within the portfo-
lio. A rate of turnover of 100% could occur, for example, if all the securi-
ties held by a Portfolio are replaced within a period of one year. When a
Portfolio sells securities realizing gain, tax laws require that such gains be
distributed to investors every year. As a result, such investors are taxed on
their pro-rata shares of the gains. By attempting to minimize portfolio turn-
over, the Taxable Equity Portfolio will generally have a low turnover rate. It
is impossible to predict the impact of such a strategy on the realization of
gains or losses for the Taxable Equity Portfolio. For example, the Taxable Eq-
uity Portfolio may forego the opportunity to realize gains or reduce losses as
a result of this policy. The Adviser intends to balance these tax considera-
tions with portfolio trading needs and reserves the right to engage in short-
term trading if market conditions warrant such trading.
C & B MID CAP EQUITY PORTFOLIO. The Mid Cap Portfolio invests in midcap com-
panies, that is, companies having market capitalizations between $500 million
and $5 billion, with an anticipated average market capitalization of $3 bil-
lion or less. Investments in small and medium capitalization stocks may in-
volve greater risks than investing in large capitalization stocks, since
smaller companies can be subject to more abrupt, dramatic market and competi-
tive pressures, which can impact their stock prices in erratic, abrupt or more
volatile ways. Generally, the smaller the market capitalization of a company
the greater the potential for volatility. The Mid Cap Portfolio will not be
managed to minimize portfolio turnover.
Security selection for the Taxable Equity and Mid Cap Portfolios is similar
to the selection process utilized for the Equity Portfolio. Security selection
for both Portfolios is also based on analysis of a company's financial charac-
teristics, an assessment of the quality of a company's internal research capa-
bilities, the implementation of a valuation discipline and adherence to a low
risk philosophy. Companies acceptable for investment in the Portfolios are de-
termined by screening criteria such as high return on equity, strong balance
sheets, ability to generate excess cash flow, excellent fixed cost coverage
ratios, industry leadership position and a dividend and/or share repurchase
policy which will enable investors to bene
8
<PAGE>
fit from consistent, above average earnings and dividend growth. Intensive on-
site research, including interviews with top management, is undertaken by the
Adviser to identify companies with strong management, further narrowing the
universe of acceptable investments.
The Adviser bases a common stock's value on the payment of a future stream
of anticipated dividends. A dividend discount analysis is utilized to deter-
mine those stocks with the most attractive returns from this universe. The ex-
pected internal rate of return for each company is then compared to the rate
of return from a relatively riskless asset (intermediate term--U.S. Treasury
notes). To purchase a company's stock, the expected rate of return generally
must exceed the riskless rate by 600 basis points. Generally, existing stock
holdings will be sold, if the internal rate of return based on the dividend
discount model has narrowed to less than 200 basis points over the riskless
rate.
The companies which survive the Adviser's rigorous evaluation process are
high-quality, well-managed companies. In difficult economic environments, the
stocks of high quality companies likely will be far less volatile than the
stock market. Generally, the Adviser prefers to hold a smaller number of secu-
rities in the Portfolios, e.g., stocks of 25 to 40 companies. In this manner,
the Adviser seeks to provide adequate diversification while still allowing for
the opportunity to have the Portfolios' composition and performance behave
differently than the overall market. Adherence to this philosophy has resulted
in a pattern of results quite different than that of the market. The Adviser's
emphasis on quality and low risk has protected assets in down markets, while
insistence on stability of earnings and dividends growth, financial strength,
leadership position and strong cash flow has produced competitive results in
all but the most speculative markets. Over the long term, the Adviser believes
that these factors should result in superior returns with reduced risk. The
Adviser's goal generally is to be fully invested for both Portfolios, but cash
can accumulate when attractive new investments are scarce and/or market condi-
tions warrant such action.
C & B BALANCED PORTFOLIO. The Balanced Portfolio is designed to provide
shareholders a single vehicle with which to participate in the Adviser's eq-
uity and fixed income strategies, combined with the Adviser's asset allocation
decisions. The Portfolio seeks to achieve its objective by investing in a mix
of stocks, bonds, and cash equivalents. A typical asset mix for the Portfolio
is 60% stocks and 40% bonds. Depending on market conditions, this mix will
vary. However, at least 25% of the Portfolio's total assets will always be in-
vested in fixed income senior securities. Cash equivalent investments will be
maintained when deemed appropriate by the Adviser. Equity securities are se-
lected using approaches identical to those described under "Investment Poli-
cies" for the Equity Portfolio.
Fixed income securities in the Portfolio will consist primarily of (1) in-
vestment grade securities of varying maturities, including securities of or
guaranteed
9
<PAGE>
by the U.S. Government and its agencies or instrumentalities, corporate bonds,
mortgage-backed securities, variable rate debt securities, asset-backed secu-
rities, and various short-term instruments such as commercial paper, Treasury
bills, and certificates of deposit, and (2) any other publicly or privately
placed unrated security which, in the Adviser's opinion, is equivalent in
quality to securities having one of the four highest grades assigned by
Moody's Investors Service, Inc. (Moody's) or Standard & Poor's Corporation
(S&P).
Investment grade bonds are generally considered to be those bonds having one
of the four highest grades assigned by Moody's (Aaa, Aa, A or Baa) or S&P
(AAA, AA, A, or BBB). Bonds rated Baa or BBB may possess speculative charac-
teristics and may be more sensitive to changes in the economy and the finan-
cial condition of issuers than higher rated bonds. Mortgage-backed securities
in which the Portfolio will invest either carry a guarantee from an agency of
the U.S. Government or a private issuer of the timely payment of principal and
interest or are sufficiently seasoned to be considered by the Adviser to be of
investment grade quality.
The Adviser intends to limit the Portfolio's fixed income investments to in-
vestment grade securities. However, as described above, the Adviser reserves
the right to retain securities which are downgraded by one or both of the rat-
ing agencies or buy securities rated Ba or B by Moody's or BB or B by S&P if,
in the Adviser's judgment, maintaining a position in the securities is war-
ranted. Securities rated less than Baa by Moody's or BBB by S&P are classified
as carrying a high degree of risk and are considered speculative by the major
credit rating agencies. In addition, the Adviser may invest in preferred
stocks and convertible securities. In the case of convertible securities, the
conversion privilege may be exercised, but the common stocks received will be
sold.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, each Portfolio may invest a por-
tion of its assets in domestic and foreign money market instruments including
certificates of deposit, bankers' acceptances, time deposits, U.S. Government
obligations, U.S. Government agency securities, short-term corporate debt se-
curities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corpora-
tion or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated,
determined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total
10
<PAGE>
assets of at least $1 billion, or the equivalent in other currencies, (ii) in
the case of U.S. banks, it is a member of the Federal Deposit Insurance Corpo-
ration, and (iii) in the case of foreign branches of U.S. banks, the security
is, in the opinion of the Adviser, of an investment quality comparable with
other debt securities which may be purchased by each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT
COMPANIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price. The Sub-Administrator and the Adviser will mark
to market daily the value of the securities purchased. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause a Portfolio to experience a loss or delay in the liquida-
tion of the collateral securing the repurchase agreement. The Portfolio might
also incur disposition costs in liquidating the collateral. While the Fund's
management acknowledges these risks, it is expected that they can be con-
trolled through stringent security selection criteria and careful monitoring
procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into joint repurchase agree-
ments, a Portfolio may incur lower transaction costs and earn higher rates of
interest on joint repurchase agreements. Each Portfolio's contribution would
determine its return from a joint repurchase agreement. (See "SHORT TERM IN-
VESTMENTS.")
11
<PAGE>
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued" or "for-
ward delivery" basis. "When-issued" or "forward delivery" refers to securities
whose terms and indenture are available and for which a market exists, but
which are not available for immediate delivery. When-issued or forward deliv-
ery transactions may be expected to occur a month or more before delivery is
due. However, no payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to the transaction. A Portfolio will
maintain a separate account of cash or liquid securities at least equal to the
value of purchase commitments until payment is made. Such segregated securi-
ties will either mature or, if necessary, be sold on or before the settlement
date. Typically, no income accrues on securities purchased on a delayed deliv-
ery basis prior to the time delivery is made, although a Portfolio may earn
income on securities it has deposited in a segregated account.
The Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices--not to increase
its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for the Equity and Balanced Portfolios is not anticipated
to exceed 80%; turnover is not anticipated to exceed 30% for the Taxable Eq-
uity Portfolio and 50% for the Mid Cap Portfolio. In addition to Portfolio
trading costs, higher rates of portfolio turnover may result in the realiza-
tion of capital gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES"
for more information on taxation.) The Portfolios will not normally engage in
short-term trading, but each reserves the right to do so. The tables set forth
in "Financial Highlights" present the Portfolios' historical portfolio turn-
over ratios.
12
<PAGE>
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. The Portfolio will indirectly bear its proportionate share of any
management fees paid by an investment company in which it invests in addition
to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios, for cash management purposes, to invest the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN SECURITIES (ADRS)
Each Portfolio may invest up to 10% of its assets, under normal circumstanc-
es, in securities of foreign issuers through use of American Depositary Re-
ceipts ("ADRs"). These types of investments entail risks in addition to those
involved in investments in securities of domestic issues. Investing in foreign
securities through ADRs may represent a greater degree of risk than investing
in domestic securities due to possible exchange rate fluctuations, possible
exchange controls, less publicly-available information, more volatile markets,
less securities regulation, less favorable tax provisions (including possible
withholding taxes), war or expropriation. In particular, the dollar value of
portfolio securities of non-U.S. issuers fluctuates with changes in market and
economic conditions abroad and with changes in relative currency values.
ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or pool of se-
curities issued by a foreign issuer (the "underlying issuer") and deposited
with the depositary. ADRs may be "sponsored" or "unsponsored". Sponsored ADRs
are established jointly by a depositary and the underlying issuer, whereas
unsponsored ADRs may be established by a depositary without participation by
the underlying issuer. Holders of an unsponsored ADR generally bear all the
costs associated with establishing the unsponsored ADR. The depositary of an
unsponsored ADR is under no obligation to distribute shareholder communica-
tions received from the underlying issuer or to pass through to the holders of
the unsponsored ADR voting rights with respect to the deposited security or
pool of securities. For additional information regarding foreign securities,
please see the Statement of Additional Information.
13
<PAGE>
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, the Bal-
anced Portfolio may invest in stock and bond futures and options and interest
rate futures contracts and the Equity, Taxable Equity and Mid Cap Portfolios
may invest in stock futures and options. Because transaction costs associated
with futures and options may be lower than the costs of investing in stocks
and bonds directly, it is expected that the use of index futures and options
to facilitate cash flows may reduce a Portfolio's overall transactions costs.
Each Portfolio may enter into futures contracts provided that not more than
5% of the Portfolio's assets are required as margin deposit to secure obliga-
tions under such contracts. The Portfolios will engage in futures and options
transactions for hedging purposes only.
Futures and options can be volatile and involve various degrees and types of
risk. If the Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts could result in a loss. The Portfolio could also suffer
losses if it is unable to liquidate its position due to an illiquid secondary
market. In the opinion of the Fund's Directors, the risk that a Portfolio will
be unable to close out a futures position or options contract will be mini-
mized by only entering into futures contracts or options transactions traded
on national exchanges and for which there appears to be a liquid secondary
market.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. Each Portfolio will invest no more than
10% of its net assets in illiquid securities. The prices realized from the
sales of these securities could be more or less than those originally paid by
the Portfolio or less than what may be considered the fair value of such secu-
rities.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a majority of the out-
standing voting securities of each Portfolio.
14
<PAGE>
INVESTMENT LIMITATIONS
A Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 10%
of the Portfolio's gross assets valued at the lower of market or cost,
and (ii) a Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment limitations described here and in the SAI are fundamental
policies and may be changed only with the approval of the holders of a major-
ity of the outstanding shares of each Portfolio of the Fund. If a percentage
limitation on investment or utilization of assets as set forth above is ad-
hered to at the time an investment is made, a later change in percentage re-
sulting from changes in the value or total cost of a Portfolio's assets will
not be considered a violation of the restriction.
15
<PAGE>
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission, at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "VALUATION OF SHARES.") The minimum initial
investment required is $2,500. The minimum initial investment for IRA accounts
is $500. The minimum initial investment for spousal IRA accounts is $250. Cer-
tain exceptions may be made by the officers of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled to receive compensation for selling or servicing Portfolio shares may
receive different compensation with respect to one particular class of shares
over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior to the close of its business day to receive that day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
16
<PAGE>
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application, and mail it together with a check
payable to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (moneys
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. Instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check to the UAM Funds Service Center (payable to "UAM Funds") or by wiring
money to the Custodian Bank using the instructions outlined above. When making
additional investments, be sure that the account number, account name, and the
Portfolio to be purchased are specified on the check or wire. Prior to wiring
additional investments, notify the Fund by calling the number on the cover of
this Prospectus.
17
<PAGE>
Mail orders should include, when possible, the "Invest by Mail" stub which ac-
companies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional shares will not be issued. Certif-
icates for whole shares will not be issued except at the written request of
the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining to such securities shall become the property of the Portfolio and must
be delivered to the Fund by the investor upon receipt from the issuer. Securi-
ties acquired through an in-kind purchase will be acquired for investment and
not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are liquid securities and not subject to any restric-
tions upon their sale by the Portfolio under the Securities Act of
1933, or otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
18
<PAGE>
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone, at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any
redemption may be more or less than the purchase price of your shares
depending on the market value of the investment securities held by the
Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests.
19
<PAGE>
The Fund or Sub-Transfer Agent may be liable for any losses due to unautho-
rized or fraudulent telephone instructions if the Fund or the Sub-Transfer
Agent does not employ the procedures described above. Neither the Fund nor the
Sub-Transfer Agent will be responsible for any loss, liability, cost or ex-
pense for following instructions received by telephone that it reasonably be-
lieves to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after re-
ceipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
as determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the SEC. Investors may
incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each C & B Portfolio may be exchanged for In-
stitutional Class Shares of other C & B Portfolios. In addition, Institutional
Class Shares of each Portfolio may be exchanged for any other Institutional
Class
20
<PAGE>
Shares of a Portfolio included in the Fund or UAM Funds Trust. (See the list
of Portfolios of the UAM Funds--Institutional Class Shares at the end of this
Prospectus.) Exchange requests should be made by calling the Fund or writing
to the UAM Funds Service Center.
Any exchange will be based on the net asset values of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfo-
lio(s). Exchanges can only be made with Portfolios that are qualified for sale
in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4:00
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4:00 p.m. will be processed on the next business day.
The Board of Directors may limit frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telecopied instructions, see "REDEMPTION OF SHARES--BY TELEPHONE" above. An
exchange into another UAM Funds Portfolio may result in a capital gain or loss
for income tax purposes. The Fund may modify or terminate the exchange privi-
lege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices
21
<PAGE>
provided by a pricing service when such prices are believed to reflect the
fair market value of such securities. Securities purchased with remaining ma-
turities of 60 days or less are valued at amortized cost when the Board of Di-
rectors determines that amortized cost reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Reports to Shareholders for the most recent fiscal
year end contain additional performance information that include comparisons
with appropriate indices. The Annual Reports are available without charge.
Contact the UAM Funds Service Center at the address or telephone number on the
cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolios will normally distribute them
annually.
22
<PAGE>
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of each Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a regulated investment company under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
Cooke & Bieler, Inc. is a Pennsylvania corporation formed in 1951 and is lo-
cated at 1700 Market Street, Philadelphia, PA 19103. The Adviser is a wholly-
owned subsidiary of United Asset Management Corporation ("UAM") and pro-
23
<PAGE>
vides investment management services to corporations, foundations, endowments,
pension and profit sharing plans, trusts, estates and other institutions and
individuals. As of the date of this Prospectus, the Adviser had over $6 bil-
lion in assets under management. For further information on Cooke & Bieler's
investment services, please call (215) 567-1101.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day operations of the Portfolios and a description of their
business experience during the past five years are as follows:
JOHN J. MEDVECKIS, Partner and Director.
A.B., University of Cincinnati.
He has been a member of the firm since 1973 and has managed the Portfolios
since inception.
R. JAMES O'NEIL, Vice President.
B.A., cum laude, Colby College.
M.B.A., Harvard University.
He is a Chartered Financial Analyst and
has been a member of the firm since 1988 and has managed the Portfolios
since inception.
PETER A. THOMPSON, Vice President.
B.A., Princeton University.
M.B.A., Colgate Darden School of Business Administration.
He has been a member of the firm since 1989 and has managed the Portfolios
since inception.
MICHAEL M. MEYER, Associate.
B.A., cum laude, Davidson College.
M.B.A., The Wharton School of Finance, University of Pennsylvania.
He has been a member of the firm since 1993.
KERMIT S. ECK, Vice President.
B.S., Montana State University.
M.B.A., Stanford University.
He is a Chartered Financial Analyst and has been a member of the firm
since 1993.
Under Investment Advisory Agreements with the Fund, the Adviser manages the
investment and reinvestment of the assets of the Equity and Balanced Portfo-
lios, the Taxable Equity and the Mid Cap Equity Portfolios pursuant to agree-
ments dated as of July 3, 1989 and , 1996, respectively. The Adviser must
adhere to the stated investment objectives and policies of the Portfolios, and
is subject to the control and supervision of the Fund's Board of Directors.
24
<PAGE>
As compensation for its services as an Adviser, each Portfolio pays the Ad-
viser an annual fee, in monthly installments, calculated by applying the fol-
lowing annual percentage rates to each Portfolios' average daily net assets
for the month:
<TABLE>
<CAPTION>
RATE
-----
<S> <C>
Equity Portfolio...................................................... 0.625%
Balanced Portfolio.................................................... 0.625%
C & B Equity Portfolio for Taxable Investors.......................... 0.625%
C & B Mid Cap Equity Portfolio........................................ 0.625%
</TABLE>
The Adviser has voluntarily agreed to maintain each Portfolio's total annual
operating expenses from exceeding 1.00% of its average daily net assets. Ab-
sent the fees waived and expenses assumed by the Adviser, estimated annualized
total operating expenses, including administrative fees as discussed below,
would be 1.153% for the Balanced Portfolio, % for the C & B Equity Portfolio
for Taxable Investors Portfolio and 1.153% for the C & B Mid Cap Equity Port-
folio. The Fund will not reimburse the Adviser for any advisory fees which are
waived or Portfolio expenses which the Adviser may bear on behalf of the Port-
folios for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares of a Port-
folio. Payments made for any of these purposes may be made from the paying
entity's revenues, its profits or any other source available to it. When such
services arrangements are in effect, they are made generally available to all
qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives 0.15 of 1% of
the daily net asset value of Institutional Class Shares held by Smith Barney's
eligible customer accounts in addition to amounts payable to all selling deal-
ers. The Fund also compensates Smith Barney for services it provides to cer-
tain defined contribution plan shareholders that are not otherwise provided by
UAMFSI.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
25
<PAGE>
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of ag-
gregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Equity Portfolio....................................................... 0.04%
Balanced Portfolio..................................................... 0.06%
Taxable Equity Portfolio............................................... 0.04%
Mid Cap Equity Portfolio............................................... 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billionbut less than $3
billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative assets
and are subject to a graduated minimum fee schedule per Portfolio, which starts
at $2,000 per month and increases to $70,000 annually after two years. If a
separate class of shares is added to a Portfolio, its minimum annual fee in-
creases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the Dis-
tribution Agreement (the "Agreement"), the Distributor, as agent for the Fund,
agrees to use its best efforts as sole distributor of Fund shares. The Distrib-
utor does not receive any fee or other compensation under the Agreement with
respect to the Portfolios included in this Prospectus. The Agreement continues
in effect so long as it is approved at least annually by a vote of the Fund's
Board of Directors. Those approving the agreements must include a majority of
Directors who are neither parties to such Agreement nor interested persons of
any such party. The Agreement provides that the Fund will bear costs of regis-
tration of its shares with the SEC and various states as well as the printing
of its prospectuses, its statements of additional information and its reports
to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchase and sale of investment securities for the
Portfo
26
<PAGE>
lios and direct the Adviser to use its best efforts to obtain the best avail-
able price and most favorable execution for all transactions of the Portfolios.
If consistent with the interests of the Portfolios, the Adviser may select bro-
kers on the basis of the research, statistical and pricing services they pro-
vide to each Portfolio in addition to required Adviser services. Such brokers
may be paid a higher commission than that which another qualified broker would
have charged for effecting the same transaction, provided that such commissions
are paid in compliance with the Securities Exchange Act of 1934, as amended,
and that the Adviser determines in good faith that the such commission is rea-
sonable in terms either of the transaction or the overall responsibility of the
Adviser to a Portfolio and the Adviser's other clients. Although not a typical
practice, the Adviser may place portfolio orders with qualified broker-dealers
who refer clients to the Adviser.
If a purchase or sale of securities consistent with the investment policies
of a Portfolio and one or more of these other clients served by the Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reason-
able by the Adviser. Although there is no specified formula for allocating such
transactions, such allocations are subject to periodic review by the Fund's Di-
rectors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was changed
to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund was changed
to "UAM Funds, Inc.". The Fund's Articles of Incorporation permit the Directors
to issue three billion shares of common stock, with an $.001 par value. The Di-
rectors have the power to designate one or more series or classes of shares of
common stock and to classify or reclassify any unissued shares without further
action by shareholders. At its discretion, the Board of Directors may create
additional Portfolios and classes of shares of the Fund in the future.
The shares of each Portfolio are fully paid and nonassessable, have no pref-
erence as to conversion, exchange, dividends, retirement or other features and
have no pre-emptive rights. They have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of Di-
rectors can elect 100% of the Directors. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share
held), then standing in his name on the books of the Fund.
Annual meetings will not be held except as required by the 1940 Act and other
applicable laws. The Fund has undertaken that its Directors will call a meeting
of shareholders if such a meeting is requested in writing by the holders of not
less than 10% of the outstanding shares of the Fund. The Fund will assist
shareholder communications in such matters.
27
<PAGE>
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
28
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Equity Portfolio
McKee U.S. Government Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
29
<PAGE>
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
30
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Cooke & Bieler, Inc.
1700 Market Street
Philadelphia, PA 19103
(215) 567-1101
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
The DSI Portfolios
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
THE DSI PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: DEWEY SQUARE INVESTORS CORPORATION
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund". The Fund consists of multiple series (known as
"Portfolios") each of which has different investment objectives and policies.
The DSI Disciplined Value Portfolio currently offers two separate classes of
shares: Institutional Class Shares and Institutional Service Class Shares
("Service Class Shares"). The DSI Limited Maturity Bond, DSI Money Market and
DSI Balanced Portfolios currently offer only one class of shares: Institu-
tional Class Shares. The securities offered in this Prospectus are Institu-
tional Class Shares of four diversified, no-load Portfolios of the Fund man-
aged by Dewey Square Investors Corporation.
DSI DISCIPLINED VALUE PORTFOLIO. The objective of the DSI Disciplined Value
Portfolio (the "Disciplined Value Portfolio") is to achieve maximum long-term
total return consistent with reasonable risk to principal through diversified
equity investments.
DSI LIMITED MATURITY BOND PORTFOLIO. The objective of the DSI Limited Matu-
rity Bond Portfolio (the "Limited Maturity Bond Portfolio") is to provide max-
imum total return consistent with reasonable risk to principal by investing in
investment grade fixed income securities. The Portfolio will ordinarily main-
tain an average weighted maturity of less than six years.
DSI MONEY MARKET PORTFOLIO. The objective of the DSI Money Market Portfolio
(the "Money Market Portfolio") is to provide maximum current income consistent
with the preservation of capital and liquidity by investing in short-term in-
vestment grade money market obligations issued or guaranteed by financial in-
stitutions, nonfinancial corporations, and the United States Government, as
well as repurchase agreements collateralized by such securities. It is antici-
pated that the Portfolio will maintain a constant net asset value of $1.00 and
an average weighted maturity of 90 days or less. THE PORTFOLIO'S SHARES ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSUR-
ANCE THAT A CONSTANT NET ASSET VALUE OF $1.00 WILL BE MAINTAINED.
DSI BALANCED PORTFOLIO. The objective of the DSI Balanced Portfolio (the
"Balanced Portfolio") is to provide maximum long-term capital growth consis-
tent with reasonable risk to principal by investing in a diversified portfolio
of equity, primarily investment grade fixed income and money market securi-
ties.
There can be no assurance that the Portfolios will achieve their stated ob-
jective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 2, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI,
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 8
Investment Policies........................................................ 8
Other Investment Policies.................................................. 13
Investment Limitations..................................................... 17
Purchase of Shares......................................................... 18
Inititial Investments...................................................... 19
Redemption of Shares....................................................... 21
Shareholder Services....................................................... 24
Valuation of Shares........................................................ 25
Performance Calculations................................................... 26
Dividends, Capital Gains Distributions and Taxes........................... 27
Investment Adviser......................................................... 28
Administrative Services.................................................... 31
Distributor................................................................ 32
Portfolio Transactions..................................................... 33
General Information........................................................ 33
UAM Funds -- Institutional Class Shares.................................... 36
</TABLE>
<PAGE>
FUND EXPENSES
DSI INSTITUTIONAL CLASS
The following table illustrates the expenses and fees that a shareholder of
the Portfolios' Institutional Class Shares would incur. Transaction fees may
be charged if a broker-dealer or other financial intermediary deals with the
Fund on your behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
DISCIPLINED VALUE LIMITED MATURITY MONEY MARKET BALANCED
PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES
----------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales Load Imposed on
Purchases............. NONE NONE NONE NONE
Sales Load Imposed on
Reinvested Dividends.. NONE NONE NONE NONE
Deferred Sales Load..... NONE NONE NONE NONE
Redemption Fees......... NONE NONE NONE NONE
Exchange Fees........... NONE NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
DISCIPLINED VALUE LIMITED MATURITY MONEY MARKET BALANCED
PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES
----------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment Advisory
Fees.................. 0.75% 0.45% 0.40% 0.45%**
Administrative Fees..... 0.20% 0.33% 0.12% 0.22%
12b-1 Fees.............. NONE NONE NONE NONE
Other Expenses.......... 0.12% 0.23% 0.08% 0.29%
Advisory Fees Waived.... -- -- (0.22%) --
Total Operating Expenses
(After Fee Waiver).... 1.07%+ 1.01%+ 0.38%*+ 0.96%+
</TABLE>
- -----------
* Absent the Adviser's fee waiver, annualized Total Operating Expenses of
the Money Market Portfolio Institutional Class Shares for the fiscal year
ended October 31, 1996 would have been 0.60%. Until further notice, the
Adviser has voluntarily agreed to waive a portion of its advisory fees in
order to keep the advisory fees at 0.18% of the Portfolio's average daily
net assets. The Fund will not reimburse the Adviser for any advisory fees
that are waived on behalf of the Portfolio.
+ The annualized Total Operating Expenses includes the effect of expense
offsets. If expense offsets were excluded, annualized Total Operating Ex-
penses of the Limited Maturity Bond Money Market Portfolio Institutional
Class Shares would be 1.02%. If expense offsets were excluded, annualized
Total Operating Expenses of the Disciplined Value and Money Market Portfo-
lios Institutional Class Shares would not differ. As of the date of this
Prospectus, the Balanced Portfolio had not commenced operations.
** The Adviser's fee is as follows: 0.45% for the first twelve months of op-
erations, 0.55% for the next twelve months of operations and 0.65% there-
after.
1
<PAGE>
This table shows the various fees and expenses that a shareholder of the
Portfolios of the Fund would bear directly or indirectly. The expenses and
fees set forth above are based on the Disciplined Value, Limited Maturity Bond
and Money Market Portfolios' operations during the fiscal year ended October
31, 1996, except that Advisory Fees Waived for the Money Market Portfolio have
been restated to reflect the Adviser's current waiver of 0.22% of its advisory
fees, and Administrative Fees have been restated to reflect current fees. See
"ADMINISTRATIVE SERVICES" herein and in the SAI. The fees and expenses with
respect to the Balanced Portfolio are based on estimated amounts for its first
year of operations, based upon assumed average daily net assets of $25 mil-
lion. As of the date of this Prospectus, the Balanced Portfolio Institutional
Class Shares had not commenced operations.
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. The Fund charges no
redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Disciplined Value Portfolio Institutional
Class Shares................................ $11 $34 $59 $131
Limited Maturity Bond Portfolio Institutional
Class Shares................................ $10 $32 $56 $124
Money Market Portfolio Institutional Class
Shares...................................... $ 4 $12 $21 $ 48
Balanced Portfolio Institutional Class
Shares...................................... $10 $31 * *
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
- -----------
* As the Balanced Portfolio Institutional Class Shares is not yet operation-
al, the Fund has not projected expenses beyond the 3 year period shown.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Dewey Square Investors Corporation (the "Adviser"), an investment counseling
firm founded in 1989, serves as investment adviser to the Fund's four DSI
Portfolios. The Adviser was formed as the successor to the business of The
Dewey Square Investors Division of The First National Bank of Boston, which
division was established in 1984. The Adviser presently manages over $3.4 bil-
lion in assets for institutional clients and high net worth individuals. (See
"INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment for each Portfolio is $2,500. The minimum for
subsequent investments is $100. Certain exceptions to the initial or minimum
amounts may be made by the officers of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
The Money Market Portfolio declares dividends daily and distributes substan-
tially all of its net investment income monthly. Each of the other three Port-
folios will normally distribute substantially all of its net investment income
in quarterly dividends. Each Portfolio will distribute any realized net capi-
tal gains annually. Distributions will be reinvested in Portfolio shares auto-
matically unless an investor elects to receive cash distributions. (See "DIVI-
DENDS AND DISTRIBUTIONS.")
REDEMPTION AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value per share of the Portfolio next determined after receipt of
the redemption request. The redemption price may be more or less than the pur-
chase price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
Except for the Money Market Portfolio, the value of the Portfolios' shares
can be expected to fluctuate in response to changes in market and economic
conditions, as well as the financial conditions and prospects of the issuers
in which the Portfolios invest. Prospective investors Fund should consider the
following: (1) The Limited Maturity Bond and the Balanced Portfolios may in-
vest in securities rated lower than Baa by Moody's Investors Services, Inc. or
BBB by Standard & Poor's Corporation. These securities carry a high degree of
credit risk, and are considered speculative by the major credit rating agen-
cies and are sometimes referred to as "junk bonds" (See "INVESTMENT POLI-
CIES."); (2) Each Portfolio (except the Money Market Portfolio) may invest a
portion of its assets in derivatives including futures contracts and options.
(See "FUTURES CONTRACTS AND OPTIONS."); (3) Each Portfolio (except the Money
Market Portfolio) may invest in foreign securities, which may involve greater
risks than investments in domestic securities, such as foreign currency risk.
(See "FOREIGN INVESTMENTS."); (4) The fixed income securities held by the Lim-
ited Maturity Bond and the Money Market Portfolios will be affected by general
changes in interest rates resulting in an increase or decrease in the value of
obligations held by each Portfolio. The value of securities held by such Port-
folio can be expected to vary inversely with changes in the interest rates; as
interest rates decline, market value tends to increase and vice versa; (5) In
general, the Portfolios will not trade for short-term profits, however, when
circumstances warrant, investments may be sold without regard to the length of
time held. High rates of turnover may result in additional cost and the reali-
zation of capital gains. (See "PORTFOLIO TURNOVER."); (6) Each Portfolio may
use various investment practices that involve special consideration, including
investing in repurchase agreements, when-issued, forward delivery and delayed
settlement securities and lending of securities. (See "OTHER INVESTMENT POLI-
CIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS SHARES
The following tables provide selected per share information for a share out-
standing throughout each of the respective periods presented for the Disci-
plined Value, Limited Maturity Bond and Money Market Portfolios' Institutional
Class Shares. These tables are part of the Portfolios' Financial Statements,
which are included in the Portfolios' 1996 Annual Report to Shareholders. The
Portfolios' 1996 Annual Reports are incorporated into the Portfolios' SAI. The
Portfolios' Financial Statements have been audited by Price Waterhouse LLP.
Their unqualified opinion on the Financial Statements is also incorporated
into the SAI. Please read the following information in conjunction with the
Portfolios' 1996 Annual Report to Shareholders. The Balanced Portfolio Insti-
tutional Class Shares had not commenced operations as of the date of this Pro-
spectus.
DISCIPLINED VALUE PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER
12, 1989** TO YEARS ENDED OCTOBER 31,
OCTOBER ----------------------------------------------------
31, 1990 1991 1992 1993 1994 1995 1996
------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 7.86 $ 10.17 $ 10.62 $ 12.72 $ 11.11 $ 11.76
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.27 0.26 0.26 0.22 0.22 0.25 0.23
Net Realized and
Unrealized Gain
(Loss)................ (2.16) 2.31 0.46 2.09 0.17 1.70 2.26
------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations........... (1.89) 2.57 0.72 2.31 0.39 1.95 2.49
------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.. (0.25) (0.26) (0.27) (0.21) (0.22) (0.25) (0.22)
Net Realized Gain...... -- -- -- -- (1.78) (1.05) (1.04)
------- ------- ------- ------- ------- ------- -------
Total Distributions... (0.25) (0.26) (0.27) (0.21) (2.00) (1.30) (1.26)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 7.86 $ 10.17 $ 10.62 $ 12.72 $ 11.11 $ 11.76 $ 12.99
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN............ (19.26)% 32.95% 7.15% 21.92% 3.48% 20.12% 22.92%
======= ======= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $33,388 $41,558 $37,202 $42,170 $49,002 $47,938 $63,596
Ratio of Expenses to
Average Net Assets..... 1.01%* 1.05% 0.99% 1.04% 1.09% 1.00% 1.04%
Ratio of Net Investment
Income to Average Net
Assets................. 3.16%* 2.60% 2.44% 1.88% 2.02% 2.26% 1.89%
Portfolio Turnover
Rate................... 75% 62% 74% 149% 184% 121% 135%
Average Commission
Rate#.................. N/A N/A N/A N/A N/A N/A $0.0588
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A N/A 0.99% 1.04%
</TABLE>
- ----------
* Annualized
** Commencement of Operations
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
LIMITED MATURITY BOND PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER
18, 1989** TO YEARS ENDED OCTOBER 31,
OCTOBER -----------------------------------------------------
31, 1990 1991 1992 1993 1994 1995 1996
------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 9.87 $ 10.40 $ 10.56 $ 9.95 $ 9.31 $ 9.51
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income................ 0.66 0.77 0.66 0.68 0.56 0.69 0.62
Net Realized and
Unrealized Gain
(Loss)................ (0.19) 0.53 0.35 (0.16) (0.70) 0.17 (0.13)
------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations.......... 0.47 1.30 1.01 0.52 (0.14) 0.86 0.49
------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment
Income................ (0.60) (0.77) (0.67) (0.70) (0.50) (0.66) (0.60)
Net Realized Gain...... -- -- (0.18) (0.43) -- -- --
------- ------- ------- ------- ------- ------- -------
Total Distributions.. (0.60) (0.77) (0.85) (1.13) (0.50) (0.66) (0.60)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 9.87 $ 10.40 $ 10.56 $ 9.95 $ 9.31 $ 9.51 $ 9.40
------- ------- ------- ------- ------- ------- -------
TOTAL RETURN............ 4.89% 13.72% 10.03% 5.22% (1.39)% 9.58% 5.34%
======= ======= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $35,583 $34,896 $33,206 $33,724 $30,220 $29,294 $30,433
Ratio of Expenses to
Average
Net Assets............. 0.72%* 0.75% 0.72% 0.79% 0.88% 0.88% 1.00%
Ratio of Net Investment
Income to Average Net
Assets................. 8.39%* 7.39% 6.19% 6.50% 5.68% 7.12% 6.55%
Portfolio Turnover
Rate................... 192% 306% 238% 167% 274% 126% 121%
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A N/A 0.87% 0.99%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
6
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER
28, 1989** TO YEARS ENDED OCTOBER 31,
OCTOBER -----------------------------------------------------------
31, 1990 1991 1992 1993 1994 1995 1996
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income+............... 0.064 0.059 0.035 0.026 0.033 0.053 0.051
Total from Investment
Operations.......... 0.064 0.059 0.035 0.026 0.033 0.053 0.051
-------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment
Income................ (0.064) (0.059) (0.035) (0.026) (0.033) (0.053) (0.051)
Total Distributions.. (0.064) (0.059) (0.035) (0.026) (0.033) (0.053) (0.051)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- --------
TOTAL RETURN............ 6.59% 6.10% 3.66% 2.63% 3.30% 5.48%+ 5.26%+
======== ======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $258,574 $168,490 $182,807 $188,419 $112,085 $124,147 $220,124
Ratio of Expenses to
Average Net Assets..... 0.63%* 0.68% 0.64% 0.58% 0.56% 0.50% 0.38%
Ratio of Net Investment
Income to Average Net
Assets................. 7.62%* 5.98% 3.65% 2.60% 3.07% 5.35% 5.14%
Voluntary Waived Fees
and Expenses Assumed by
the Adviser Per Share.. N/A N/A N/A N/A N/A $ 0.001 $ 0.002
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A N/A 0.49% 0.38%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain expenses not been waived for
the period indicated.
7
<PAGE>
INVESTMENT OBJECTIVES
DISCIPLINED VALUE PORTFOLIO -- The objective of the Disciplined Value Port-
folio is to provide maximum long-term total return consistent with reasonable
risk to principal through diversified equity investments. The Portfolio's in-
vestment strategy is value-oriented with a disciplined approach to stock se-
lection.
LIMITED MATURITY BOND PORTFOLIO -- The objective of the Limited Maturity
Bond Portfolio is to provide maximum total return consistent with reasonable
risk to principal by investing in investment grade fixed income securities.
These consist of securities of the U.S. Government and its agencies, corporate
bonds, mortgage-backed securities, and various short-term instruments such as
commercial paper, Treasury bills, and certificates of deposit. Income return
is expected to be a predominant portion of the Portfolio's total return. Any
capital return on the Portfolio is dependent upon interest rate movements. The
capital return from the Portfolio will vary according to, among other factors,
interest rate changes and the average weighted maturity (duration) of the
Portfolio. The Portfolio will ordinarily maintain an average weighted maturity
of less than six years.
MONEY MARKET PORTFOLIO -- The objective of the Money Market Portfolio is to
provide maximum current income consistent with the preservation of capital and
liquidity by investing in investment grade money market obligations issued or
guaranteed by financial institutions, nonfinancial corporations, and the U.S.
Government, as well as repurchase agreements collateralized by such securi-
ties. The Portfolio also invests in U.S. dollar-denominated short-term obliga-
tions of foreign banks, foreign branches of domestic banks and foreign non-fi-
nancial corporations. It is anticipated that the Portfolio will maintain a
constant net asset value of $1.00 and an average weighted maturity of 90 days
or less. There can be no assurance, however, that a constant net asset value
of $1.00 will be maintained.
BALANCED PORTFOLIO -- The objective of the Balanced Portfolio is to provide
maximum long-term capital growth consistent with reasonable risk to principal
by investing in a diversified portfolio of equity, primarily investment grade
fixed income and money market securities. At least 25% of the Portfolio's to-
tal assets will always be invested in fixed income senior securities including
debt securities and preferred stock.
INVESTMENT POLICIES
DISCIPLINED VALUE PORTFOLIO -- The Disciplined Value Portfolio seeks to
achieve its objective by investing primarily in common stocks of mid to large
capitalization companies. The selection process for the Portfolio focuses upon
the stocks of undervalued yet fundamentally sound companies which exhibit im-
proving fundamentals.
8
<PAGE>
Using screening parameters such as relative price to earnings ratios, rela-
tive dividend yields, relative price to book ratios, debt adjusted price to
sales ratios, and other financial ratios, the Adviser screens over one thou-
sand stocks to identify potentially undervalued securities. Stocks are also
screened by an "earnings per share" revision screen which measures the change
in earnings estimate expectations of each stock. The list of potential invest-
ments is narrowed further by the use of traditional fundamental security anal-
ysis. The Adviser interviews company management and reviews the assessments
and opinions of outside analysts and consultants as well as monitors industry
trends and technical accumulation/distribution patterns before making the fi-
nal stock selection.
The Portfolio maintains a high degree of diversification generally with a
representation in all of the Standard & Poor's 500 Composite Price Stock Index
economic sectors. As market timing is not an important part of the Adviser's
investment strategy, cash reserves will normally represent a small portion of
the Portfolio's assets (under 20%). It is the policy of the Portfolio to in-
vest, under normal circumstances, at least 80% of its assets in equity securi-
ties. For temporary defensive purposes, however, the Portfolio may reduce its
holdings of equity securities and invest up to 100% of its holdings in short-
term investments.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States-based companies; however, from time to time
shares of foreign-based companies may be purchased if they pass the selection
process outlined above. Under normal circumstances, foreign securities will
not comprise more than 20% of the Portfolio's assets.
LIMITED MATURITY BOND PORTFOLIO -- The Limited Maturity Bond Portfolio seeks
to achieve its objective by investing primarily in investment grade fixed in-
come securities. These consist of securities of the U.S. Government and its
agencies or instrumentalities, corporate bonds, municipal bonds, Yankee bonds,
mortgage-backed securities, asset-backed securities, commercial paper, vari-
able rate and fixed rate debt securities, which are deemed by the Adviser and
the rating agencies cited below to be of investment grade quality. Investment
grade bonds are generally considered to be those bonds having one of the four
highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa,
Aa, A or Baa) or Standard & Poor's Corporation ("S&P") (AAA, AA, A or BBB).
The Portfolio will only invest in municipal bonds when the expected return is
higher than or equivalent to a taxable investment.
Mortgage-backed securities in which the Portfolio may invest will either
carry a guarantee from an agency of the U.S. Government or a private issuer of
the timely payment of principal and interest or are sufficiently seasoned to
be considered by the Adviser to be of investment grade quality. Mortgage-
backed securities differ from bonds in that the principal is paid back by the
borrower over the length of the loan rather than returned in a lump sum at ma-
turity. Mortgage-backed secu-
9
<PAGE>
rities are called "Pass-Through" securities because both interest and princi-
pal payments (including pre-payments) are passed through to the holder of the
security. When prevailing interest rates rise, the value of a mortgage-backed
security may decrease as do other types of debt securities. When prevailing
interest rates decline, however, the value of mortgage-backed securities may
not rise on a comparable basis with other debt securities because of the pre-
payment feature. When interest rates decline, additional mortgage prepayments
must be reinvested at lower interest rates. Additionally, if a mortgage-backed
security is purchased at a premium above its principal value because its fixed
rate of interest exceeds the prevailing level of yields, the decline in price
to par may result in a loss of the premium in the event of prepayment. Certain
mortgage-backed securities are referred to as""derivatives."
It is the Adviser's intention that the Portfolio's investments will be lim-
ited to the investment grades described above. However, the Adviser reserves
the right to retain securities which are downgraded by one or both of the rat-
ing agencies if, in the Adviser's judgment, the retention of the securities is
warranted. In addition, the Adviser may invest up to 10% of the Portfolio's
assets in fixed income securities rated Ba or B by Moody's or BB or B by S&P
(or which, if unrated, are in the Adviser's opinion of comparable quality or
better), preferred stocks and convertible securities. In the case of convert-
ible securities, the conversion privilege may be exercised, but the common
stocks received will be sold. Securities which are rated Baa or lower by
Moody's or BBB or lower by S&P are considered to be more speculative with re-
gard to the payment of interest and principal (according to the terms of the
indenture) than securities in the three highest rating categories. Such secu-
rities normally carry with them a greater degree of investment risk than secu-
rities with higher ratings. Securities rated lower than Baa by Moody's or BBB
by S&P can carry a high degree of credit risk and are considered speculative
by the major credit rating agencies. They are sometimes referred to as "junk
bonds."
The Adviser expects to actively manage the Portfolio in order to meet the
investment objective. This will be accomplished by identifying sectors or se-
curities in the market which are inefficiently valued. The Portfolio will
maintain an average weighted maturity of less than six years.
While the Adviser anticipates that the majority of the assets in the Portfo-
lio will be U.S. dollar-denominated securities, it reserves the right to pur-
chase debt obligations of foreign governments, agencies, or corporations de-
nominated either in U.S. dollars or foreign currencies and forward contracts
for such currencies. The credit quality standards applied to foreign obliga-
tions are the same as those applied to the selection of U.S. based securities.
For a more complete description of the special considerations and risks asso-
ciated with investments in foreign issuers, see "FOREIGN INVESTMENTS."
10
<PAGE>
The Portfolio may enter into forward foreign currency exchange contracts
("forward contracts") when, in the Adviser's judgment, the specific foreign
currency covered by a forward contract is likely to appreciate against the
U.S. dollar. However, unanticipated changes in currency prices may result in a
loss to the Portfolio. In addition, forward contracts are traded over-the-
counter and typically not in organized markets. As a result, the Portfolio may
be unable to liquidate a forward contract prior to its stated maturity date or
it may be required to enter into an offsetting contract (which it may be un-
able to do). In addition, the other party to a forward contract may require
the Portfolio to deposit collateral upon entering into a forward contract and
to deposit additional collateral if exchange rates move adversely to the Port-
folio's position. For additional information regarding forward contracts, see
the SAI.
It is the policy of the Portfolio to invest, under normal circumstances, at
least 80% of its assets in fixed income securities. For temporary defensive
purposes, however, the Portfolio may reduce its holdings of fixed income secu-
rities and increase, up to 100%, its holdings in short-term investments.
MONEY MARKET PORTFOLIO -- The Money Market Portfolio seeks to achieve its
objective by investing in money market instruments which mature in one year or
less. The Portfolio will maintain an average weighted maturity of 90 days or
less.
The Portfolio will invest in the following U.S. dollar-denominated securi-
ties:
. Negotiable certificates of deposit and bankers' acceptances of U.S.
banks having total assets in excess of $1 billion;
. Commercial paper (including variable amount master demand notes)
rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P (The
Portfolio will not invest more than 5% of its assets in securities
rated Prime-2 by Moody's and A-2 by S&P);
. Short-term corporate obligations rated Aa or better by Moody's or
AA or better by S&P;
. Eurodollar certificates of deposit of approved U.S. Banks, Yankee
obligations of foreign-owned U.S. banks and U.S. regulated
branches of foreign banks;
. United States Treasury obligations including bills, notes, bonds,
and other debt obligations issued by the United States Treasury.
These securities are backed by the full faith and credit of the
U.S. Government;
. Securities issued or guaranteed by agencies and instrumentalities
of the U.S. Government. Such "agency" securities may not be backed
by the full faith and credit of the U.S. Government;
. Money Market obligations issued by domestic and foreign corpora-
tions rated Aa or better by Moody's or AA or better by S&P; and
11
<PAGE>
. Repurchase agreements that are collateralized by securities de-
scribed under "Short-Term Investments."
In addition, up to 10% of the Portfolio's assets may be invested in illiquid
money market securities which include securities that are not freely market-
able or which are subject to restrictions on disposition under the Securities
Act of 1933.
BALANCED PORTFOLIO--The Balanced Portfolio seeks to achieve its objective by
investing in a diversified portfolio of equity, primarily investment grade
fixed income and money market securities.
It is designed to provide shareholders with a single vehicle with which to
participate in the Adviser's equity and fixed income strategies combined with
the Adviser's asset allocation decisions.
The Portfolio's equity portion will consist of common, preferred and con-
vertible preferred stocks, convertible bonds, and rights and warrants.
The fixed income portion of the Portfolio will consist of securities of the
U.S. government and its agencies, corporate bonds, municipal bonds, and mort-
gage-backed and asset-backed securities. Bonds will also include medium-term
notes, debentures, equipment trust certificates and yankees. The Portfolio
will invest primarily in investment grade fixed income securities which are
those securities rated no lower than investment grade by Moody's (Aaa, Aa, A
or Baa) or by S&P (AAA, AA, A or BBB). Bonds rated Baa or BBB possess specula-
tive characteristics and may be more sensitive to changes in the economy and
the financial condition of issuers than higher rated bonds. The Adviser re-
serves the right to retain securities which are downgraded by one or both of
the rating agencies, if in the Adviser's judgement, the retention of securi-
ties is warranted. The Adviser may invest up to 10% of the Portfolio's assets
in fixed income securities rated Ba or B by Moody's or BB or B by S&P or
which, if unrated, are in the Adviser's opinion of comparable quality or bet-
ter. Securities rated less than Baa by Moody's or BBB by S&P are classified as
non-investment grade securities, carry a high degree of risk and are consid-
ered speculative by the major credit rating agencies. They are sometimes re-
ferred to as "junk bonds." It is anticipated that the Portfolio's weighted av-
erage composition of debt securities graded by S&P will mirror the composition
of the DSI Limited Maturity Bond Portfolio. Please see the chart included in
"Investment Policies--DSI Limited Maturity Bond Portfolio" which details that
Portfolio's weighted average composition of debt securities during the fiscal
year ended October 31, 1995. The chart does not necessarily indicate what each
Portfolio's composition will be in the current and subsequent fiscal years.
While the Adviser anticipates that the majority of the assets in the Portfo-
lio will be U.S. dollar-denominated securities, it reserves the right to pur-
chase debt obligations of foreign governments, agencies, or corporations de-
nominated either
12
<PAGE>
in U.S. dollars or foreign currencies. The credit quality standards applied to
foreign obligations are the same as those applied to the selection of U.S.
based securities. The Portfolio may enter into forward contracts when, in the
Adviser's judgment, the specific foreign currency covered by a forward con-
tract is likely to appreciate against the U.S. dollar. However, unanticipated
changes in currency prices may result in a loss to the Portfolio. A discussion
of forward contracts may be found above under the DSI Limited Maturity Bond
Portfolio and in the Statement of Additional Information. For a more complete
description of the special considerations and risks associated with invest-
ments in foreign issuers, see "FOREIGN INVESTMENTS."
The proportion of the Portfolio's assets invested in equity or fixed income
securities will vary as market conditions warrant. Under normal investing con-
ditions, the typical asset mix for the Portfolio is expected to be 60% equi-
ties and 40% fixed income securities. However, the percentage of the Portfo-
lio's assets committed to different asset classes may range as follows: 40% to
75% in equities, 25% to 60% in fixed income securities, and 0% to 25% in cash
and cash equivalents. The Portfolio will always invest at least 25% of its to-
tal assets in fixed income senior securities. The fixed income portion of the
Portfolio will ordinarily maintain an average weighted maturity of between 3
and 10 years.
Equity, fixed income and money market securities are selected using ap-
proaches identical to those set forth above under "Investment Policies--Disci-
plined Value, Limited Maturity Bond and Money Market Portfolios," respective-
ly.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% (15% for the Balanced Portfolio) of the to-
tal assets of a Portfolio. Each Portfolio will not invest in any security is-
sued by a commercial bank unless (i) the bank has total assets of at least $1
billion, or the equivalent in other currencies, (ii) in the case of U.S.
banks, it is a member of the Federal Deposit Insurance Corporation, and (iii)
in the case of foreign branches of U.S.
13
<PAGE>
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price if such securities mature in less than one year.
The Administrator and the Adviser will mark to market daily the value of the
securities purchased. The use of repurchase agreements involves certain risks.
For example, a default by the seller of the agreement may cause a Portfolio to
experience a loss or delay in the liquidation of the collateral securing the
repurchase agreement. The Portfolio might also incur disposition costs in liq-
uidating the collateral. While the Fund's management acknowledges these risks,
it is expected that they can be controlled through stringent security selec-
tion criteria and careful monitoring procedures. The Fund has received permis-
sion from the SEC to pool daily uninvested cash balances of the Fund's Portfo-
lios in order to invest in repurchase agreements on a joint basis. By entering
into joint repurchase agreements, a Portfolio may incur lower transactions
costs and earn higher rates of interest on joint repurchase agreements. Each
Portfolio's contribution would determine its return from a joint repurchase
agreement. (See "SHORT-TERM INVESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the
14
<PAGE>
extent that greater than one-third of its assets at fair market value would be
committed to loans. During the term of a loan, the Portfolio is subject to a
gain or loss depending on any increase or decrease in the market price of the
securities loaned. Lending of securities is subject to review by the Fund's
Board of Directors. All relevant facts and circumstances, including the cred-
itworthiness of the broker, dealer or institution, will be considered in mak-
ing decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "forward
delivery" or "delayed settlement" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. "Delayed settlement" is a term used to describe the set-
tlement of a security transaction in the secondary market which will occur
sometime in the future. However, no payment or delivery is made by a Portfolio
until it receives payment or delivery from the other party to the transaction.
A Portfolio will maintain a separate account of cash or liquid securities at
least equal to the value of purchase commitments until payment is made. Such
segregated securities will either mature or, if necessary, be sold on or be-
fore the settlement date. Typically, no income accrues on securities purchased
on a delayed delivery basis prior to the time delivery is made, although a
Portfolio may earn income on securities it has deposited in a segregated ac-
count.
Each Portfolio may engage in these types of purchases in order to buy secu-
rities that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
PORTFOLIO TURNOVER
The Money Market Portfolio is expected to have a high portfolio turnover
rate due to the short maturities of the securities purchased. Higher rates of
portfolio turnover may result in realization of capital gains. (See "DIVI-
DENDS, CAPITAL GAINS AND TAXES" for more information on taxation.) The tables
set forth in "Financial Highlights" present the Disciplined Value and Limited
Maturity Bond Portfolios' historical portfolio turnover ratios. It is expected
that the annual portfolio turnover rate for the equity portion of the Balanced
Portfolio will be approxi-
15
<PAGE>
mately 65%. The annual portfolio turnover rate for its fixed income portion
will not exceed 150%. The Portfolios will not normally engage in short-term
trading but reserve the right to do so.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Money Market Portfolio provided that the invest-
ment is consistent with the Portfolio's investment policies and restrictions.
Based upon the Portfolio's assets invested in the Money Market Portfolio, the
investing Portfolio's adviser will waive its investment advisory fee and any
other fees earned as a result of the Portfolio's investment in the Money Mar-
ket Portfolio. The investing Portfolio will bear expenses of the Money Market
Portfolio on the same basis as all of its other shareholders.
FOREIGN INVESTMENTS
Investing in foreign companies may involve additional risks and considera-
tions which are not typically associated with investing in U.S. companies.
Since stocks of foreign companies are normally denominated in foreign curren-
cies, the Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, comparable information may not be readily avail-
able about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S. compa-
nies. In addition, in certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those coun-
tries.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, each
Portfolio may invest in futures and options and interest rate futures con-
tracts. Because
16
<PAGE>
transaction costs associated with futures and options may be lower than the
costs of investing in the securities directly, it is expected that use of in-
dex futures and options to facilitate cash flows may reduce a Portfolio's
overall transactions costs. The Portfolio may enter into futures contracts
provided that not more than 5% of its total assets are at the time of acquisi-
tion required as margin deposit to secure obligations under such contracts.
The Portfolio will engage in futures and options transactions for hedging pur-
poses only.
Futures and options can be volatile and involve various degrees and types of
risk. If a Portfolio judges market conditions incorrectly or employs a strat-
egy that does not correlate well with its investments, use of futures and op-
tions contracts could result in a loss. A Portfolio could also suffer losses
if it is unable to liquidate its position due to an illiquid secondary market.
In the opinion of the Directors of the Fund, the risk that a Portfolio will be
unable to close out a futures position or options contract will be minimized
by only entering into futures contracts or options transactions traded on na-
tional exchanges and for which there appears to be a liquid secondary market.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a majority of the out-
standing voting securities of each Portfolio as defined in the 1940 Act.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. government or any of its agencies or instrumental-
ities);
(b) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) a continuous op-
erating history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single in-
dustry; however, there are no limitations on investments made in in-
struments issued or guaranteed by the U.S. Government and its agen-
cies when the Portfolio adopts a temporary defensive position.
(e) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations which are publicly distributed, (including repurchase
agreements provided, that repurchase agreements maturing in more than
seven days,
17
<PAGE>
together with securities which are not readily marketable, will not
exceed 10% (15% for the Balanced Portfolio) of a Portfolio's total as-
sets), and (ii) by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or inter-
pretations of the SEC thereunder;
(f) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% (33 1/3%
for the Balanced Portfolio) of the Portfolio's gross assets valued at the
lower of market or cost. A Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross assets; and
(g) pledge, mortgage or hypothecate more than 10% (33 1/3% for the Bal-
anced Portfolio) of its total assets.
The investment limitations described here and in the SAI are fundamental
policies of the Disciplined Value, Limited Maturity Bond and Money Market
Portfolios and may be changed only with the approval of the holders of a ma-
jority of the outstanding shares of each Portfolio of the Fund. Only invest-
ment limitations (a), (b), (d), (e) and (f) are classified as fundamental pol-
icies of the Balanced Portfolio. If a percentage limitation on investment or
utilization of assets as set forth above is adhered to at the time an invest-
ment is made, a later change in percentage resulting from changes in the value
or total cost of a Portfolio's assets will not be considered a violation of
the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "VALUATION OF SHARES.") The minimum initial
investment required is $2,500 for each Portfolio. Certain exceptions may be
made by the officers of the Fund.
Shares of the Portfolios may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase
or redemption of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or differ-
ent purchase and redemption conditions. Shareholders who are customers of
Service Agents should consult their Service Agent for information regarding
these fees and conditions. Amounts paid to Service Agents may include transac-
tion fees and/or service fees
18
<PAGE>
paid by the Fund from the Fund assets attributable to the Service Agent, and
which would not be imposed if shares of the Portfolio were purchased directly
from the Fund or the Distributor. The Service Agents may provide shareholder
services to their customers that are not available to a shareholder dealing
directly with the Fund. A salesperson and any other person entitled to receive
compensation for selling or servicing Portfolio shares may receive different
compensation with respect to one particular class of shares over another in
the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior to the close of its business day to receive that day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application, and mail it, together with a check
payable to UAM Funds, to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for purchases of shares received by mail will be credited to an ac-
count at the next share price calculated for the Portfolio after receipt. Pay-
ment does not need to be converted into Federal Funds (monies credited to the
Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will accept
it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
19
<PAGE>
. Instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #02100-0021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check made payable to UAM Funds to the above address or by wiring money to the
Custodian Bank using the instructions outlined above. When making additional
investments, be sure that the account number, account name and the Portfolio
to be purchased are identified on the check or wire. Prior to wiring addi-
tional investments, notify the UAM Funds Service Center by calling the number
on the cover of this Prospectus. Mail orders should include, when possible,
the "Invest by Mail" stub which accompanies any Fund confirmation statement
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. Eastern Time (ET) (the close of the NYSE)
will be invested at the share price calculated after the NYSE closes on that
day. Investments received after the close of the NYSE will be executed at the
price computed on the next day the NYSE is open. The Fund reserves the right,
in its sole discretion, to suspend the offering of shares of each Portfolio or
to reject purchase orders when, in the judgment of management, such suspension
or rejection is in the best interests of the Fund. Purchases of a Portfolio's
shares will be made in full and fractional shares of the Portfolio calculated
to three decimal places. Certificates for fractional shares will not be is-
sued. Certificates for whole shares will not be issued except at the written
request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determina
20
<PAGE>
tion of net asset value after acceptance. Shares issued by a Portfolio in ex-
change for securities will be issued at net asset value determined as of the
same time. All dividends, interest, subscription, or other rights pertaining
to such securities shall become the property of the Portfolio and must be de-
livered to the Fund by the investor upon receipt from the issuer. Securities
acquired through an in-kind purchase will be acquired for investment and not
for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are liquid securities and not subject to any restric-
tions upon their sale by the Portfolio under the Securities Act of
1933, or otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio of the Fund may be redeemed by mail or telephone at
any time without cost, at the net asset value per share of the Portfolio next
determined after receipt of the redemption request. No charge is made for re-
demptions. Any redemption may be more or less than the purchase price depend-
ing on the market value of the investment securities held by the Portfolio.
In addition to redeeming shares by mail or telephone, a shareholder of the
DSI Money Market Portfolio may redeem shares by check at any time, without
cost, at the net asset value per share of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of your shares depending
on the market value of the investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
21
<PAGE>
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened as well as prior to effecting each transaction requested by
telephone. All telephone transaction requests will be recorded and investors
may be required to provide additional telecopied written instructions of such
transaction requests. The Fund or Sub-Transfer Agent may be liable for any
losses due to unauthorized or fraudulent telephone instruction if the Fund or
Sub-Transfer Agent do not employ the procedures described above. Neither the
Fund nor the Sub-Transfer Agent will be responsible for any loss, liability,
cost or expense for following instructions received by telephone that it rea-
sonably believes to be genuine.
BY CHECK
Shares of the Money Market Portfolio may be redeemed by checks drawn on your
Fund account. Checks must be for amounts of $500 or more. The shares to be re-
deemed by check will continue to earn dividends until the check clears at The
Chase Manhattan Bank.
22
<PAGE>
Checks are supplied free of charge, and additional checks are mailed upon
request. Checks will be mailed only to the registered owner at the address on
record. To redeem shares by check:
. indicate the option on the Optional Services Form accompanying the
Application; and
. submit a signature card with the required signature guarantees (see
"SIGNATURE GUARANTEES").
To arrange for redemption by check after an account has been opened, submit
a written request and a signature card with the required signature guarantees
to the UAM Funds Service Center.
Stop payment instructions with respect to checks may be given to the UAM
Funds Service Center. If there are insufficient shares in the account to cover
the amount of the redemption by check, the redemption check will be returned
marked "insufficient funds," and the account will be charged a fee of $25.00.
Checks may not be used to close an account.
If any portion of the shares to be redeemed represents an investment made by
personal check, the Fund reserves the right not to honor the redemption until
it is reasonably satisfied that the check has been collected in accordance
with the applicable banking regulations, which may take up to 15 days. If a
purchase check is not collected, the purchase will be canceled and the account
will be charged $25.00. Purchase of shares using Federal funds or bank wires,
certified checks or cashier's checks allows more immediate access to an in-
vestment. Banks normally impose a charge in connection with the use of bank
wires, certified checks, cashier's checks and Federal funds.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
23
<PAGE>
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after the
receipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities so received in pay-
ment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE". An ex-
change into another UAM Funds Portfolio is a sale of shares and may result in
a gain or loss for income tax purposes. The Fund may modify or terminate the
exchange privilege at any time.
24
<PAGE>
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost when the Board of
Directors determines that amortized cost reflects fair value.
The Money Market Portfolio values its assets at amortized cost while also
monitoring the available market bid prices, or yield equivalents. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold the instrument. The net asset value per
share of the Portfolio will ordinarily remain at $1.00 and the Portfolio's
daily dividends will vary in amount. There can be no assurance, however, that
the Portfolio will maintain a constant net asset value per share of $1.00.
The use of amortized cost and the maintenance of the Portfolio's per share
net asset value at $1.00 is based on its election to operate under the provi-
sions of Rule 2a-7 under the Investment Company Act of 1940. As a condition of
operating under that rule, the Portfolio must maintain an average weighted ma-
turity of 90 days or less, purchase only instruments deemed to have remaining
maturities of one year or less, and invest only in securities which are deter-
mined by the Adviser to present minimal credit risks and which are of high
quality as determined by any major rating service, or in the case of any in-
strument not so rated, considered by the Adviser to be of comparable quality.
The Directors have established procedures designed to stabilize the net as-
set value per share for sales and redemptions at $1.00. These procedures in-
clude periodic review at intervals the Directors deem appropriate and reason-
able.
25
<PAGE>
In the event of a deviation of over 1/2 of 1% between the Portfolio's net
asset value based upon available market quotations or market equivalents and
$1.00 per share based on amortized cost, the Directors will promptly consider
what action, if any, should be taken. Redemption in kind, selling instruments
prior to maturity to realize capital gains or losses or to shorten the average
weighted maturity, exercising puts, withholding dividends, paying distribu-
tions from capital or capital gains or utilizing a net asset value per share
as determined by using available market quotations are all actions the Direc-
tors may take in response to such a deviation.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Dividends paid by the Portfolio with respect to Institu-
tional Class and Service Class Shares, to the extent any dividends are paid,
will be calculated in the same manner at the same time on the same day and
will be in the same amount, except that service and distribution fees relating
to Service Class Shares will be borne exclusively by that class.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with
26
<PAGE>
appropriate indices. The Annual Report is available without charge. To receive
an Annual Report, contact the UAM Funds Service Center at the address or phone
number on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Money Market Portfolio declares dividends daily and distributes substan-
tially all of its net investment income monthly. The other Portfolios will
normally distribute substantially all of their net investment income (for tax
purposes) to shareholders in quarterly dividends. If any net capital gains are
realized, the Portfolios will normally distribute them annually.
All dividend and capital gains distributions will be automatically rein-
vested in additional shares of that Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November, or December to shareholders of rec-
ord in such month will be deemed to have been paid by the Fund and received by
the shareholders on December 31 of such calendar year, provided that the divi-
dends are paid before February 1 of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number provided is correct and that either you are
not currently subject to backup withholding, or you are exempt from backup
withholding. This certification must be made on the Application or on a sepa-
rate form supplied by the Fund.
27
<PAGE>
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
Dewey Square Investors Corporation, a Delaware corporation formed in 1989 as
the successor to the business of the Dewey Square Investors Division of the
First National Bank of Boston (which division was established in 1984), is lo-
cated at One Financial Center, Boston, MA 02111. The Adviser is a wholly-owned
subsidiary of United Asset Management Corporation ("UAM") and provides invest-
ment management services to corporations, foundations, endowments, pension and
profit sharing plans, trusts, estates and other institutions and individuals.
As of the date of this Prospectus, the Adviser had over $3.4 billion in assets
under management.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day operations of the Portfolios and a description of their
business experience during the past five years are as follows:
RONALD L. MCCULLOUGH, CFA, MANAGING DIRECTOR -- EQUITY INVESTING, is the se-
nior equity strategist and is responsible for all equity investments. He has
27 years of investment experience. Prior to joining Dewey Square, Mr.
McCullough was Senior Portfolio Manager and a member of the Trust Investment
Committee at Bank of Boston's Institutional Investment Division. He has a BA
from Harvard College and is a member of the Boston Security Analysts Society
and the Institute of Chartered Financial Analysts (CFA). Mr. McCullough cur-
rently manages the DSI Disciplined Value Portfolio. He has managed the Portfo-
lio since its inception.
ROBERT S. STEPHENSON, CPA, SENIOR PORTFOLIO MANAGER, EQUITY, is responsible
for the analysis of stocks in the following industries: energy, banking, in-
surance, telecommunications, trucking, brokerage, and appliance. Mr. Stephen-
son has 24 years of experience in the investment business and was most re-
cently at The Putnam Management Company from 1978 through 1990 where he man-
aged the Putnam Option Trust. Mr. Stephenson joined Dewey Square in 1991. He
graduated from Rochester Institute of Technology with a BS degree and earned
an MBA from Columbia University. Mr. Stephenson currently manages the DSI Dis-
ciplined Value Portfolio. He assumed responsibility for managing the Portfolio
in April of 1993.
G.A. DAVID GRAY, MANAGING DIRECTOR -- FIXED INCOME INVESTING, has 30 years
of investment experience. Mr. Gray joined Dewey Square in 1994. Previously, he
was Senior Vice President and Director of Fixed Income management at The
28
<PAGE>
Boston Company which he joined in 1986. Prior to his tenure at The Boston Com-
pany, he was Managing Director of Fixed Income at Greenspan O'Neil Associates
in New York and in charge of fixed income management at Manufacturers Hanover
Trust Company. Mr. Gray is a graduate of Wilfred Laurier University, Waterloo,
Ontario, Canada. He has authored several articles on various aspects of bond
management. Mr. Gray manages the DSI Limited Maturity Bond, DSI Money Market
and the DSI Balanced Portfolios. He has managed the DSI Limited Maturity Bond
and DSI Money Market Portfolios since March, 1994.
Additional members of Dewey Square's team of professionals are:
PETER M. WHITMAN, JR., PRESIDENT & CHIEF INVESTMENT OFFICER, is part of the
team that founded Dewey Square in 1984. He was appointed President in 1988 and
was previously Managing Director of Fixed Income, a position he held for seven
years. Prior to the formation of Dewey Square, he served as Head of Fixed In-
come for the Bank of Boston's Institutional Investment Division. He joined the
Bank of Boston in 1971 as a Credit Analyst and was appointed head of Fixed In-
come Research in 1975. He has 28 years of investment experience. Mr. Whitman
holds a BA from Harvard College and an MBA from the New York University Gradu-
ate School of Business. Mr. Whitman also serves as a Director/Trustee of the
UAM Funds, which are mutual funds managed by various United Asset Management
affiliates. He is a member and former Director of the Boston Security Analysts
Society and a member and former President of the Boston Economics Club.
EVA S. DEWITZ, SENIOR PORTFOLIO MANAGER, EQUITY, is part of the team that
founded Dewey Square in 1984. Prior to the formation of Dewey Square, she was
a Portfolio Manager and Research Analyst for the Bank of Boston's Institu-
tional Investment Division, which she joined in 1970. She has 26 years of in-
vestment experience. Ms. Dewitz is a member of the Boston Security Analysts
Society. She holds a BA from Smith College and an MBA from Northeastern Uni-
versity.
RICHARD M. KANE, CFA, SENIOR PORTFOLIO MANAGER, EQUITY, is part of the team
that founded Dewey Square in 1984. Prior to the formation of Dewey Square, he
was a Portfolio Manager and a Research Analyst for the Bank of Boston's Insti-
tutional Investment Division, which he joined in 1981. He has 16 years of in-
vestment experience. He is a member of the Institute of Chartered Financial
Analysts and the Boston Security Analysts Society. He holds a BS and an MBA in
Finance from the State University of New York at Buffalo. Mr. Kane manages the
DSI Balanced Portfolio.
LAUREL A. GORMLEY, CFA, PORTFOLIO MANAGER, EQUITY ANALYST, joined Dewey
Square in 1985. In addition to her current responsibilities, she has served as
Treasurer and Compliance Officer for Dewey Square. Previously, she was em-
ployed at the Bank of Boston in the Loan Officer Training Program. She has 11
years of investment experience. She is a member of the Institute of Chartered
29
<PAGE>
Financial Analysts and the Boston Security Analysts Society. She holds a BS
from Boston College and is presently working towards an MBA at Babson College.
SCOTT D. PITZ, CFA, SENIOR QUANTITATIVE ANALYST, EQUITY, joined Dewey Square
in 1985. He is responsible for Dewey Square's quantitative research. Prior to
his current responsibilities, he was in charge of all the operational/systems
functions at Dewey Square. He has 11 years of investment experience. Mr. Pitz
is a member of the Institute of Chartered Financial Analysts and the Boston
Security Analysts Society. He holds a BS from Middlebury College and an MBA
from Northeastern University.
ROBERT P. CLANCY, SENIOR PORTFOLIO MANAGER, FIXED INCOME, joined Dewey
Square in 1994. Prior to that, he was a Vice President at Standish, Ayer &
Wood responsible for the management of institutional bond portfolios, syn-
thetic GIC's and quantitative research. Previously, he worked as a Vice Presi-
dent at First Boston Company working primarily with insurance company and
structured bond portfolios. Prior to that, Mr. Clancy worked for State Street
Bank and John Hancock Mutual Life Insurance Company. He has 17 years of in-
vestment experience and is a Fellow of the Society of Actuaries and a recipi-
ent of the Halmstad Prize for his research paper on options on bonds. Mr.
Clancy holds a BS from Brown University.
FREDERICK C. MELTZER, PH.D. SENIOR PORTFOLIO MANAGER, FIXED INCOME, joined
Dewey Square in 1995. Prior to that he was Managing Director of Fixed Income
at World Asset Management. Previously, he held positions as Senior Manager of
Fixed income at PanAgora Asset Management and Senior Fixed Income Portfolio
Manager at The Boston Company. He has also held positions as Director of Re-
search for the Farm Credit Banks Funding Corporation, Fixed Income Strategist
at Chase Investors, and a staff economist at the Federal Reserve Bank of New
York. He has 22 years of investment experience. Mr. Meltzer holds a MA in Eco-
nomics from John Hopkins University and a Ph.D. in Economics from the Univer-
sity of Virginia.
MICHAEL E. SALVAY, SENIOR PORTFOLIO MANAGER, FIXED INCOME, joined Dewey
Square in 1988. Prior to that, he worked for the Bank of Boston in the Trea-
sury Division as a Quantitative Analyst. He has 9 years investment experience.
Mr. Salvay holds a BA from the University of California at San Diego and an
MBA from the Amos Tuck School of Dartmouth College.
Under Investment Advisory Agreements with the Fund, dated as of September
27, 1989 and February 22, 1995, the Adviser manages the investment and rein-
vestment of the assets of each Portfolio. The Adviser must adhere to the
stated investment objectives and policies of the Portfolios, and is subject to
the control and supervision of the Fund's Board of Directors.
30
<PAGE>
As compensation for its services as an Adviser each Portfolio pays the Ad-
viser an annual fee, in monthly installments, calculated by applying the fol-
lowing annual percentage rates to each Portfolios' average daily net assets
for the month:
<TABLE>
<S> <C>
Disciplined Value Portfolio....
0.75% of the first $500 million.
0.65% in excess of $500 million
Limited Maturity Bond
Portfolio.................... 0.45% of the first $500 million.
0.40% of the next $500 million.
0.35% in excess of $1 billion.
Money Market Portfolio.........
0.40% of the first $500 million.
0.35% in excess of $500 million.
Balanced Portfolio............. 0.45% for the first 12 months of operations
0.55% for the next 12 months of operations;
0.65% thereafter.
</TABLE>
Until further notice, the Adviser has voluntarily agreed to waive a portion
of its advisory fees to maintain the advisory fees at 0.18% of the Money Mar-
ket Portfolio's average daily net assets. The Fund will not reimburse the Ad-
viser for any advisory fees that are waived on behalf of the Portfolio for a
given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares of a Port-
folio. Payments made for any of these purposes may be made from, its profits
or any other source available to it. When such service arrangement are in ef-
fect, they are made generally available to all qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and oversee-
31
<PAGE>
ing administrative, fund accounting, dividend disbursing and transfer agent
services provided to the Fund and its Portfolios. UAMFSI's principal office is
located at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted
some of these services to Chase Global Funds Services Company ("CGFSC"), an
affiliate of The Chase Manhattan Bank, by a Mutual Funds Service Agreement
dated April 15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio-specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The following Portfolio-specific fees are calculated from the
aggregate net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Disciplined Value Portfolio............................................ 0.06%
Limited Maturity Bond Portfolio........................................ 0.04%
Money Market Portfolio................................................. 0.02%
Balanced Portfolio..................................................... 0.06%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent for the
Fund, agrees to use its best efforts as sole distributor of the Fund's shares.
The Distributor does not receive any fee or other compensation under the
Agreement with respect to the DSI Portfolios Institutional Class Shares in
this Prospectus. The Agreement continues in effect so long as it is approved
at least annually by the Fund's Board of Directors. Those approving the Agree-
ment must include a majority of Directors who are neither parties to such
Agreement nor interested persons of any such party. The Agreement provides
that the Fund will bear the costs of the registration of its
32
<PAGE>
shares with the SEC and various states and the printing of its prospectuses,
its SAIs and its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each Portfolio. The Agreements direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of research, statistical and pric-
ing services these brokers provide to the Portfolios in addition to required
Adviser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients. Although not a typical practice, the Adviser may place portfo-
lio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series or classes of shares of common stock and to classify or reclassify any
unissued shares without further action by shareholders.
The shares of each Portfolio and Class are fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no pre-emptive rights. They have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional
33
<PAGE>
share held), then standing in his or her name on the books of the Fund. Both
Institutional and Service Class Shares represent an interest in the same as-
sets of a Portfolio. Service Class Shares bear certain expenses related to
shareholder servicing and may bear expenses related to the distribution of
such shares. Service Class Shares have exclusive voting rights with respect to
matters relating to such distribution expenditures. For information about the
Service Class Shares of the Portfolios, contact the UAM Funds Service Center.
As of December 6, 1996, Bank of Boston & Co., Boston, MA, held of record
42.8% of the outstanding shares of the Disciplined Value Portfolio Institu-
tional Class Shares and 55.2% of the outstanding shares of the Limited Matu-
rity Bond Portfolio Institutional Class Shares for which beneficial ownership
is disclaimed or presumed disclaimed and First National Bank of Boston, Can-
ton, MA held of record 72.5% of the outstanding shares of the Money Market
Portfolio Institutional Class Shares for which beneficial ownership is dis-
claimed or presumed disclaimed. The persons or organizations owning 25% or
more of the outstanding shares of a Portfolio may be presumed to "control" (as
that term is defined in the Investment Company Act of 1940) such Portfolio. As
a result, those persons or organizations could have the ability to vote a ma-
jority of the shares of the Portfolio on any matter requiring the approval of
shareholders of such Portfolio.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT
34
<PAGE>
OF ADDITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OF-
FERING MAY NOT LAWFULLY BE MADE.
35
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee U.S. Government Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
36
<PAGE>
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
37
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Dewey Square Investors Corporation
One Financial Center
Boston, MA 02111
(617) 526-1300
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
DSI Disciplined Value
Portfolio
Institutional Service
Class Shares
P R O S P E C T U S
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
DEWEY SQUARE INVESTORS CORPORATION
SERVES AS INVESTMENT ADVISER TO THE DSI DISCIPLINED VALUE PORTFOLIO
INSTITUTIONAL SERVICE CLASS SHARES
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
INVESTMENT OBJECTIVE
UAM Funds, Inc. (hereinafter defined as "UAM Funds" or the "Fund") is an
open-end, management investment company known as a "mutual fund" and organized
as a Maryland corporation. The Fund consists of multiple series of shares
(known as "Portfolios"), each of which has a different investment objective
and different investment policies. The Portfolio offered by this Prospectus
presently offers two separate classes of shares: Institutional Class Shares
and Institutional Service Class Shares ("Service Class Shares"). Shares of
each class represent equal, pro rata interests in the Portfolio and accrue
dividends in the same manner except that Service Class Shares bear fees pay-
able by the class (at the rate of .25% per annum) to financial institutions
for services they provide to the owners of such shares. (See "SERVICE AND DIS-
TRIBUTION PLANS.") The securities offered hereby are shares of the Service
Class Shares of the diversified DSI Disciplined Value Portfolio which is man-
aged by Dewey Square Investors Corporation.
DSI DISCIPLINED VALUE PORTFOLIO. The objective of the DSI Disciplined Value
Portfolio is to achieve maximum long-term total return consistent with reason-
able risk to principal through diversified equity investments.
There can be no assurance that the Portfolio will meet its stated objective.
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets forth
concisely information that you should know before you invest. A "Statement of
Additional Information" containing additional information about the Fund has
been filed with the Securities and Exchange Commission. Such Statement is
dated January 3, 1997 and has been incorporated by reference into this Pro-
spectus. A copy of the Statement may be obtained, without charge, by writing
to the Fund or by calling the telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATIONTO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Performance Calculations................................................... 4
Investment Objective and Policies.......................................... 4
Other Investment Policies.................................................. 5
Investment Limitations..................................................... 12
Investment Suitability..................................................... 13
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 16
Service and Distribution Plans............................................. 18
Shareholder Services....................................................... 20
Valuation of Shares........................................................ 21
Dividends, Capital Gains Distributions and Taxes........................... 22
Investment Adviser......................................................... 24
Administrative Services.................................................... 26
Distributor................................................................ 26
Portfolio Transactions..................................................... 27
General Information........................................................ 28
Directors and Officers..................................................... 30
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a Service Class
shareholder of the DSI Disciplined Value Portfolio will incur. However, trans-
action fees may be charged if you are a customer of a broker-dealer or other
financial intermediary who has established a shareholder servicing relation-
ship with the Fund on behalf of their customers. Please see "Purchase of
Shares" for further information.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
DSI DISCIPLINED
VALUE PORTFOLIO
SERVICE CLASS
SHARES
---------------
<S> <C>
Sales Load Imposed on Purchases.............................. NONE
Sales Load Imposed on Reinvested Dividends................... NONE
Deferred Sales Load.......................................... NONE
Redemption Fees.............................................. NONE
Exchange Fees................................................ NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
DSI DISCIPLINED
VALUE PORTFOLIO
SERVICE CLASS
SHARES
---------------
<S> <C>
Investment Advisory Fees..................................... 0.75%
Administrative Fee........................................... 0.16%
12b-1 Fees (Including Shareholder Servicing Fees)*........... 0.25%
Other Expenses............................................... 0.09%
----
Total Operating Expenses..................................... 1.25%+
</TABLE>
- -----------
* See "SERVICE AND DISTRIBUTION PLANS."
+ The annualized Total Operating Expenses excludes the effect of expense
offsets. If expense offsets were included, annualized Total Operating
Expenses of the DSI Disciplined Value Portfolio Service Class Shares would
be 1.24%.
The purpose of this table is to assist the investor in understanding the
various expenses that a shareholder in the Service Class Shares of the DSI
Disciplined Value Portfolio will bear directly or indirectly. The expenses and
fees set forth above are based on the operations of the DSI Disciplined Value
Portfolio Institutional Class Shares during the fiscal year ended October 31,
1995, except that such information has been restated to reflect 12b-1 fees.
1
<PAGE>
The following example illustrates the expenses that a Service Class share-
holder would pay on a $1,000 investment over various time periods assuming (1)
a 5% annual rate of return and (2) redemption at the end of each time period.
As noted in the table above, the Portfolio charges no redemption fees of any
kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
DSI Disciplined Value Portfolio Service
Class Shares.............................. $13 $40 $69 $151
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
NOTE TO EXPENSE TABLE
The information set forth in the foregoing table and example relates only to
Service Class Shares of the Portfolio, which Shares are subject to different
total fees and expenses then Institutional Class Shares. Service Organizations
may charge other fees to their customers who are beneficial owners of Service
Class Shares in connection with their customer accounts. (See "SERVICE AND
DISTRIBUTION PLANS.")
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Dewey Square Investors Corporation (the "Adviser"), an investment counseling
firm founded in 1989, serves as investment adviser to the Fund's four DSI
Portfolios including the DSI Disciplined Value Portfolio. The Adviser was
formed as the successor to the business of The Dewey Square Investors Division
of The First National Bank of Boston which division was established in 1984.
The Adviser presently manages over $3.4 billion in assets for institutional
clients and high net worth individuals. See "INVESTMENT ADVISER."
HOW TO INVEST
Service Class Shares of the Portfolio are offered to investors through bro-
ker-dealers and other financial institutions ("Service Agents") at net asset
value without a sales commission. The minimum initial investment is $500,000
with certain exceptions as may be determined from time to time by the Officers
of the Fund. The minimum for subsequent investments is $1,000. See "PURCHASE
OF SHARES."
HOW TO REDEEM
Service Class Shares of the Portfolio may be redeemed at any time, without
cost, at the net asset value per share of the Portfolio next determined after
receipt of the redemption request. The redemption price may be more or less
than the purchase price. See "REDEMPTION OF SHARES."
ADMINISTRATIVE SERVICES
Chase Global Funds Services Company (the "Administrator"), a subsidiary of
The Chase Manhattan Bank, N.A., provides the Fund with administrative, divi-
dend disbursing and transfer agent services. See "ADMINISTRATIVE SERVICES."
RISK FACTORS
The value of the Portfolio's shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolio invests. Prospective
investors in the Fund should consider the following factors associated with an
investment in the Portfolio: (1) The Portfolio may invest a portion of its as-
sets in derivatives including futures contracts and options. (See "FUTURES
CONTRACTS AND OPTIONS.") (2) The Portfolio may invest in foreign securities,
which may involve greater risks than investments in domestic securities, such
as foreign currency risks. (See "FOREIGN INVESTMENTS.") (3) In general the
Portfolio will not trade for short-term profits, however, when circumstances
warrant, investments may be sold without regard to the length of time held.
High rates of portfolio turnover may result in additional cost and the reali-
zation of capital gains. (See "OTHER IN-
3
<PAGE>
VESTMENT POLICIES -- PORTFOLIO TURNOVER.") (4) In addition, the Portfolio may
use various investment practices that involve special consideration, including
investing in repurchase agreements, when-issued, forward delivery and delayed
settlement securities and lending of securities, each of which involves spe-
cial risks. (See "OTHER INVESTMENT POLICIES.")
PERFORMANCE CALCULATIONS
The Portfolio may advertise or quote yield data from time to time, however,
the yield of the Portfolio is computed based on the net income of the Portfo-
lio during a 30-day (or one month) period, which period will be identified in
connection with the particular yield quotation. More specifically, the Portfo-
lio's yield is computed by dividing the Portfolio's net income per share dur-
ing a 30-day (or one month) period by the maximum offering price per share on
the last day of the period and annualizing the result on a semi-annual basis.
Similarly, the Portfolio may advertise or quote total return data. Total re-
turn will be calculated on an average annual total return basis, and may also
be calculated on an aggregate total return basis, for various periods. Average
annual total return reflects the average annual percentage change in value of
an investment in the Portfolio over a measuring period. Aggregate total return
reflects the total percentage change in value over a measuring period. Both
methods of calculating total return assume that dividends and capital gains
distributions made by the Portfolio during the period are reinvested in Port-
folio shares. Performance will be calculated separately for Institutional
Class and Service Class Shares. Dividends paid by the Portfolio with respect
to Institutional Class and Service Class Shares, to the extent any dividends
are paid, will be calculated in the same manner at the same time on the same
day and will be in the same amount, except that service fees, any distribution
charges and any incremental transfer agency costs relating to Service Class
Shares will be borne exclusively by that class.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge upon
request to the Fund by writing to the address or calling the phone number on
the cover of this Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
DSI DISCIPLINED VALUE PORTFOLIO -- The objective of the DSI Disciplined
Value Portfolio is to provide maximum long-term total return consistent with
reasonable risk to principal through diversified equity investments. The Port-
folio's investment strategy is value oriented, with a disciplined approach to
stock selection.
4
<PAGE>
The DSI Disciplined Value Portfolio seeks to achieve its objective by in-
vesting primarily in common stocks of mid to large capitalization companies.
The selection process for the Portfolio focuses upon the stocks of undervalued
yet fundamentally sound companies which exhibit improving fundamentals.
Using screening parameters such as relative price/earning ratios, relative
dividend yields, relative price to book ratios, debt adjusted price to sales
ratios, and other financial ratios, the Adviser screens over one thousand
stocks to identify potentially undervalued securities. Stocks are also
screened by an "Earnings per share" revision screen which measures the change
in earnings estimate expectations of each stock. The list of potential invest-
ments is narrowed further by the use of traditional fundamental security anal-
ysis. The Adviser interviews company managements and reviews the assessments
and opinions of outside analysts and consultants as well as monitors industry
trends and technical accumulation/distribution patterns before making the fi-
nal stock selection.
The Portfolio maintains a high degree of diversification generally with a
representation in all of the Standard & Poor's 500 Composite Price Stock Index
economic sectors. As market timing is not an important part of the Adviser's
investment strategy, cash reserves will normally represent a small portion of
the Portfolio's assets (under 20%). It is the policy of the Portfolio to in-
vest, under normal circumstances, at least 80% of its assets in equity securi-
ties. For temporary defensive purposes, however, the Portfolio may reduce its
holdings of equity securities and invest up to 100% of its holdings in short-
term investments.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States-based companies; however, from time to time
shares of foreign-based companies may be purchased if they pass the selection
process outlined above. Under normal circumstances, foreign securities will
not comprise more than 20% of the Portfolio's assets.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
From time to time, the Portfolio may invest a portion of its assets in the
following money market instruments, consistent with the Portfolio's investment
policies as set forth above. The Portfolio may invest in:
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits will
not exceed 10% of the total assets of the Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in
5
<PAGE>
the issuing institution. Variable rate certificates of deposit are certifi-
cates of deposit on which the interest rate is periodically adjusted prior to
their stated maturity based upon a specified market rate. A banker's accept-
ance is a time draft drawn on a commercial bank by a borrower usually in con-
nection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).
(1) The Portfolio will not invest in any security issued by a commercial
bank unless (i) the bank has total assets of at least $1 billion, or
the equivalent in other currencies, and (ii) in the case of U.S.
banks, it is a member of the Federal Deposit Insurance Corporation,
and (iii) in the case of foreign branches of U.S. banks, the security
is, in the opinion of the Adviser, of an investment quality comparable
with other debt securities which may be purchased by the Portfolio;
(2) Commercial paper rated A-1, A-2 by S&P or Prime-1, Prime-2 by Moody's
or, if not rated, issued by a corporation having an outstanding
unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated A or better by Moody's or by
S&P;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Treasury, supported by the full faith and credit
pledge of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. Generally, such
securities are evaluated on the creditworthiness of their issuing
agency or guarantor and are not backed by the direct full faith and
credit pledge of the U.S. Government. These include securities issued
by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Admin-
istration, Federal Farm Credit Banks, Federal Intermediate Credit
Bank, Federal National Mortgage Association, Federal Financing Bank,
the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
The Fund has applied to the Securities and Exchange Commission (the "Commis-
sion") for permission to deposit the daily uninvested cash balances of the
Fund's Portfolios, as well as cash for investment purposes, into one or more
joint accounts and to invest the daily balance of the joint accounts in the
following short-term investments: fully collateralized repurchase agreements,
interest-bearing or discounted commercial paper including dollar-denominated
commercial paper of foreign issuers, and any other short-term money market in-
struments including variable rate demand notes and other tax-exempt money mar-
ket instruments. By enter-
6
<PAGE>
ing into these investments on a joint basis, it is expected that a Portfolio
may earn a higher rate of return on investments relative to what it could earn
individually. While the Fund expects to receive permission from the Commis-
sion, there can be no assurance that the requested relief will be granted.
The Fund has applied to the Commission for permission to allow each of its
Portfolios to invest the greater of 5% of its total assets or $2.5 million in
the Fund's DSI Money Market Portfolio for cash management purposes. (See "IN-
VESTMENT COMPANIES.") While the Fund expects to receive permission from the
Commission, there can be no assurance that the requested relief will be grant-
ed.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities listed above under "Short-Term Investments". In a
repurchase agreement, the Portfolio purchases a security and simultaneously
commits to resell that security at a future date to the seller (a qualified
bank or securities dealer) at an agreed upon price plus an agreed upon market
rate of interest (itself unrelated to the coupon rate or date of maturity of
the purchased security). The seller under a repurchase agreement will be re-
quired to maintain the value of the securities subject to the agreement at not
less than (i) the repurchase price if such securities mature in one year or
less, or (ii) 101% of the repurchase price if such securities mature in more
than one year. The Administrator and the Adviser will mark to market daily the
value of the securities purchased, and the Adviser will, if necessary, require
the seller to maintain additional securities to ensure that the value is in
compliance with the previous sentence. The Adviser will consider the credit-
worthiness of a seller in determining whether a Portfolio should enter into a
repurchase agreement.
In effect, by entering into a repurchase agreement, the Portfolio is lending
its funds to the seller at the agreed upon interest rate, and receiving a se-
curity as collateral for the loan. Such agreements can be entered into for pe-
riods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the under-
lying securities at a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Portfolio
and therefore subject to sale by the trustee in bankruptcy. Finally, it is
possible that the Portfolio may not be able to substantiate its interest in
the underlying securities. While the Fund's management
7
<PAGE>
acknowledges these risks, it is expected that they can be controlled through
stringent security selection criteria and careful monitoring procedures.
Credit screens will be established and maintained for dealers and dealer-banks
before portfolio transactions are executed for the Fund.
The Fund has applied to the Commission for permission to pool the daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into repurchase agreements on a
joint basis, it is expected that a Portfolio will incur lower transactions
costs and potentially obtain higher rates of interest on such repurchase
agreements. Each Portfolio's participation in the income from jointly pur-
chased repurchase agreements will be based on that Portfolio's percentage
share in the total repurchase agreement. While the Fund expects to receive
permission from the Commission, there can be no assurance that the requested
relief will be granted.
LENDING OF SECURITIES
The Portfolio may lend its portfolio securities to qualified institutional
investors who need to borrow securities in order to complete certain transac-
tions, such as covering short sales, avoiding failures to deliver securities
or completing arbitrage operations. The Portfolio will not loan portfolio se-
curities to the extent that greater than one-third of its assets at fair mar-
ket value, would be committed to loans. By lending its investment securities,
the Portfolio attempts to increase its income through the receipt of interest
on the loan. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of the
Portfolio. The Portfolio may lend its investment securities to qualified bro-
kers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are
not inconsistent with the Investment Company Act of 1940, as amended, (the
"1940 Act") or the Rules and Regulations or interpretations of the Commission
thereunder, which currently require that (a) the borrower pledge and maintain
with the Portfolio collateral consisting of cash, an irrevocable letter of
credit issued by a domestic U.S. bank or securities issued or guaranteed by
the U.S. Government having a value at all times not less than 100% of the
value of the securities loaned, (b) the borrower add to such collateral when-
ever the price of the securities loaned rises (i.e., the borrower "marks to
the market" on a daily basis), (c) the loan be made subject to termination by
the Portfolio at any time, and (d) the Portfolio receives reasonable interest
on the loan (which may include the Portfolio investing any cash collateral in
interest bearing short-term investments). As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. These risks are
similar to the ones involved with repurchase agreements as discussed above.
All relevant facts and circumstances, including the creditworthiness of the
broker, dealer or institution, will be considered in making decisions with re-
spect to the lending of securities, subject to review by the Fund's Board of
Directors.
8
<PAGE>
At the present time, the Staff of the Commission does not object if an in-
vestment company pays reasonable negotiated fees in connection with loaned se-
curities so long as such fees are set forth in a written contract and approved
by the investment company's Board of Directors. The Portfolio will continue to
retain any voting rights with respect to the loaned securities. If a material
event occurs affecting an investment on a loan, the loan must be called and
the securities voted. For additional information regarding the lending of se-
curities, see the Statement of Additional Information.
PORTFOLIO TURNOVER
The Portfolio will not trade in securities for short-term profits but, when
circumstances warrant, securities may be sold without regard to length of time
held. The Portfolio will not normally engage in short-term trading but reserve
the right to do so. It should be understood that the rate of portfolio turn-
over will depend upon market and other conditions and it will not be a limit-
ing factor when the Adviser believes that portfolio changes are appropriate. A
rate of turnover of 100% would occur, for example, if all the securities held
by the Portfolio were replaced within a period of one year.
High rates of portfolio turnover necessarily result in correspondingly heav-
ier brokerage and portfolio trading costs which are paid by the Portfolio. In
addition to portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. As a general rule, net gains are
distributed to shareholders and will be taxable at ordinary income tax rates
for federal income tax purposes regardless of long- or short-term capital
gains status. See "Dividends, Capital Gains and Taxes" for more information on
taxation. The table set forth in "Financial Highlights" present the DSI Disci-
plined Portfolio's historical portfolio turnover ratios.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Portfolio may purchase and sell securities on a "when-issued," "forward
delivery" or "delayed settlement" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When-issued
or forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. "Delayed settlement" is a term used to describe the set-
tlement of a security transaction in the secondary market which will occur
sometime in the future. However, no payment or delivery is made by the Portfo-
lio until it receives payment or delivery from the other party to the transac-
tion. The Portfolio will maintain a separate account of cash, U.S. Government
securities or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made. Such segregated securities will
either mature or, if necessary, be sold on or before the settlement date. Typ-
ically, no income accrues on securities purchased
9
<PAGE>
on a delayed delivery basis prior to the time delivery of the securities is
made although a Portfolio may earn income on securities it has deposited in a
segregated account.
The Portfolio will engage in when-issued transactions to obtain what is con-
sidered to be an advantageous price and yield at the time of the transaction.
When the Portfolio engages in when-issued or forward delivery transactions, it
will do so for the purpose of acquiring securities consistent with its invest-
ment objective and policies and not for the purposes of investment leverage.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, the
Portfolio may utilize appropriate futures contracts and options to a limited
extent. These investments are commonly referred to as "derivatives." Specifi-
cally, the DSI Disciplined Value Portfolio is authorized to invest in stock
futures and options. For example, in order to remain fully exposed to the
movements of the market, while maintaining liquidity to meet potential share-
holder redemptions, the Portfolio may invest a portion of its assets in stock
futures contracts. Because futures contracts only require a small initial mar-
gin deposit, the Portfolio would then be able to keep a cash reserve available
to meet potential redemptions, while at the same time being effectively fully
invested. Also, because transaction costs associated with futures and options
may be lower than the costs of investing in stocks directly, it is expected
that the use of index futures and options to facilitate cash flows may reduce
the Portfolio's overall transactions costs.
In addition, the Portfolio may enter into futures contracts provided that
not more than 5% of the Portfolio's assets are required as margin deposit to
secure obligations under such contracts. The Portfolio will engage in futures
and options transactions for hedging purposes only.
The primary risks associated with the use of futures and options are (i) im-
perfect correlation between the change in market value of the securities held
by the Portfolio and the prices of futures and options relating to the stocks
purchased or sold by the Portfolio; and (ii) possible lack of a liquid second-
ary market for a futures contract or option resulting in the inability to
close a futures position which could have an adverse impact on the Portfolio's
ability to hedge. In the opinion of the Fund's Directors, the risk that the
Portfolio will be unable to close out a futures position or options contract
will be minimized by only entering into futures contracts or options transac-
tions traded on national exchanges and for which there appears to be a liquid
secondary market. For additional information on futures contracts and options,
see the Statement of Additional Information.
FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves spe-
cial considerations which are not typically associated with investing in U.S.
companies.
10
<PAGE>
Since the securities of foreign companies are frequently denominated in for-
eign currencies, and since the Portfolio may temporarily hold uninvested re-
serves in bank deposits in foreign currencies, the Portfolio will be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between vari-
ous currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, there may be less publicly available information
about certain foreign companies than about U.S. companies. Securities of some
non-U.S. companies may be less liquid and more volatile than securities of
comparable U.S. companies. There is generally less government supervision and
regulation of stock exchanges, brokers and listed companies than in the U.S.
In addition, with respect to certain foreign countries, there is the possibil-
ity of expropriation or confiscatory taxation, political or social instabili-
ty, or diplomatic developments which would affect U.S. investments in those
countries.
INVESTMENT COMPANIES
As permitted by the 1940 Act, each Portfolio reserves the right to invest up
to 10% of its total assets, calculated at the time of investment, in the secu-
rities of other open-end or closed-end investment companies. No more than 5%
of the investing Portfolio's total assets may be invested in the securities of
any one investment company nor may it acquire more than 3% of the voting secu-
rities of any other investment company. The Portfolio will indirectly bear its
proportionate share of any management fees paid by an investment company in
which it invests in addition to the advisory fee paid by the Portfolio.
The Fund has applied to the Commission for permission to allow each of its
Portfolios to invest the greater of 5% of its total assets or $2.5 million in
the Fund's DSI Money Market Portfolio for cash management purposes provided
that the investment is consistent with the Portfolio's investment policies and
restrictions. Based upon the Portfolio's assets invested in the DSI Money Mar-
ket Portfolio, the investing Portfolio's adviser will waive its investment ad-
visory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders. While the Fund expects to receive permission from the Commission,
there can be no assurance that the requested relief will be granted.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a "majority of the out-
standing voting securities of the Portfolio," as defined in the 1940 Act.
11
<PAGE>
INVESTMENT LIMITATIONS
The Portfolio has adopted certain limitations designed to reduce its expo-
sure to specific situations. Some of these limitations are that the Portfolio
will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any agency or instrumentality there-
of);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) acquire any security of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's to-
tal assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or instruments issued by U.S. banks
when the Portfolio adopts a temporary defensive position;
(e) make loans except (i) by purchasing bonds, debentures or similar obli-
gations which are publicly distributed, (including repurchase agree-
ments provided, however, that repurchase agreements maturing in more
than seven days, together with securities which are not readily mar-
ketable, will not exceed 10% of the Portfolio's total assets), and
(ii) by lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not incon-
sistent with the 1940 Act or the rules and regulations or interpreta-
tions of the Commission thereunder;
(f) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% of the
Portfolio's gross assets valued at the lower of market or cost, and
the Portfolio may not purchase additional securities when borrowings
exceed 5% of total gross assets; and
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment limitations described here and in the Statement of Additional
Information are fundamental policies and may be changed only with the approval
of the holders of a majority of the outstanding shares of the Portfolio. If a
percentage limitation on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in per-
centage resulting from
12
<PAGE>
changes in the value or total cost of the Portfolio's assets will not be con-
sidered a violation of the restriction.
INVESTMENT SUITABILITY
The Portfolio was designed principally for the investments of institutional
investors. The Portfolio is available for purchase by individuals and may be
suitable for investors who seek maximum long-term total return consistent with
reasonable risk to principal through diversified equity investments. Although
no mutual fund can guarantee that its investment objective will be met.
PURCHASE OF SHARES
Shares may be purchased through any Service Agent having selling or service
agreements with UAM Fund Distributors, Inc. (the "Distributor") without a
sales commission, at the net asset value per share next determined after an
order is received by the Fund or the designated Service Agent. (See "SERVICE
AND DISTRIBUTION PLANS" and "VALUATION OF SHARES.") The minimum initial in-
vestment required is $500,000, with certain exceptions as may be determined
from time to time by the Officers of the Fund. The Portfolio issues two clas-
ses of shares: Institutional Class and Service Class. The two classes of
shares each represent interests in the same portfolio of investments, have the
same rights and are identical in all respects, except that the Service Class
Shares offered by this Prospectus bear shareholder servicing expenses, may in
the future bear distribution plan expenses, and have exclusive voting rights
with respect to the Rule 12b-1 Distribution Plan pursuant to which the distri-
bution fee may be paid. The two classes have different exchange privileges.
See ("EXCHANGE PRIVILEGE.") The net income attributable to Service Class
Shares and the dividends payable on Service Class Shares will be reduced by
the amount of the shareholder servicing and distribution fees; accordingly,
the net asset value of the Service Class Shares will be reduced by such amount
to the extent the Portfolio has undistributed net income.
Some Service Agents may also impose additional or different conditions or
other account fees on the purchase and redemption of Portfolio shares, which
are not subject to the Rule 12b-1 Service and Distribution Plans. These may
include transaction fees and/or service fees paid by the Fund from the Fund
assets attributable to the Service Agent and would not be imposed if shares of
the Portfolio were purchased directly from the Fund or the Distributor. The
Service Agents may provide shareholder services to their customers that are
not available to a shareholder dealing directly with the Fund. Each Service
Agent is responsible for transmitting to its customers a schedule of any such
fees and information regarding any additional or different conditions regard-
ing purchases and redemptions. Shareholders who are customers of Service
Agents should consult their Service Agent for
13
<PAGE>
information regarding these fees and conditions. A salesperson and any other
person entitled to receive compensation for selling or servicing Portfolio
shares may receive different compensation with respect to one particular class
of shares over another in the Fund.
If you buy shares of a Portfolio through a Service Agent, the Service Agent
must receive your investment order before the close of trading on the New York
Stock Exchange ("NYSE"), generally 4:00 p.m. (Eastern Time) and transmit it to
the Fund's Transfer Agent, Chase Global Funds Services Company, (prior to the
close of the Transfer Agent's business day) and the Distributor to receive
that day's offering price with proper payment to the Fund to follow. Service
Agents are responsible to their customers, the Fund and its Distributor for
timely transmission of all subscription and redemption requests, investment
information, documentation and money.
INITIAL INVESTMENTS BY MAIL
An account also may be opened with the assistance of your Service Agent by
completing and signing an Account Registration Form, and forwarding it, to-
gether with a check payable to "UAM Funds, Inc.", through your Service Agent
to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
The carbon copy of the Account Registration Form (manually signed) must be
mailed to:
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
For purchases by check, the Fund is ordinarily credited with Federal Funds
within one business day. Thus your purchase of shares by check is ordinarily
credited to your account at the net asset value per share of the Portfolio
next determined on the next business day after receipt. Please note that pur-
chases made by check are not permitted to be redeemed until payment of the
purchase has been collected, which may take up to eight business days after
purchase.
INITIAL INVESTMENTS BY WIRE
Shares may also be purchased by wiring Federal Funds to the Fund's custodian
bank, The Bank of New York (the "Custodian Bank"), (see instructions below).
In order to insure prompt crediting of the Federal Funds wire, it is important
to follow these steps:
14
<PAGE>
(a) Your Service Agent should telephone the Fund's Transfer Agent (toll-
free 1-800-638-7983), and provide the account name, address, telephone
number, social security or taxpayer identification number, the name of
the Portfolio (Service Class Shares), the amount being wired and the
name of the bank wiring the funds (Investors with existing accounts
should also notify the Fund prior to wiring funds). An account number
will then be provided to you:
(b) Instruct your bank to wire the specified amount to the Custodian Bank;
The Bank of New York
New York, NY 10286
ABA #0210-0023-8
DDA Acct. #000-77-103
F/B/O UAM Funds, Inc.
Ref: DSI Disciplined Value Portfolio (Service Class Shares)
Your Account Number _____________
Your Account Name ______________
(c) A completed Account Registration Form must be forwarded to the Fund
and the Distributor at the addresses shown thereon as soon as possi-
ble. Federal Funds purchases will be accepted only on a day on which
the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment is
$1,000) by purchasing shares at net asset value through your Service Agent or
by mailing a check to the UAM Funds Service Center (payable to "UAM Funds,
Inc.") at the above address or by wiring monies to the Custodian Bank using
the instructions outlined above. It is very important that your account num-
ber, account name, Class of Shares, and the name of the Portfolio(s) of which
shares are to be purchased are specified on the check or wire to insure proper
crediting to your account. In order to insure that your wire orders are in-
vested promptly, you are requested to notify the Fund (toll-free 1-800-638-
7983) prior to the wire date. Mail orders should include, when possible, the
"Invest by Mail" stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Non-securities dealer Service Agents may receive transaction fees that are
the same as distribution fees paid to dealers.
The Fund reserves the right, in its sole discretion, to suspend the offering
of shares or reject purchase orders of each Class or Portfolio when, in the
judgment of management, such suspension or rejection is in the best interests
of the Fund.
Purchases of shares will be made in full and fractional shares calculated to
three decimal places. In the interest of economy and convenience, certificates
for
15
<PAGE>
shares will not be issued except at the written request of the shareholder.
Certificates for fractional shares, however, will not be issued.
IN-KIND PURCHASES
If accepted by the Fund, shares may be purchased in exchange for securities
which are eligible for acquisition by the Portfolio as described in this Pro-
spectus. Securities to be exchanged which are accepted by the Fund will be
valued as set forth under "VALUATION OF SHARES" at the time of the next deter-
mination of net asset value after such acceptance. Shares issued in exchange
for securities, will be issued at net asset value determined as of the same
time. All dividends, interest, subscription, or other rights pertaining to
such securities shall become the property of the Portfolio whose shares are
being acquired and must be delivered to the Fund by the investor upon receipt
from the issuer. Securities acquired through an in-kind purchase will be ac-
quired for investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of the Portfolio
unless: (1) such securities are, at the time of the exchange, eligible to be
included in the Portfolio whose shares are to be issued and current market
quotations are readily available for such securities; (2) the investor repre-
sents and agrees that all securities offered to be exchanged are not subject
to any restrictions upon their sale by the Portfolio under the Securities Act
of 1933, or otherwise; and (3) the value of any such security (except U.S.
Government Securities) being exchanged together with other securities of the
same issuer owned by the Portfolio will not exceed 5% of the net assets of the
Portfolio immediately after the transaction.
A gain or loss for Federal income tax purposes will be realized by investors
who are subject to Federal taxation upon the exchange depending upon the cost
of the securities or local currency exchanged. Investors interested in such
exchanges should contact the Adviser.
REDEMPTION OF SHARES
Shares may be redeemed by mail or telephone, at any time, without cost, at
their net asset value per share next determined after receipt of the redemp-
tion request. No charge is made for redemptions. Any redemption may be more or
less than the purchase price of your shares depending on the market value of
the investment securities held by the Portfolio.
BY MAIL
Shares will be redeemed at the net asset value next determined after the re-
quest is received in "good order". Your request should be addressed to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
16
<PAGE>
or to your Service Agent.
"Good order" means that the request to redeem shares must include the fol-
lowing documentation:
(a) The stock certificates, if issued;
(b) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered own-
ers of the shares in the exact names in which they are registered;
(c) Any required signature guarantees (see "SIGNATURE GUARANTEES" below);
and
(d) Other supporting legal documentations, if required, in the case of es-
tates, trusts, guardianships, custodianships, corporations, pension
and profit sharing plans and other organizations.
Shareholders who are uncertain of requirements for redemption should contact
the UAM Funds Service Center.
SIGNATURE GUARANTEES
To protect your account, the Fund and the Administrator from fraud, signa-
ture guarantees are required for certain redemptions. Signature guarantees are
required for (1) redemptions where the proceeds are to be sent to someone
other than the registered shareowner(s) and the registered address, and (2)
share transfer requests. The purpose of signature guarantees is to verify the
identity of the party who has authorized a redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule17Ad-15 under the Securities Exchange Act of 1934. Eligible guar-
antor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. A complete definition of eligible guarantor institu-
tions is available from the Administrator. Broker-dealers guaranteeing signa-
tures must be a member of a clearing corporation or maintain net capital of at
least $100,000. Credit unions must be authorized to issue signature guaran-
tees. Signature guarantees will be accepted from any eligible guarantor insti-
tution which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
BY TELEPHONE
Provided you have previously established the telephone redemption privilege
by completing an Account Registration Form, you may request a redemption of
17
<PAGE>
your shares by calling the Fund and requesting the redemption proceeds be
mailed to you or wired to your bank. The Fund and the Fund's Transfer Agent
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and they may be liable for any losses if they fail to
do so. These procedures include requiring the investor to provide certain per-
sonal identification at the time an account is opened and prior to effecting
each transaction requested by telephone. In addition, all telephone transac-
tion requests will be recorded and investors may be required to provide addi-
tional telecopied written instructions of such transaction requests. Neither
the Fund nor the Transfer Agent will be responsible for any loss, liability,
cost or expense for following instructions received by telephone that it rea-
sonably believes to be genuine.
To change the name of the commercial bank or the account designated to re-
ceive redemption proceeds, a written request must be sent to the Fund at the
address above. Requests to change the bank or account must be signed by each
shareholder and each signature must be guaranteed. You cannot redeem shares by
telephone if you hold stock certificates for these shares. Please contact one
of the Fund's representatives at the Administrator for further details.
FURTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under this pro-
cedure within one business day of receipt of the request, but in no event will
payment be made more than seven days after receipt of a redemption request in
good order. The Fund may suspend the right of redemption or postpone the date
at times when both the NYSE and Custodian Bank are closed, or under any emer-
gency circumstances as determined by the Securities and Exchange Commission
(the "Commission").
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the Commission. Invest-
ors may incur brokerage charges on the sale of portfolio securities so re-
ceived in payment of redemptions.
SERVICE AND DISTRIBUTION PLANS
Under the Service Plan for Service Class Shares, adopted pursuant to
Rule 12b-1 under the 1940 Act, the Fund may enter into service agreements with
Service Agents (broker-dealers or other financial institutions) who receive
fees with respect to the Fund's Service Class Shares owned by shareholders for
whom the Service Agent is the dealer or holder of record, or for whom the
Service Agent performs Servicing, as defined below. These fees are paid out of
the assets allocable to Service Class Shares to the Distributor, to the Serv-
ice Agent directly or through the Distributor. The Fund reimburses the Dis-
tributor or a Service Agent,
18
<PAGE>
as the case may be, for payments made at an annual rate of up to .25 of 1% of
the average daily value of Service Class Shares owned by clients of such Serv-
ice Agent during the period payments for Servicing are being made to it. Such
payments are borne exclusively by the Service Class Shares. Each item for
which a payment may be made under the Service Plan constitutes personal serv-
ice and/or shareholder account maintenance and may constitute an expense of
distributing Fund Service Class Shares as the Commission construes such term
under Rule 12b-1. The fees payable for Servicing are payable without regard to
actual expenses incurred, subject to adjustment of the fee prospectively to
reflect actual expenses.
Servicing may include, among other things, one or more of the following ren-
dered with respect to Service Class Shares or shareholders: answering client
inquiries regarding the Fund; assisting clients in changing dividend options,
account designations and addresses; performing sub-accounting; establishing
and maintaining shareholder accounts and record; processing purchase and re-
demption transactions; investing client cash account balances automatically in
Fund Service Class Shares; providing periodic statements showing a client's
account balance and integrating such statements with those of other transac-
tions and balances in the client's other accounts serviced by the Service
Agent; arranging for bank wires; and such other services as the Fund may re-
quest, to the extent the Service Agent is permitted by applicable statute,
rule or regulation.
The Glass-Steagall Act and other applicable laws prohibit Federally chart-
ered or supervised banks from engaging in certain aspects of the business of
issuing, underwriting, selling and/or distributing securities. Accordingly,
banks will be engaged to act as Service Agent only to perform administrative
and shareholder servicing functions, including transaction-related agency
services for their customers. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain Fund shareholders and alter-
native means for continuing the Servicing of such shareholders would be
sought.
The Distributor promotes the distribution of the Service Class Shares of the
Fund in accordance with the terms of a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act. The Distribution Plan provides for the use of
Fund assets allocable to Service Class Shares to pay expenses of distributing
such shares.
The Distribution Plan and the Service Plan (together, the "Plans") were ap-
proved by the Board of Directors, including a majority of the directors who
are not "interested persons" of the Fund as defined in the 1940 Act (and each
of whom has no direct or indirect financial interest in the Plans or any
agreement related thereto, referred to herein as the "12b- 1 Directors"). The
Plans may be terminated at any time by the vote of the Board or the 12b-1 Di-
rectors, or by the vote of a majority of the outstanding voting securities of
the Service Class Shares.
While the Plans continue in effect, the selection of the 12b-1 Directors is
committed to the discretion of such persons then in office. The Plans provide
19
<PAGE>
generally that a Portfolio may incur distribution and service costs under the
Plans which may not exceed 0.75% per annum of that Portfolio's net assets. The
Board has currently limited payments under the Plans to 0.50% per annum of a
Portfolio's net assets. The Service Class Shares offered by this Prospectus
currently are not making any payments under the Distribution Plan. Upon imple-
mentation, the Distribution Plan would permit payments to the Distributor,
broker-dealers, other financial institutions, sales representatives or other
third parties who render promotional and distribution services, for items such
as advertising expenses, selling expenses, commissions or travel reasonably
intended to result in sales of shares of the Service Class Shares and for the
printing of prospectuses sent to prospective purchasers of the Service Class
Shares of the Portfolio.
Although the Plans may be amended by the Board of Directors, any change in
the Plans which would materially increase the amounts authorized to be paid
under the Plans must be approved by shareholders of the class involved. The
total amounts paid with respect to a class of shares of a Portfolio under the
foregoing arrangements may not exceed the maximum limits specified above, and
the amounts and purposes of expenditures under the Plans must be reported to
the 12b-1 Directors quarterly. The amounts allowable under the Plans for each
Class of Shares of the Portfolios are also limited under certain rules of the
National Association of Securities Dealers, Inc.
In addition to payments by the Fund under the Plans, the Distributor, United
Asset Management Corporation ("UAM"), the parent company of the Adviser, the
Adviser, or any of their affiliates, may, at its own expense, compensate a
Service Agent or other person for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to the Fund, a Portfolio
or any Class of Shares of a Portfolio. The person making such payments may do
so out of its revenues, its profits or any other source available to it. Such
services arrangements, when in effect, are made generally available to all
qualified service providers. The Adviser may compensate its affiliated compa-
nies for referring investors to the Portfolios.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Service Class Shares of the Disciplined Value Portfolio may be exchanged for
any other Service Class Shares of a Portfolio included in UAM Funds which is
comprised of the Fund and UAM Funds Trust. (For those Portfolios currently of-
fering Service Class Shares, please call the UAM Funds Service Center.) Ex-
change requests should be made by calling the Fund (1-800-638-7983) or by
writing to UAM Funds, UAM Funds Service Center, c/o Chase Global Funds Serv-
ices Company, P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is
only available with respect to Portfolios that are registered for sale in a
shareholder's state of residence.
20
<PAGE>
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made by mail, telephone or through a Service Agent.
Telephone exchanges will be accepted only if the certificates for the shares
to be exchanged are held by the Fund for the account of the shareholder and
the registration of the two accounts will be identical. Requests for exchanges
received prior to 12:00 noon (Eastern Time) for the DSI Money Market Portfo-
lio, and 4:00 p.m. (Eastern Time) for the other two DSI Portfolios will be
processed as of the close of business on the same day. Requests received after
these times will be processed on the next business day. Neither the Fund nor
the Administrator will be responsible for the authenticity of the exchange in-
structions received by telephone. Exchanges may also be subject to limitations
as to amounts or frequency and to other restrictions established by the Board
of Directors to assure that such exchanges do not disadvantage the Fund and
its shareholders. For additional information regarding responsibility for the
authenticity of telecopied instructions, see "REDEMPTION OF SHARES--BY TELE-
PHONE" above.
For Federal income tax purposes, an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF REGISTRATION
You may transfer the registration of your Fund shares to another person by
writing to UAM Funds at the above address. As in the case of redemptions, the
written request must be received in good order before any transfer can be
made. (See "REDEMPTION OF SHARES" for a definition of "good order.")
VALUATION OF SHARES
The net asset value of the Shares is determined by dividing the total market
value of the underlying Portfolio's investments and other assets, less any li-
abilities, by the total outstanding shares of the Class. The net asset value
per share is determined as of the close of the NYSE on each day that the NYSE
is open for business (currently 4:00 p.m. Eastern Time). The per share net as-
set value of the Service Class Shares may be lower than the per share net as-
set value of the Institutional Class Shares reflecting the daily expense
accruals of the shareholder servicing fee
21
<PAGE>
and any distribution and transfer agency fees applicable to the Service Class
Shares.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken
from the exchange where the security is primarily traded. Unlisted equity se-
curities and listed securities not traded on the valuation date for which mar-
ket quotations are readily available are valued not exceeding the current
asked prices nor less than the current bid prices.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities which is
accrued daily.
In addition, bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. The prices provided by a
pricing service are determined without regard to bid or last sale prices but
take into account institutional size trading in similar groups of securities
and any developments related to the specific securities. Securities not priced
in this manner are valued at the most recent quoted bid price, or, when stock
exchange valuations are used, at the latest quoted sale price on the day of
valuation. If there is no such reported sale, the latest quoted bid price will
be used. Securities purchased with remaining maturities of 60 days or less are
valued at amortized cost if it approximates market value. In the event that
amortized cost does not approximate market value, market prices as determined
above will be used.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolios will normally distribute substantially all of its net invest-
ment income to shareholders of both of its Classes in the form of quarterly
dividends. If any net capital gains are realized, the Portfolio will normally
distribute such gains with the last dividend for the fiscal year. The per
share dividends and distributions on Service Class Shares generally will be
lower than the per share dividends and distributions on Institutional Class
Shares as a result of the shareholder servicing, distribution and any transfer
agency fees applicable to the Service Class Shares.
Undistributed net investment income is included in the Portfolio's net as-
sets for the purpose of calculating net asset value per share. Therefore, for
the Portfolio, on the "ex-dividend" date, the net asset value per share ex-
cludes the dividend (i.e., is reduced by the per share amount of the divi-
dend). Dividends paid shortly after the purchase of shares by an investor, al-
though in effect a return of capital, are taxable to shareholders.
22
<PAGE>
The Portfolio's dividend and capital gains distributions will be automati-
cally reinvested in additional shares of the Portfolio unless the Fund is no-
tified in writing that the shareholder elects to receive distributions in
cash.
FEDERAL TAXES
The Portfolio intends to qualify each year as a "regulated investment compa-
ny" under the Internal Revenue Code of 1986, as amended (the "Code"), and if
it qualifies, will not be liable for Federal income taxes to the extent it
distributes all of its net investment income and net realized capital gains.
Dividends, either in cash or reinvested in shares, paid by the Portfolio from
net investment income will be taxable to shareholders as ordinary income. Such
dividends paid by the DSI Disciplined Value Portfolio will generally qualify
in part for the 70% dividends received deduction for corporations, but the
portion of the dividends so qualified depends on the ratio of the aggregate
taxable qualifying dividend income received by the Portfolio from domestic
(U.S.) sources to the total taxable income of the Portfolio, exclusive of
long-term capital gains.
Whether paid in cash or additional shares of a Portfolio and regardless of
the length of time the shares in such Portfolio have been owned by the share-
holder, distributions from long-term capital gains are taxable to shareholders
as such, but are not eligible for the dividends received deduction. Sharehold-
ers are notified annually by the Fund as to the Federal tax status of divi-
dends and distributions paid by a Portfolio. Such dividends and distributions
may also be subject to state and local taxes.
Exchanges and redemptions of shares in the Portfolio are taxable events for
Federal income tax purposes. A shareholder may also be subject to state and
local taxes on such exchanges and redemptions.
The Portfolio intends to declare and pay dividend and capital gains distri-
butions so as to avoid imposition of the Federal Excise Tax. To do so, the
Portfolio expects to distribute an amount equal to (1) 98% of its calendar
year ordinary income, (2) 98% of its capital gains net income (the excess of
short and long-term capital gains over short and long-term capital losses) for
the one-year period ending October 31st, and (3) 100% of any undistributed or-
dinary or capital gains net income from the prior year. Dividends declared in
October, November, or December to shareholders of record in such month will be
deemed to have been paid by the Fund and received by the shareholders on De-
cember 31 of such calendar year, provided that the dividends are paid before
February 1 of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions)
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify on the Account Registra-
tion Form or on a separate form supplied by the Fund that your Social Security
or Taxpayer Identi-
23
<PAGE>
fication Number provided is correct and that you are not currently subject to
backup withholding, or that you are exempt from backup withholding.
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from the Fund. Shareholders should consult with their tax advisers with re-
spect to the tax status of distributions from the Fund in their state and lo-
cality.
INVESTMENT ADVISER
The investment adviser to the Portfolio, Dewey Square Investors Corporation,
is a Delaware corporation formed in 1989 as the successor to the business of
the Dewey Square Investors Division of the First National Bank of Boston which
division was established in 1984, and is located at One Financial Center, Bos-
ton, MA 02111. The Adviser is a wholly-owned subsidiary of United Asset Man-
agement Corporation and provides investment management services to corpora-
tions, foundations, endowments, pension and profit sharing plans, trusts, es-
tates and other institutions and individuals. As of the date of this Prospec-
tus, the Adviser had over $3.4 billion in assets under management.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day operations of the Portfolio and a description of their
business experience are as follows:
Ronald L. McCullough, CFA, MANAGING DIRECTOR -- EQUITY INVESTING, is the se-
nior equity strategist and is responsible for all equity investments. He has
27 years of investment experience. Prior to joining Dewey Square, Mr.
McCullough was Senior Portfolio Manager and a member of the Trust Investment
Committee at Bank of Boston's Institutional Investment Division. He has a BA
from Harvard College and is a member of the Boston Security Analysts Society
and the Institute of Chartered Financial Analysts (CFA). Mr. McCullough has
managed the Portfolio since its inception.
Robert S. Stephenson, CPA, SENIOR PORTFOLIO MANAGER, EQUITY, is responsible
for the analysis of stocks in the following industries: energy, banking, in-
surance, telecommunications, trucking, brokerage, and appliance. Mr. Stephen-
son has 24 years of experience in the investment business and was most re-
cently at The Putnam Management Company from 1978 through 1990 where he man-
aged the Putnam Option Trust. Mr. Stephenson joined Dewey Square in 1991. He
graduated from Rochester Institute of Technology with a BS degree and earned
an MBA from Columbia University. Mr. Stephenson assumed responsibility for
managing the Portfolio in April of 1993.
Additional members of Dewey Square Investors Corporation team of equity pro-
fessionals are:
24
<PAGE>
Eva S. Dewitz, SENIOR PORTFOLIO MANAGER, EQUITY, is part of the team that
founded Dewey Square in 1984. Prior to the formation of Dewey Square, she was
a Portfolio Manager and Research Analyst for the Bank of Boston's Institu-
tional Investment Division, which she joined in 1970. She has 26 years of in-
vestment experience. Ms. Dewitz is a member of the Boston Security Analysts
Society. She holds a BA from Smith College and an MBA from Northeastern Uni-
versity Graduate School of Business Administration.
Richard M. Kane, CFA, SENIOR PORTFOLIO MANAGER, EQUITY, is part of the team
that founded Dewey Square in 1984. Prior to the formation of Dewey Square, he
was a Portfolio Manager and a Research Analyst for the Bank of Boston's Insti-
tutional Investment Division, which he joined in 1981. He has 16 years of in-
vestment experience. Richard is a member of the Institute of Chartered Finan-
cial Analysts and the Boston Security Analysts Society. He holds a BS and an
MBA in Finance from the State University of New York at Buffalo.
Laurel A. Gormley, CFA, PORTFOLIO MANAGER, joined Dewey Square in 1985. In
addition to her current responsibilities, she has served as Treasurer and Com-
pliance Officer for Dewey Square. Previously she was employed at the Bank of
Boston in the Loan Officer Training Program. She has 11 years of investment
experience. Ms. Gormley is a member of the Institute of Chartered Financial
Analysts and the Boston Security Analyst Society. She holds a BS from Boston
College and is presently working towards an MBA at Babson College.
Scott D. Pitz, CFA, SENIOR QUANTITATIVE ANALYST, EQUITY, joined Dewey Square
in 1985. He is responsible for Dewey Square's quantitative research. Prior to
his current responsibilities, he was in charge of all the operational/systems
functions at Dewey Square. He has 11 years of investment experience. Mr. Pitz
is a member of the Institute of Chartered Financial Analysts and the Boston
Security Analysts Society. He holds a BS from Middlebury College and an MBA
from Northeastern Univeristy.
Under an Investment Advisory Agreement (the "Advisory Agreement") with the
Fund, dated as of September 27, 1989, the Adviser, subject to the control and
supervision of the Fund's Board of Directors and in conformance with the
stated investment objective and policies of the Fund, manages the investment
and reinvestment of the assets of the Fund. In this regard, it is the respon-
sibility of the Adviser to make investment decisions for the Portfolio and to
place the Portfolio's purchase and sales orders.
As compensation for the services rendered by the Adviser under the Advisory
Agreement, the Portfolio pays the Adviser an annual fee, in monthly install-
ments, calculated by applying the following annual percentage rates to the
Portfolio's average daily net assets for the month:
25
<PAGE>
<TABLE>
<S> <C>
.750% of the first
$500 million.
.650% in excess of
DSI Disciplined Value Portfolio.............................. $500 million.
</TABLE>
ADMINISTRATIVE SERVICES
The Chase Manhattan Bank, N.A., through its subsidiary Chase Global Funds
Services Company, provides the Fund and the Portfolio with administrative,
fund accounting, dividend disbursing and transfer agent services pursuant to a
Fund Administration Agreement (the "Administration Agreement") dated as of De-
cember 16, 1991. The services provided under this Administration Agreement are
subject to the supervision of the Officers and the Directors of the Fund, and
include day-to-day administration of matters related to the corporate exist-
ence of the Fund, maintenance of its records, preparation of reports, supervi-
sion of the Fund's arrangements with its custodian, and assistance in the
preparation of the Fund's registration statements under Federal and state se-
curities laws. Chase Global Funds Services Company is located at 73 Tremont
Street, Boston, MA 02108-3913. The Chase Manhattan Corporation ("Chase"), the
parent company of The Chase Manhattan Bank, N.A., and Chemical Banking Corpo-
ration ("Chemical"), the parent company of Chemical Bank, have entered into an
Agreement and Plan of Merger which, when completed, will merge Chase with and
into Chemical. Chemical will be the surviving corporation and will continue
its corporate existence under the name "The Chase Manhattan Corporation." It
is anticipated that this transaction will be completed in the first quarter of
1996 and will not effect the nature nor quality of the services furnished to
the Fund and its Portfolios. Pursuant to the Administration Agreement, as
amended February 1, 1994, the Fund will pay Chase Global Funds Services Com-
pany a monthly fee for its services which on an annualized basis equals: 0.20
of 1% of the first $200 million of the aggregate net assets of the Fund; plus
0.12 of 1% of the next $800 million of the aggregate net assets of the Fund;
plus 0.08 of 1% of the aggregate net assets in excess of $1 billion, but less
than $3 billion; plus 0.06 of 1% of the aggregate assets in excess of $3 bil-
lion. The fees are allocated on the basis of its relative assets and are sub-
ject to a graduated minimum fee schedule, which rises from $2,000 per month
upon inception of the portfolio to $70,000 annually after two years. The Fund,
with respect to the Fund or any Portfolio or Class of the Fund, may enter into
other or additional arrangements for transfer or subtransfer agency, record-
keeping or other shareholder services with organizations other than the Admin-
istrator.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation with its principal office at 211 Congress Street, Boston,
MA 02110, distributes the shares of the Fund. Under the Fund's Distribution
26
<PAGE>
Agreement (the "Agreement"), the Distributor, as agent of the Fund, agrees to
use its best efforts as sole distributor of the Fund's shares. The Distributor
does not receive any fee or other compensation under the Agreement (except as
described under "Service and Distribution Plans" above). The Agreement contin-
ues in effect so long as such continuance is approved at least annually by the
Fund's Board of Directors, including a majority of those Directors who are not
parties to such Agreement or interested persons of any such party. The Agree-
ment provides that the Fund will bear the costs of the registration of its
shares with the Commission and various states and the printing of its prospec-
tuses, statements of additional information and reports to stockholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Portfolio and directs the Adviser to use its best efforts to obtain the best
available price and most favorable execution with respect to all transactions
for the Portfolio. The Adviser may, however, consistent with the interests of
the Portfolio, select brokers on the basis of the research, statistical and
pricing services they provide to the Portfolio. Information and research re-
ceived from such brokers will be in addition to, and not in lieu of, the serv-
ices required to be performed by the Adviser under the Advisory Agreement. A
commission paid to such brokers may be higher than that which another quali-
fied broker would have charged for effecting the same transaction, provided
that such commissions are paid in compliance with the Securities Exchange Act
of 1934, as amended, and that the Adviser determines in good faith that such
commission is reasonable in terms either of the transaction or the overall re-
sponsibility of the Adviser to the Portfolio and the Adviser's other clients.
It is not the Fund's practice to allocate brokerage or effect principal
transactions with dealers on the basis of sales of shares which may be made
through intermediary brokers or dealers that market shares of the Fund. Howev-
er, the Adviser may place portfolio orders with qualified broker-dealers who
refer clients to the Adviser.
Some securities considered for investment by the Portfolio may also be ap-
propriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
27
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series ("Portfolios") or classes of shares of common stock and to classify or
reclassify any unissued shares with respect to such Portfolios, without fur-
ther action by shareholders. Currently, the Fund consists of 30 Portfolios.
The Directors of the Fund may create additional Portfolios and Classes of
shares of the Fund in the future at their discretion.
The shares of each Portfolio and Class of the Fund are fully paid and nonas-
sessable, have no preference as to conversion, exchange, dividends, retirement
or other features and have no pre-emptive rights. The shares of each Portfolio
and Class have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Directors can elect
100% of the Directors if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his name on the books of the Fund. Both Institu-
tional Class and Service Class Shares represent an interest in the same assets
of the Portfolio and are identical in all respects except that the Service
Class Shares bear certain expenses related to shareholder servicing and may
bear expenses related to the distribution of such shares, and have exclusive
voting rights with respect to matters relating to such distribution expendi-
tures. Information about the Service Class Shares of the Portfolios, along
with the fees and expenses associated with such shares, is available upon re-
quest by contacting the Fund at 1-800-638-7983.
As of January 31, 1996, Bank of Boston & Co., Boston, MA, held of record 46%
of the outstanding shares of the DSI Disciplined Value Portfolio Institutional
Class Shares for which beneficial ownership is disclaimed or presumed dis-
claimed. The persons or organizations owning 25% or more of the outstanding
shares of the Portfolio may be presumed to "control" (as that term is defined
in the 1940 Act) such Portfolio. As a result, those persons or organizations
could have the ability to vote a majority of the shares of the Portfolio on
any matter requiring the approval of shareholders of such Portfolio. The Fund
will not hold annual meetings except as required by the 1940 Act and other ap-
plicable laws. The Fund has undertaken that its Directors will call a meeting
of shareholders if such a meeting is requested in writing by the holders of
not less than 10% of the outstanding shares of the Fund. To the extent re-
quired by the undertaking, the Fund will assist shareholder communications in
such matters.
28
<PAGE>
CUSTODIAN
The Bank of New York serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund and
audits its financial statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by writing to the Fund at the address on
the cover of this Prospectus or by calling 1-800-638-7983.
LITIGATION
The Fund is not involved in any litigation.
29
<PAGE>
DIRECTORS AND OFFICERS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
MARY RUDIE BARNEBY* 1133 Av- Director and Executive Vice President of the
enue of the Americas New Fund; President of Regis Retirement Plan
York, NY 10036 Services since 1993; Former President of UAM
Fund Distributors, Inc.; Formerly responsi-
ble for Defined Contribution Plan Services
at a division of the Equitable Companies,
Dreyfus Corporation and Merrill Lynch.
JOHN T. BENNETT, JR. Director of the Fund; President of Squam In-
College Road -- RFD 3 vestment Management Company Inc. and Great
Meredith, NH 03253 Island Management Company Inc.; President of
Bennett Management Company from 1988 to
1993.
J. EDWARD DAY Director of the Fund; Retired Partner in the
5804 Brookside Drive Washington office of the law firm Squire,
Chevy Chase, MD 20815 Sanders & Dempsey; Director, Medical Mutual
Liability Insurance Society of Maryland;
Formerly, Chairman Montgomery County, Mary-
land, Revenue Authority.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert Price
1717 Arch Street & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President and Director of United Asset
Boston, MA 02110 Management Corporation; Director, Partner or
Trustee of each of the Investment Companies
of the Eaton Vance Group of Mutual Funds.
30
<PAGE>
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Investors
Boston, MA 02111 Corporation ("DSI") since 1988; Director and
Chief Executive Officer of H.T. Investors,
Inc., formerly a subsidiary of DSI.
WILLIAM H. PARK* Vice President and Assistant Treasurer of
One International Place the Fund; Executive Vice President and Chief
Boston, MA 02110 Financial Officer of United Asset Management
Corporation.
ROBERT R. FLAHERTY* Treasurer of the Fund; Manager of Fund Ad-
73 Tremont Street ministration and Compliance of the Adminis-
Boston, MA 02108 trator since March 1995; formerly Senior
Manager of Deloitte & Touche LLP from 1985
to 1995.
KARL O. HARTMANN* Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Administrator; Senior
Boston, MA 02108 Vice President, Secretary and General Coun-
sel of Leland, O'Brien, Rubinstein Associ-
ates, Inc., from November 1990 to November
1991.
HARVEY M. ROSEN* Assistant Secretary of the Fund; Senior Vice
73 Tremont Street President of Administrator.
Boston, MA 02108
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act. UAM FUNDS
31
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Dewey Square Investors Corporation
One Financial Center
Boston, MA 02111
(617) 526-1300
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
FMA Small Company Portfolio
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
FMA SMALL COMPANY PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: FIDUCIARY MANAGEMENT ASSOCIATES, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund". The Fund consists of multiple series of shares
(known as "Portfolios"), each of which has different investment objectives and
policies. The FMA Small Company Portfolio currently offers two separate clas-
ses of shares: Institutional Class Shares and Institutional Service Class
Shares ("Service Class Shares"). Shares of each class represent equal, pro
rata interests in a Portfolio and accrue dividends in the same manner except
that Service Class Shares bear fees payable by the class (at the rate of .40%
per annum) to financial institutions for services they provide to the owners
of such shares. The securities offered in this Prospectus are Institutional
Class Shares of one diversified, no-load Portfolio of the Fund managed by Fi-
duciary Management Associates, Inc.
FMA SMALL COMPANY PORTFOLIO. The objective of the FMA Small Company Portfo-
lio (the "Portfolio") is to provide maximum, long-term total return consistent
with reasonable risk to principal by investing primarily in common stocks of
smaller companies in terms of revenues and/or market capitalization.
There can be no assurance that the Portfolio will achieve its stated objec-
tive.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997, and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TOTHE CON-
TRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fund Expenses............................................................... 1
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 4
Financial Highlights........................................................ 5
Investment Objective........................................................ 6
Investment Policies......................................................... 6
Other Investment Policies................................................... 6
Investment Limitations...................................................... 10
Purchase of Shares.......................................................... 11
Redemption of Shares........................................................ 14
Shareholder Services........................................................ 16
Valuation of Shares......................................................... 16
Performance Calculations.................................................... 17
Dividends, Capital Gains Distributions and Taxes............................ 17
Investment Adviser.......................................................... 18
Administrative Services..................................................... 21
Distributor................................................................. 22
Portfolio Transactions...................................................... 22
General Information......................................................... 23
UAM Funds -- Institutional Class Shares..................................... 25
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Portfolio would incur. However, transaction fees may be charged if a bro-
ker-dealer or other financial intermediary deals with the Fund on your behalf.
(See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases......................................... NONE
Sales Load Imposed on Reinvested Dividends.............................. NONE
Deferred Sales Load..................................................... NONE
Redemption Fees......................................................... NONE
Exchange Fees........................................................... NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Investment Advisory Fees............................................ 0.75 %
Administrative Fees................................................. 0.38 %
12b-1 Fees.......................................................... NONE
Distribution Costs.................................................. NONE
Other Expenses...................................................... 0.40 %
Advisory Fees Waived................................................ (0.50)%
-----
Total Operating Expenses (After Fee Waiver)......................... 1.03 %*
-----
</TABLE>
- -----------
* Absent the Adviser's fee waiver, annualized Total Operating Expenses of the
Portfolio for the fiscal year ended October 31, 1996 would have been 1.53%.
The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, the annualized Total Operating Ex-
penses would not have differed.
The table above shows various fees and expenses an investor would bear di-
rectly or indirectly.
The annualized expenses and fees listed above are based on the Portfolio's
operations during the fiscal year ended October 31, 1996, except that Adminis-
trative Fees have been restated to reflect the current fees. See "ADMINISTRA-
TIVE SERVICES" herein and in the SAI. The Adviser has voluntarily agreed to
waive a portion of its advisory fees to maintain the Portfolio's total annual
operating expenses from exceeding 1.03% of its average daily net assets. The
Fund will not reimburse the Adviser for any advisory fees that are waived or
Portfolio expenses that the Adviser may bear on behalf of the Portfolio for a
given fiscal year.
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Portfolio charges no redemption fees of any kind.
1
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FMA Small Company Portfolio.................. $11 $33 $57 $126
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Fiduciary Management Associates, Inc. (the "Adviser"), an investment coun-
seling firm founded in 1980, serves as investment adviser to the Fund's FMA
Small Company Portfolio (the "Portfolio"). The Adviser presently manages over
$1.2 billion in assets for institutional clients and high net worth individu-
als. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor"), to investors at net asset value without a sales commission.
Share purchases may be made by sending investments directly to the Fund. The
minimum initial investment is $25,000. The minimum for subsequent investments
is $1,000. Certain exceptions to the initial or minimum investment amounts may
be made by the officers of the Fund (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. The Portfolio will distribute any realized
net capital gains annually. Distributions will be reinvested in Portfolio
shares automatically unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTION AND EXCHANGE
Shares of the Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolio's shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolio invests. Prospective
investors in the Fund should consider the following: (1) Common stocks of com-
panies which have small market capitalization may exhibit greater market vola-
tility than common stock of companies which have larger capitalization; (2)
The Portfolio may invest in foreign securities which may involve greater risks
than investments in domestic securities, such as foreign currency risks. (See
"FOREIGN INVESTMENTS."); (3) The Portfolio may use various investment prac-
tices that involve special consideration, including investing in repurchase
agreements, when-issued, forward delivery and delayed settlement securities
and lending of securities, each of which involves special risks. (See "OTHER
INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table shows selected per share information for a share out-
standing throughout the periods presented for the Portfolio. It is part of the
Portfolio's Financial Statements, which are included in the Portfolio's 1996
Annual Report to Shareholders. The Annual Report is incorporated into the
Portfolio's SAI. The Portfolio's Financial Statements have been audited by
Price Waterhouse LLP. Their unqualified opinion is also incorporated into the
SAI. Please read the following information in conjunction with the Portfolio's
1996 Annual Report to Shareholders.
<TABLE>
<CAPTION>
JULY 31,**
1991 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, ---------------------------------------------
1991 1992 1993 1994 1995 1996
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $ 10.54 $ 10.36 $ 14.24 $ 12.13 $ 13.19
------ ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)+............... 0.04 (0.01) 0.02 0.01 0.08 0.09
Net Realized &
Unrealized Gain (Loss)
on Investments........ 0.53 (0.14) 3.88 0.50 1.47 2.46
------ ------- ------- ------- ------- -------
Total from Investment
Operations............ 0.57 (0.15) 3.90 0.51 1.55 2.55
------ ------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.. (0.03) (0.01) (0.02) -- (0.08) (0.09)
Net Realized Gain...... -- (0.01) -- (2.62) (0.41) (1.60)
Return of Capital...... -- (0.01) -- -- -- --
------ ------- ------- ------- ------- -------
Total Distributions.... (0.03) (0.03) (0.02) (2.62) (0.49) (1.69)
------ ------- ------- ------- ------- -------
CAPITAL CONTRIBUTION.... -- -- -- -- -- 0.06
NET ASSET VALUE, END OF
PERIOD................. $10.54 $ 10.36 $ 14.24 $ 12.13 $ 13.19 $ 14.11
====== ======= ======= ======= ======= =======
TOTAL RETURN++.......... 5.71 % (1.48%) 37.65% 4.54% 13.57% 22.51%
====== ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $9,834 $18,071 $18,569 $19,561 $20,847 $20,953
Ratio of Expenses to
Average Net Assets..... 1.03%* 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% 0.75%
Portfolio Turnover
Rate................... 7% 134% 163% 121% 170% 106%
Average Commission Rate
#...................... N/A N/A N/A N/A N/A $0.0600
Voluntary Waived Fees
and Expenses Assumed by
the Adviser Per Share.. $ 0.04 $ 0.003 $ 0.03 $ 0.03 $ 0.04 $ 0.06
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A 1.03% 1.03%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower if certain fees and expenses had not
been waived or assumed by the Adviser.
# For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose the average commission rate per share it paid for
Portfolio trades on which commissions were charged.
5
<PAGE>
INVESTMENT OBJECTIVE
The objective of the FMA Small Company Portfolio is to provide maximum,
long-term total return consistent with reasonable risk to principal by invest-
ing primarily in common stocks of smaller companies in terms of revenues
and/or market capitalization. Market capitalization of companies in the Port-
folio will generally be in the $50 million to $1 billion range. Capital return
is likely to be the predominant component of the Portfolio's total return.
INVESTMENT POLICIES
The Portfolio seeks to achieve its objective by investing primarily in com-
mon stocks of smaller, less established companies in terms of revenues, assets
and market capitalization. The Portfolio may invest in both stock exchange
listed and over-the-counter securities. Under normal market conditions, at
least 65% of the Portfolio's total assets will be invested in small companies
(companies whose stock market capitalizations range from $50 million to $1
billion).
In analyzing and selecting investments, the Adviser looks for market themes
and changes that signal opportunity. At any given time, the Portfolio will be
invested in a diversified group of stocks in several industries. The Portfolio
will invest primarily in U.S. companies. The Adviser seeks out companies with
lower price to earnings ratios, strong cash flow, good credit lines and clean
or improving balance sheets. To minimize risk and volatility, the Adviser uses
initial public offerings sparingly, concentrating instead on companies with
seasoned management or a track record as part of a larger company.
The Adviser follows all stocks owned or being considered for purchase. The
Adviser's sell discipline calls for re-evaluation of the fundamentals of
stocks that:
. meet initial targets of revenue or stock market value growth
. decline an absolute 15% in stock market value
. grow by 25% in stock market value in a short time.
Cash reserves will represent a relatively small percentage of the Portfo-
lio's assets. For temporary defensive purposes, the Portfolio may reduce its
holding of equity securities and increase its holdings of short-term invest-
ments.
The Portfolio may also, under normal circumstances, invest up to 35% of its
assets, unless restricted by additional limitations described below or in the
Portfolio's SAI, in the following securities or investment techniques.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets
6
<PAGE>
in domestic and foreign money market instruments including certificates of de-
posit, bankers' acceptances, time deposits, U.S. Government obligations, U.S.
Government agency securities, short-term corporate debt securities, and com-
mercial paper rated A-1 or A-2 by Standard & Poor's Corporation or Prime-1 or
Prime-2 by Moody's Investors Service, Inc. or if unrated, determined by the
Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, the Portfolio buys a security and simultaneously commits
to sell it back at an agreed upon price plus an agreed upon market rate of in-
terest. Under a repurchase agreement, the seller is also required to maintain
the value of the securities subject to the agreement at not less than 100% of
the repurchase price if such securities mature in less than one year. The Sub-
Administrator and the Adviser will mark to market daily the value of the secu-
rities purchased.
7
<PAGE>
The use of repurchase agreements involves certain risks. For example, a de-
fault by the seller under an agreement may cause the Portfolio to experience a
loss or delay in the liquidation of the collateral securing the repurchase
agreement. The Portfolio might also incur disposition costs in liquidating the
collateral. While the Fund's management acknowledges these risks, it is ex-
pected that they can be controlled through stringent security selection crite-
ria and careful monitoring procedures.
The Fund has been granted permission by the SEC to pool daily uninvested
cash balances of the Fund's Portfolios in order to invest in repurchase agree-
ments on a joint basis. By entering into joint repurchase agreements, a Port-
folio may incur lower transactions costs and earn higher rates of interest on
such repurchase agreements. Each Portfolio's contribution will determine its
return from a joint repurchase agreement.
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. The Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolio will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by the Portfolio until it re-
ceives payment or delivery from the other party to any of the above transac-
tions. It is possible that the market price of the securities at the time of
delivery may be higher or lower
8
<PAGE>
than the purchase price. The Portfolio will maintain a separate account of
cash or liquid securities at least equal to the value of purchase commitments
until payment is made. Such segregated securities will either mature or, if
necessary, be sold on or before the settlement date. Typically, no income ac-
crues on securities purchased on a delayed delivery basis prior to the time
delivery is made although a Portfolio may earn income on securities it has de-
posited in a segregated account.
The Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices -- not to in-
crease its investment leverage.
PORTFOLIO TURNOVER
The Portfolio will not normally engage in short-term trading but reserves
the right to do so. In addition to portfolio trading costs, higher rates of
portfolio turnover may result in realization of capital gains. (See "DIVI-
DENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES" for information on taxation.)
The table set forth in "Financial Highlights" presents the Portfolio's histor-
ical portfolio turnover ratios.
INVESTMENT COMPANIES
The Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN INVESTMENTS
The Portfolio may invest up to 10% of its assets in the equity securities of
foreign issuers of developed countries. As foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards and
practices comparable to those applicable to U.S. companies, comparable infor-
mation
9
<PAGE>
may not be readily available about certain foreign companies. Securities of
some non-U.S. Securities of some foreign companies may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, in certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a majority of the out-
standing voting securities of the Portfolio.
INVESTMENT LIMITATIONS
The Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 10%
of the Portfolio's gross assets valued at the lower of market or cost,
and (ii) the Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
10
<PAGE>
The investment limitations described here and in the SAI are fundamental
policies and may be changed only with the approval of the holders of a major-
ity of the outstanding shares of the Portfolio. If a percentage limitation on
investment or utilization of assets as set forth above is adhered to at the
time an investment is made, a later change in percentage resulting from
changes in the value or total cost of the Portfolio's assets will not be con-
sidered a violation of the restriction.
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Funds Distributor, Inc. (the
"Distributor"), without a sales commission, at the net asset value per share
next determined after an order is received by the Fund and payment is received
by the Custodian. (See "VALUATION OF SHARES.") The minimum initial investment
required is $25,000. Certain exceptions may be made by the officers of the
Fund.
Shares of the Portfolio may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase
or redemption of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or differ-
ent purchase and redemption conditions. Shareholders who are customers of
Service Agents should consult their Service Agent for information regarding
these fees and conditions. Amounts paid to Service Agents may include transac-
tion fees and/or service fees paid by the Fund from the Fund assets attribut-
able to the Service Agent, and which would not be imposed if shares of the
Portfolio were purchased directly from the Fund or the Distributor. Service
Agents may provide shareholder services to their customers that are not avail-
able to a shareholder dealing directly with the Fund. A salesperson and any
other person entitled to receive compensation for selling or servicing Portfo-
lio shares may receive different compensation with respect to one particular
class of shares over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If you buy shares of the Portfolio in this manner, the Service Agent
must receive your investment order before the close of trading on the New York
Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer Agent
prior to the close of its business day to receive that day's share price.
Proper payment for the order must be received by the Sub-Transfer Agent no
later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
11
<PAGE>
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application, and mail it, together with a check
payable to "UAM Funds" to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment need not be converted into Federal Funds (monies credited
to the Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will
accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. Instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can by made at any time. The minimum additional in-
vestment is $1,000. Shares can be purchased at net asset value by mailing a
check to the UAM Funds Service Center (payable to "UAM Funds") or by wiring
money to the Custodian Bank using the instructions outlined above. When making
additional investments, be sure that your account number, account name, and
the Portfolio to be purchased are specified on the check or wire. Prior to
wiring addi
12
<PAGE>
tional investments, notify the Fund by calling the number on the cover of this
Prospectus. Mail orders should include, when possible, the "Invest by Mail"
stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received prior to 4 p.m. Eastern Time (ET) (the close of the
NYSE) will be invested at the price calculated after the NYSE closes on that
day. Investments received after the close of the NYSE will be executed at the
price computed on the next day the NYSE is open.
The Fund reserves the right, in its sole discretion, to suspend the offering
of shares of the Portfolio or reject purchase orders when, in the judgment of
management, such suspension or rejection is in the best interests of the Fund.
Purchases of shares will be made in full and fractional shares of the Port-
folio calculated to three decimal places. Certificates for fractional shares
will not be issued. Certificates for whole shares will not be issued except at
the written request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolio may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolio as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as detailed under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining to such securities shall become the property of the Portfolio and must
be delivered to the Fund by the investor upon receipt from the issuer. Securi-
ties acquired through an in-kind purchase will be acquired for investment and
not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange such securities are eligible to be included
in the Portfolio (current market quotations must be readily available
for such securities);
. the investor represents and agrees that all securities offered to be ex-
changed are not subject to any restrictions upon their sale by the Port-
folio under the Securities Act of 1933, or otherwise; and
. the value of any such security (except U.S. Government Securities) being
exchanged together with other securities of the same issuer owned by the
Portfolio will not exceed 5% of the net assets of the Portfolio immedi-
ately after the transaction.
13
<PAGE>
Investors who are subject to Federal taxation upon exchange may realize a
loss or gain depending upon the cost of securities or local currency ex-
changed. Investors interested in such exchanges should contact the Adviser.
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed by mail or telephone, at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of the shares depending
on the market value of investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documentation, if required, in the case
of estates, trusts, guardianships, custodianships, corporations,
pension and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be
14
<PAGE>
liable for any losses if they fail to do so. These procedures include requir-
ing the investor to provide certain personal identification at the time an ac-
count is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or the Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after the
receipt of the request or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by the Portfolio in lieu of
cash in conformity with applicable rules of the SEC. Investors may incur bro-
kerage charges on the sale of portfolio securities received in payment of re-
demptions.
15
<PAGE>
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of the Portfolio may be exchanged for any other
Institutional Class Shares of any other UAM Funds Portfolio. (See the list of
Portfolios of the UAM Funds -- Institutional Class Shares at the end of this
Prospectus.) Exchange requests should be made by contacting the UAM Funds
Service Center.
Any exchange will be based on the net asset values of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a free copy of the Prospectus for the Portfo-
lio(s) in which you are interested. Exchanges can only be made with Portfolios
that are qualified for sale in the shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE" above.
An exchange into another UAM Funds Portfolio is a sale of shares and may re-
sult in a gain or loss for income tax purposes. The fund may modify or termi-
nate the exchange privilege at any time.
VALUATION OF SHARES
The net asset value of the Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. Net asset value per share of the Portfolio is determined as of the
close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sales prices of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
16
<PAGE>
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating total return. Both yield
and total return figures are based on historical earnings and are not intended
to indicate future performance.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report, contact the UAM Funds Service Center at the address
or telephone number on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholder in quarterly dividends. If any
net capital gains are realized, the Portfolio will normally distribute them
annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of the Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
The Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, the Portfolio must,
among
17
<PAGE>
other things, distribute substantially all of its ordinary income and net cap-
ital gains on a current basis and maintain a portfolio of investments which
satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Portfolio is required by Federal law to withhold 31% of reportable pay-
ments paid to shareholders who have not complied with IRS identification regu-
lations. In order to avoid this withholding requirement, you must certify that
your Social Security or Taxpayer Identification Number provided is correct and
that either you are not currently subject to backup withholding, or you are
exempt from backup withholding. This certification must be made either on the
Application or on a separate form supplied by the Fund.
Dividends and interest received by the Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce the Port-
folio's dividends but are included in the taxable income reported on your tax
statement if the Portfolio qualifies for this tax treatment and elects to pass
it through to you. Consult a tax adviser for more information regarding deduc-
tions and credits for foreign taxes.
INVESTMENT ADVISER
Fiduciary Management Associates, Inc. is an Illinois corporation formed in
1980 and is located at 55 West Monroe Street, Suite #2550, Chicago, Illinois
60603. The Adviser is a wholly-owned subsidiary of United Asset Management
Corporation ("UAM") and provides investment management services to corpora-
tions, foundations, endowments, pension and profit sharing plans, trusts, es-
tates and other institutions as well as individuals. As of the date of this
Prospectus, the Adviser had over $1.2 billion in assets under management.
18
<PAGE>
The investment professionals of the Adviser primarily responsible for the
day-to-day management of the Portfolio and a description of their business ex-
perience are as follows:
PATRICIA A. FALKOWSKI
PRESIDENT AND CHIEF INVESTMENT OFFICER
<TABLE>
<C> <S>
1993-present Fiduciary Management Associates, Inc.
President and Chief Investment Officer
1992-1993 Fiduciary Management Associates, Inc.
Executive Vice President and Chief Investment Officer
1991-1992 Vice President, Portfolio Manager
1989-1991 STR Analysis, Inc.
President
1983-1989 Kemper Financial Services
Associate Director of Equity Research
1981-1983 Harris Trust & Savings
Sector Head, Equity Research
1979-1981 Kemper Financial Services, Inc.
Research Analyst
1970-1979 Federal government positions
Financial Analyst
1980 M.B.A., University of Chicago
1969 B.S., Rider College
</TABLE>
Ms. Falkowski began managing the FMA Small Company Portfolio in July of
1992.
ALBERT F. GUSTAFSON
SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER
<TABLE>
<C> <S>
1995-present Fiduciary Management Associates, Inc.
Senior Vice President and Portfolio Manager
1992-1995 Prairie State Advisory, Inc.
President
1990-1992 Weiss, Peck & Greer
Research Analyst
1988-1992 Oakwood Asset Management
Partner
1988-1988 Gabelli and Company
Investment Manager & Research
1985-1988 Kemper Financial Services
Research and Fund Management
1981-1985 Alliance Capital Management
Research Analyst
1974 M.B.A., DePaul University
1967 B.S., University of Illinois
</TABLE>
Mr. Gustafson began managing the FMA Small Company Portfolio in November of
1995.
19
<PAGE>
Additional members of the Fiduciary Management Associates, Inc. team of pro-
fessionals are as follows:
ROBERT F. "TAD" CARR, III
CHAIRMAN
<TABLE>
<S> <C>
1980-present Fiduciary Management Associates, Inc.
Chairman and Co-founder
Client Relations
New Business
1972-1980 Investment and Capital Management Corp.
Executive Vice President
1966-1972 Murine Company
Treasurer
Abbott Laboratories
Manager of Optical Division
1964-1966 Northern Trust Bank
Banking Department -- Corporate Accounts
1962 B.S., Babson College
ROBERT W. THORNBURGH, JR., C.F.A.
EXECUTIVE VICE PRESIDENT AND ACCOUNT MANAGER
1984-present Fiduciary Management Associates, Inc.
Executive Vice President and Account
Manager
1970-1984 Scudder, Stevens & Clark
Vice President and Senior Portfolio
Manager
1969 M.B.A., Northwestern University
1964 B.S., Northwestern University
LLOYD J. SPICER, C.F.A.
SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER
1994-present Fiduciary Management Associates, Inc.
Senior Vice President and Portfolio
Manager
1982-1994 La Salle National Corporation
Senior Vice President
1979 M.B.A., Illinois Institute of Technology
1974 B.S., Indiana State University
</TABLE>
Under an Investment Advisory Agreement with the Fund, dated as of October 8,
1990, the Adviser manages the investment and reinvestment of the assets of the
Portfolio. The Adviser must adhere to the stated investment objectives and
policies of the Portfolios, and is subject to the control and supervision of
the Fund's Board of Directors.
20
<PAGE>
As compensation for its services as an Adviser, the Portfolio pays the Ad-
viser an annual fee, in monthly installments, calculated by applying the fol-
lowing annual percentage rate to the Portfolio's average daily net assets for
the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
FMA Small Company Portfolio............................................ 0.75%
</TABLE>
In cases where a shareholder of the Portfolio has an investment counseling
relationship with the Adviser, the Adviser may, at its discretion, reduce the
investment counseling fees paid by the client directly to the Adviser. This
procedure will be utilized with clients having contractual relationships based
on total assets managed by Fiduciary Management Associates, Inc. to avoid sit-
uations where excess advisory fees might be paid to the Adviser. In no event
will a client pay higher total advisory fees as a result of the client's in-
vestment in the Portfolio. The Adviser may waive its advisory fees to keep the
Portfolio's total annual operating expenses from exceeding 1.03% of its aver-
age daily net assets. The Fund will not reimburse the Adviser for any advisory
fees which are waived or Portfolio expenses which the Adviser may bear on be-
half of the Portfolio for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolio. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares of a Port-
folio. Payments made for any of these purposes may be made from the paying
entity's revenues, its profits or any other source available to it. When in
effect, such services arrangements, are made generally available to all quali-
fied service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
21
<PAGE>
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of
aggregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
FMA Small Company Portfolio............................................ 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent for the
Fund, agrees to use its best efforts as sole distributor of Fund shares. The
Distributor does not receive any fee or other compensation under the Agreement
with respect to the FMA Small Company Portfolio included in this Prospectus.
The Agreement continues in effect so long as it is approved at least annually
by the Fund's Board of Directors. Those approving the agreements must include
a majority of Directors who are not parties to such Agreement or interested
persons of any such party. The Agreement provides that the Fund will bear
costs of the registration of its shares with the SEC and various states, and
the printing of its prospectuses, statements of additional information and re-
ports to stockholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Portfolio. The Agreement directs the Adviser to use its best efforts to obtain
the best available price and most favorable execution for all transactions of
the Portfolio. The Adviser may, however, consistent with the interests of the
Portfolio, select
22
<PAGE>
brokers on the basis of the research, statistical and pricing services they or
their affiliates provide to the Portfolio in addition to required broker serv-
ices. Such brokers may be paid a higher commission than that which another
qualified broker would have charged for effecting the same transaction, pro-
vided that such commissions are paid in compliance with the Securities Ex-
change Act of 1934, as amended, and that the Adviser determines in good faith
that the commission is reasonable in terms either of the transaction or the
overall responsibility of the Adviser to the Portfolio and the Adviser's other
clients.
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities consistent with the investment policies
of the Portfolio and one or more other clients served by the Adviser is con-
sidered at or about the same time, transactions in such securities will be al-
located among the Portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, allocations are subject to periodic review by the Fund's Direc-
tors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation permit
the Directors to issue three billion shares of common stock, with an $.001 par
value. The Directors have the power to designate one or more series or classes
of shares of common stock and to classify or reclassify any unissued shares
without further action by shareholders. At its discretion, the Board of Direc-
tors may create additional Portfolios and Classes of shares of the Fund.
The shares of each Portfolio are fully paid and nonassessable, have no pref-
erence as to conversion, exchange, dividends, retirement or other features and
have no pre-emptive rights. They have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election
of Directors can elect 100% of the Directors. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held), then standing in his name on the books of the Fund.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
23
<PAGE>
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the telephone number or address listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
24
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Rice, Hall James Small Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
25
<PAGE>
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
26
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Fiduciary Management Associates, Inc.
55 West Monroe Street
Suite 2550
Chicago, IL 60603-5093
(312) 930-6850
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
FMA Small Company Portfolio
Institutional Service
Class Shares
P R O S P E C T U S
January 3, 1997
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
FMA SMALL COMPANY PORTFOLIO
INVESTMENT ADVISER FIDUCIARY MANAGEMENT ASSOCIATES, INC.
INSTITUTIONAL SERVICE CLASS SHARES
- -------------------------------------------------------------------------------
PROSPECTUS -- JAN 3, 1997
INVESTMENT OBJECTIVE
UAM Funds, Inc. (hereinafter referred to as "UAM Funds" or the "Fund") is an
open-end, management investment company known as a "mutual fund" and organized
as a Maryland corporation. The Fund consists of multiple series of shares
(known as "Portfolios"), each of which has different investment objectives and
investment policies. Several of the Fund's Portfolios offer two separate clas-
ses of shares: Institutional Class Shares and Institutional Service Class
Shares ("Service Class Shares"). The FMA Small Company Portfolio currently of-
fers two classes of shares. The securities offered in this Prospectus are
Service Class Shares of one diversified, no-load Portfolio of the Fund managed
by Fiduciary Management Associates, Inc.
FMA SMALL COMPANY PORTFOLIO. The objective of the FMA Small Company Portfo-
lio is to provide maximum, long-term total return consistent with reasonable
risk to principal by investing primarily in common stocks of smaller companies
in terms of revenues and/or market capitalization.
There can be no assurance that the Portfolio will meet its stated objective.
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets forth
concisely information that you should know before you invest. A "Statement of
Additional Information" containing additional information about the Fund has
been filed with the Securities and Exchange Commission. Such Statement is
dated June 27, 1996, and has been incorporated by reference into this Prospec-
tus. A copy of the Statement may be obtained, without charge, by writing to
the Fund or by calling the telephone number shown above.
THIS SECURITY HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURI- TIES COMMISSION PASSED
UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Performance Calculations................................................... 4
Investment Objective....................................................... 5
Investment Policies........................................................ 5
Other Investment Policies.................................................. 6
Investment Limitations..................................................... 11
Investment Suitability..................................................... 12
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 16
Service and Distribution Plans............................................. 18
Shareholder Services....................................................... 20
Valuation of Shares........................................................ 21
Dividends, Capital Gains Distributions and Taxes........................... 22
Investment Adviser......................................................... 23
Administrative Services.................................................... 26
Distributor................................................................ 27
Portfolio Transactions..................................................... 27
General Information........................................................ 28
Directors and Officers..................................................... 30
UAM Funds -- Service Class Shares......................................... 32
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a Service Class
shareholder of the FMA Small Company Portfolio will incur. The Fund does not
charge shareholder transaction expenses. However, transaction fees may be
charged if you are a customer of a broker-dealer or other financial intermedi-
ary who has established a shareholder servicing relationship with the Fund on
behalf of their customers. Please see "Purchase of Shares" for further infor-
mation.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
FMA
SMALL
COMPANY
PORTFOLIO
SERVICE
CLASS
SHARES
---------
<S> <C>
Sales Load Imposed on Purchases.................................... NONE
Sales Load Imposed on Reinvested Dividends......................... NONE
Deferred Sales Load................................................ NONE
Redemption Fees.................................................... NONE
Exchange Fees...................................................... NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
FMA
SMALL
COMPANY
PORTFOLIO
SERVICE
CLASS
SHARES
---------
<S> <C>
Investment Advisory Fees........................................... .75 %
Administrative Fees................................................ .38 %
12b-1 Fees (Including Shareholder Servicing Fees)(*)............... 0.40 %
Other Expenses..................................................... .26 %
Advisory Fees Waived............................................... (.36)%
----
Total Operating Expenses (After Fee Waiver)........................ 1.43 %
</TABLE>
- -----------
+ Absent the Adviser's fee waiver, annualized Total Operating Expenses of the
Service Class Shares would be 1.79%. The annualized Total Operating Expenses
excludes the effect of expense offsets. If expense offsets were included,
annualized Total Operating Expenses would not significantly differ.
* Service Class Shares may bear service fees of 0.25% and distribution fees
and expenses of up to 0.15% Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. See "Service
and Distribution Plans."
1
<PAGE>
The purpose of the above table is to assist the investor in understanding
the various fees that an investment in the FMA Small Company Portfolio's Serv-
ice Class Shares will bear directly or indirectly. The expenses and fees set
forth above are estimates, based on the Portfolio's Institutional Class Shares
operations during the fiscal year ended October 31, 1996 except that such in-
formation has been restated to reflect 12b-1 fees and current administrative
fees.
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume as the Adviser's own expense operating expenses otherwise pay-
able by the Portfolio, if necessary, in order to keep the Portfolio's Service
Class Shares total annual operating expenses from exceeding 1.43% of average
daily net assets. The Fund will not reimburse the Adviser for any advisory
fees that are waived or Portfolio expenses that the Adviser may bear on behalf
of the Portfolio.
The following example illustrates the expenses that a Service Class share-
holder would pay on a $1,000 investment over various time periods assuming (1)
a 5% annual rate of return and (2) a redemption at the end of each time peri-
od. As noted in the table on the previous page, the Portfolio charges no re-
demption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FMA Small Company Portfolio Service Class
Shares.................................. $15 $33 * *
</TABLE>
- -----------
* As the Portfolio has not yet begun operations, the Fund has not projected
expenses beyond the three-year period shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
NOTE TO EXPENSE TABLE
The information set forth in the foregoing table and example relates only to
Service Class Shares of the Portfolio, which shares are subject to different
total fees and expenses than Institutional Class Shares. Service Agents may
charge other fees to their customers who are beneficial owners of Service
Class Shares in connection with their customer accounts. See "Service and Dis-
tribution Plans."
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Fiduciary Management Associates, Inc. (the "Adviser"), an investment coun-
seling firm founded in 1980, serves as investment adviser to the Fund's FMA
Small Company Portfolio (the "Portfolio"). The Adviser presently manages over
$1.2 billion in assets for institutional clients and high net worth individu-
als. See "Investment Adviser."
HOW TO INVEST
Service Class Shares of the Portfolio are offered to investors through bro-
ker-dealers and other financial institutions ("Service Agents") at net asset
value next determined after the purchase order is received in proper form. The
minimum initial investment is $25,000, and the minimum for subsequent invest-
ments is $1,000. The officers of the Fund may make certain exceptions to the
initial and minimum investment amounts. See "Purchase of Shares."
HOW TO REDEEM
Service Class Shares of the Portfolio may be redeemed at any time, without
cost, at the net asset value of the Portfolio next determined after receipt of
the redemption request. The Portfolio's share price will fluctuate with market
and economic conditions. Therefore, your investment may be worth more or less
when redeemed than when purchased. See "Redemption of Shares."
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. (the "Administrator"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), is responsible for performing and
overseeing administration, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. See
"Administrative Services."
3
<PAGE>
RISK FACTORS
The value of the Portfolio's shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolio invests. Prospective
investors in the Fund should consider the following factors associated with an
investment in the Portfolio: (1) Common stocks of companies which have small
market capitalization may exhibit greater market volatility than common stock
of companies which have larger capitalization. (2) The Portfolio may invest in
foreign securities which may involve greater risks than investments in domes-
tic securities, such as foreign currency risks. (See "Foreign Investments.")
(3) In addition, the Portfolio may use various investment practices that in-
volve special consideration, including investing in repurchase agreements,
when-issued, forward delivery and delayed settlement securities and lending of
securities, each of which involves special risks. (See "Other Investment Poli-
cies.")
PERFORMANCE CALCULATIONS
The Portfolio may advertise or quote yield data from time to time. The yield
of the Portfolio is computed based on the net income of the Portfolio during a
30-day (or one month) period, which period will be identified in connection
with the particular yield quotation. More specifically, the Portfolio's yield
is computed by dividing the Portfolio's net income per share during a 30-day
(or one month) period by the maximum offering price per share on the last day
of the period and annualizing the result on a semi-annual basis.
The Portfolio may advertise or quote total return data. Total return will be
calculated on an average annual total return basis, and may also be calculated
on an aggregate total return basis, for various periods. Average annual total
return reflects the average annual percentage change in value of an investment
in the Portfolio over a measuring period. Aggregate total return reflects the
total percentage change in value over a measuring period. Both methods of cal-
culating total return assume that dividends and capital gains distributions
made by the Portfolio during the period are reinvested in Portfolio shares.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Dividends paid by the Portfolio with respect to Institu-
tional Class and Service Class Shares, to the extent any dividends are paid,
will be calculated in the same manner at the same time on the same day and
will be in the same amount, except that service fees, distribution charges and
any incremental transfer agency costs relating to Service Class Shares will be
borne exclusively by that class.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end will contain additional performance information that includes compar-
isons with appropriate indices. The Annual Report will be available without
charge upon
4
<PAGE>
request to the Fund by writing to the address or calling the phone number on
the cover of this Prospectus.
INVESTMENT OBJECTIVE
The objective of the FMA Small Company Portfolio is to provide maximum,
long-term total return, consistent with reasonable risk to principal, by in-
vesting primarily in common stocks of smaller companies in terms of revenues
and/or market capitalization. Market capitalization of companies in the Port-
folio will generally be in the $50 million to $12 billion range. Capital re-
turn is likely to be the predominant component of the Portfolio's total re-
turn.
INVESTMENT POLICIES
The Portfolio seeks to achieve its objective by investing primarily in com-
mon stocks of smaller, less established companies in terms of revenues, assets
and market capitalization. The Portfolio may invest in both stock exchange
listed and over-the-counter securities. Under normal market conditions, at
least 65% of the Portfolio's total assets will be invested in small companies,
i.e., companies whose stock market capitalization (total market value of out-
standing shares) range from $50 million to $1 billion.
In analyzing and selecting investments, the Adviser looks for market themes
and changes that signal opportunity. At any given time, the Portfolio will be
invested in a diversified group of stocks in several industries. Primarily,
the Portfolio will invest in U.S. companies. The Adviser seeks out companies
with lower price to earnings ratios, strong cash flow, good credit lines and
clean or improving balance sheets. To minimize risk and volatility, the Ad-
viser uses initial public offerings sparingly, concentrating instead on compa-
nies with seasoned management or a track record as part of a larger company.
The Adviser follows all stocks owned or being considered for purchase. The
Adviser's sell discipline calls for re-evaluation of the fundamentals of
stocks that:
--meet initial targets of revenue or stock market value growth
--decline an absolute 15% in stock market value
--grow by 25% in stock market value in a short time.
Cash reserves will represent a relatively small percentage of the Portfo-
lio's assets. For temporary defensive purposes, the Portfolio may reduce its
holding of equity securities and increase its holdings of short-term invest-
ments.
The Portfolio may also, under normal circumstances, invest up to 35% of its
assets, unless restricted by additional limitations described below or in the
Portfolio's Statement of Additional Information, in the following securities
or investment techniques:
5
<PAGE>
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
From time to time, the Portfolio may invest a portion of its assets in the
following money market instruments, consistent with the Portfolio's investment
policies as set forth above.
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by the Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of the Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
The Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, and (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by the Portfolio;
(2) Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") or
Prime-I by Moody's Investors Service Inc. ("Moody's") or, if not rat-
ed, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated A or better by Moody's or S&P;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal In-
6
<PAGE>
termediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6)Repurchase agreements collateralized by securities listed above.
The Fund has applied to the Securities and Exchange Commission (the "Commis-
sion") for permission to deposit the daily uninvested cash balances of the
Fund's Portfolios, as well as cash for investment purposes, into one or more
joint accounts and to invest the daily balance of the joint accounts in the
following short-term investments: fully collateralized repurchase agreements,
interest-bearing or discounted commercial paper including dollar-denominated
commercial paper of foreign issuers, and any other short-term money market in-
struments including variable rate demand notes and other tax-exempt money in-
struments. By entering into these investments on a joint basis, it is expected
that a Portfolio may earn a higher rate of return on investments relative to
what it could earn individually. While the Fund expects to receive permission
from the Commission, there can be no assurance that the requested relief will
be granted.
The Fund has received permission from the Commission to allow each of its
Portfolios to invest the greater of 5% of its total assets or $2.5 million in
the Fund's DSI Money Market Portfolio for cash management purposes. (See "In-
vestment Companies.")
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "Short-Term Investments." In a
repurchase agreement, the Portfolio purchases a security and simultaneously
commits to resell that security at a future date to the seller (a qualified
bank or securities dealer) at an agreed upon price plus an agreed upon market
rate of interest (itself unrelated to the coupon rate or date of maturity of
the purchased security). The seller under a repurchase agreement will be re-
quired to maintain the value of the securities subject to the agreement at not
less than (1) the repurchase price if such securities mature in one year or
less, or (2) 101% of the repurchase price if such securities mature in more
than one year. The Administrator and the Adviser will mark to market daily the
value of the securities purchased, and the Adviser will, if necessary, require
the seller to maintain additional securities to ensure that the value is in
compliance with the previous sentence. The Adviser will consider the credit-
worthiness of a seller in determining whether a Portfolio should enter into a
repurchase agreement.
In effect, by entering into a repurchase agreement, the Portfolio is lending
its funds to the seller at the agreed upon interest rate, and receiving a se-
curity as collateral for the loan. Such agreements can be entered into for pe-
riods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
7
<PAGE>
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the under-
lying securities at a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Portfolio
and therefore subject to sale by the trustee in bankruptcy. Finally, it is
possible that the Portfolio may not be able to substantiate its interest in
the underlying securities. While the Fund's management acknowledges these
risks, it is expected that they can be controlled through stringent security
selection criteria and careful monitoring procedures. Credit screens will be
established and maintained for dealers and dealer-banks before portfolio
transactions are executed for the Portfolio.
The Fund has applied to the Commission for permission to pool the daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into repurchase agreements on a
joint basis, it is expected that a Portfolio will incur lower transactions
costs and potentially obtain higher rates of interest on such repurchase
agreements. Each Portfolio's participation in the income from jointly pur-
chased repurchase agreements will be based on that Portfolio's percentage
share in the total repurchase agreement. While the Fund expects to receive
permission from the Commission, there can be no assurance that the requested
relief will be granted.
SECURITIES LENDING
The Portfolio may lend its investment securities to qualified institutional
investors who need to borrow securities in order to complete certain transac-
tions, such as covering short sales, avoiding failures to deliver securities
or completing arbitrage operations. The Portfolio will not loan portfolio se-
curities to the extent that greater than one-third of its assets at fair mar-
ket value, would be committed to loans. By lending its investment securities,
the Portfolio attempts to increase its income through the receipt of interest
on the loan. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of the
Portfolio. The Portfolio may lend its investment securities to qualified bro-
kers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are
not inconsistent with the Investment Company Act of 1940, as amended, (the
"1940 Act") or the Rules and Regulations or interpretations of the Securities
and Exchange Commission (the "Commission") thereunder, which currently require
that (a) the borrower pledge and maintain with the Portfolio collateral con-
sisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having
a value at all times not less than 100% of the value of the securities loaned,
(b) the borrower add to such collateral whenever the price of the securities
loaned rises (i.e., the borrower
8
<PAGE>
"marks to the market" on a daily basis), (c) the loan be made subject to ter-
mination by the Portfolio at any time, and (d) the Portfolio receives reason-
able interest on the loan (which may include the Portfolio investing any cash
collateral in interest bearing short-term investments). As with other exten-
sions of credit, there are risks of delay in recovery or even loss of rights
in the securities loaned if the borrower of the securities fails financially.
These risks are similar to the ones involved with repurchase agreements as
discussed above. All relevant facts and circumstances, including the credit-
worthiness of the broker, dealer or institution, will be considered in making
decisions with respect to the lending of securities, subject to review by the
Fund's Board of Directors.
At the present time, the Staff of the Commission does not object if an in-
vestment company pays reasonable negotiated fees in connection with loaned se-
curities so long as such fees are set forth in a written contract and approved
by the investment company's Board of Directors. The Portfolio will continue to
retain any voting rights with respect to the loaned securities. If a material
event occurs affecting an investment on a loan, the loan must be called and
the securities voted.
PORTFOLIO TURNOVER
Generally, the Portfolio will not trade in securities for short-term profits
but, when circumstances warrant, securities may be sold without regard to
length of time held. It should be understood that the rate of portfolio turn-
over will depend upon market and other conditions, and it will not be a limit-
ing factor when the Adviser believes that portfolio changes are appropriate. A
rate of turnover of 100% would occur, for example, if all the securities held
by the Portfolio were replaced within a period of one year. The Portfolio will
not normally engage in short-term trading but reserves the right to do so.
High rates of portfolio turnover necessarily result in correspondingly heav-
ier brokerage and portfolio trading costs which are paid by the Portfolio. In
addition to portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. To the extent net short-term capi-
tal gains are realized, any distributions resulting from such gains are con-
sidered ordinary income for federal income tax purposes. See "Dividends, Capi-
tal Gains Distributions and Taxes" for more information on taxation.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When-issued
or forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future.
9
<PAGE>
Generally, no payment or delivery is made by the Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It
is possible that the market price of the securities at the time of delivery
may be higher or lower than the purchase price. The Portfolio will maintain a
separate account of cash, U.S. Government securities or other high grade debt
obligations at least equal to the value of purchase commitments until payment
is made. Such segregated securities will either mature or, if necessary, be
sold on or before the settlement date. Typically, no income accrues on securi-
ties purchased on a delayed delivery basis prior to the time delivery of the
securities is made although a Portfolio may earn income on securities it has
deposited in a segregated account.
The Portfolio will engage in when-issued transactions to obtain what is con-
sidered to be an advantageous price and yield at the time of the transaction.
When the Portfolio engages in when-issued or forward delivery transactions, it
will do so for the purpose of acquiring securities consistent with its invest-
ment objective and policies and not for the purposes of investment leverage.
FOREIGN INVESTMENTS
The Portfolio may invest up to 10% of its assets in the equity securities of
foreign issuers of developed countries. As foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards and
practices comparable to those applicable to U.S. companies, there may be less
publicly available information about certain foreign companies than U.S. com-
panies. There is generally less government supervision and regulation of for-
eign stock exchanges, brokers and listed companies than in the U.S. Securities
of some foreign companies may be less liquid and more volatile than securities
of comparable U.S. companies. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
INVESTMENT COMPANIES
As permitted by the 1940 Act, the Portfolio reserves the right to purchase
up to 10% of its total assets, calculated at the time of purchase, in the se-
curities of other open-end or closed-end investment companies. No more than 5%
of the purchasing Portfolio's total assets may be invested in the securities
of any one investment company nor may it acquire more than 3% of the voting
securities of any other investment company. The Portfolio will indirectly bear
its proportionate share of any management fees paid by an investment company
in which it invests in addition to the advisory fee paid by the Portfolio.
The Fund has received permission from the Commission to allow each of its
Portfolios to invest the greater of 5% of its total assets or $2.5 million in
the Fund's DSI Money Market Portfolio for cash management purposes provided
that the investment is consistent with the Portfolio's investment policies and
restrictions.
10
<PAGE>
Based upon the Portfolio's assets invested in the DSI Money Market Portfolio,
the investing Portfolio's adviser will waive its investment advisory and any
other fees earned as a result of the Portfolio's investment in the DSI Money
Market Portfolio. The investing Portfolio will bear expenses of the DSI Money
Market Portfolio on the same basis as all of its other shareholders. While the
Fund expects to receive permission from the Commission, there can be no assur-
ance that the requested relief will be granted.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental, and the Directors may
change such policies without an affirmative vote of a "majority of the out-
standing voting securities of the Portfolio," as defined in the 1940 Act.
INVESTMENT LIMITATIONS
The Portfolio has adopted certain limitations designed to reduce its expo-
sure to risk in specific situations. Some of these limitations are that the
Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) acquire any security of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's to-
tal assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or instruments issued by U.S. banks
when a Portfolio adopts a temporary defensive position;
(e) make loans except (i) by purchasing bonds, debentures or similar obli-
gations which are publicly distributed, (including repurchase agree-
ments provided, however, that repurchase agreements maturing in more
than seven days, together with securities which are not readily mar-
ketable, will not exceed 10% of a Portfolio's total assets), and (ii)
by lending its portfolio securities to banks, brokers, dealers and
other financial institutions so long as such loans are not inconsis-
tent with the 1940 Act or the rules
11
<PAGE>
and regulations or interpretations of the Commission thereunder; and
any securities which are loaned by the Portfolio will be continually
collateralized and marked-to-market daily;
(f) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% of the
Portfolio's gross assets valued at the lower of market or cost, and
the Portfolio may not purchase additional securities when borrowings
exceed 5% of total gross assets; and
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment limitations described here and in the Statement of Additional
Information are fundamental policies and may be changed only with the approval
of the holders of a majority of the outstanding shares of the Portfolio. If a
percentage limitation on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in per-
centage resulting from changes in the value or total cost of the Portfolio's
assets will not be considered a violation of the restriction.
INVESTMENT SUITABILITY
The Portfolio was designed principally for the investments of institutional
investors. The Portfolio is available for purchase by individuals and may be
suitable for investors who seek maximum, long-term total return consistent
with reasonable risk to principal by investing primarily in common stocks of
smaller companies in terms of revenues and/or market capitalization, although
no mutual fund can guarantee that its investment objective will be met.
PURCHASE OF SHARES
Shares of the portfolio may be purchased through any Service Agent having
selling or service agreements with UAM Fund Distributors, Inc. (the "Distribu-
tor") without a sales commission, at the net asset value per share next deter-
mined after an order is received by the Fund or the designated Service Agent.
(See "Service and Distribution Plans" and "Valuation of Shares.") The required
minimum initial investment for the Portfolio is $25,000, with certain excep-
tions as may be determined from time to time by the Officers of the Fund. The
Portfolio issues two classes of shares: Institutional Class and Service Class.
The two classes of shares each represent interests in the same portfolio of
investments, have the same rights and are identical in all respects, except
that the Service Class Shares offered by this Prospectus bear shareholder ser-
vicing expenses and distribution plan expenses, and have exclusive voting
rights with respect to the Rule 12b-1 Distribution Plan pursuant to which the
distribution fee may be paid. The two classes have different
12
<PAGE>
exchange privileges. (See "Exchange Privilege.") The net income attributable
to Service Class Shares and the dividends payable on Service Class Shares will
be reduced by the amount of the shareholder servicing and distribution fees;
accordingly, the net asset value of the Service Class Shares will be reduced
by such amount to the extent the Portfolio has undistributed net income.
Some Service Agents may also impose additional or different conditions or
other account fees on the purchase and redemption of Portfolio shares, which
are not subject to the Rule 12b-1 Service and Distribution Plans, which may
include transaction fees and/or service fees paid by the Fund from the Fund
assets attributable to the Service Agent and which would not be imposed if
shares of the Portfolio were purchased directly from the Fund or the Distribu-
tor. The Service Agents may provide shareholder services to their customers
that are not available to a shareholder dealing directly with the Fund. Each
Service Agent is responsible for transmitting to its customers a schedule of
any such fees and information regarding any additional or different conditions
regarding purchases and redemptions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. A salesperson and any other person entitled to receive compen-
sation for selling or servicing Portfolio shares may receive different compen-
sation with respect to one particular class of shares over another in the
Fund.
If you buy shares of a Portfolio through a Service Agent, the Service Agent
must receive your investment order before the close of trading on the New York
Stock Exchange ("NYSE"), generally 4:00 p.m. (Eastern Time) and transmit it to
the Fund's Transfer Agent, Chase Global Funds Services Company, (prior to the
close of the Transfer Agent's business day) and the Distributor to receive
that day's offering price. Proper payment for the order must be received by
the Transfer Agent no later than the time when the Portfolio is priced on the
following business day. Service Agents are responsible to their customers, the
Fund and its Distributor for timely transmission of all subscription and re-
demption requests, investment information, documentation and money.
INITIAL INVESTMENTS BY MAIL
An account also may be opened with the assistance of your Service Agent by
completing and signing an Account Registration Form, and forwarding it, to-
gether with a check payable to "UAM FUNDS, INC.", through your Service Agent
to:
UAM Funds
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
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<PAGE>
The carbon copy (manually signed) of the Account Registration Form must be
delivered to:
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Such payment need not be converted into Federal Funds (monies
credited to the Fund's custodian bank, The Bank of New York (the "Custodian
Bank") by a Federal Reserve Bank) before acceptance by the Fund.
INITIAL INVESTMENTS BY WIRE
Shares of the Portfolio may also be purchased by wiring Federal Funds to the
Fund's Custodian Bank (see instructions below). In order to insure prompt
crediting of the Federal Funds wire, it is important to follow these steps:
(a) Your Service Agent should telephone the Fund's Transfer Agent (toll-
free 1-800-638-7983) and provide the account name, address, telephone
number, social security or taxpayer identification number, the Portfo-
lio selected (Service Class Shares), the amount being wired and the
name of the bank wiring the funds. (Investors with existing accounts
should also notify the Fund prior to wiring funds.) An account number
will then be provided to you;
(b) Instruct your bank to wire the specified amount to the Fund's Custodian;
The Bank of New York
New York, NY 10286
ABA #0210-0023-8
DDA Acct. #001-12-721
F/B/O UAM Funds, Inc.
Ref: FMA Small Company Portfolio -- Service Class Shares
Your Account Number
Your Account Name
(c) A completed Account Registration Form must be forwarded to the UAM
Funds Service Center and UAM Fund Distributors, Inc. at the addresses
shown thereon as soon as possible. Federal Funds purchases will be ac-
cepted only on a day on which the New York Stock Exchange and the Cus-
todian Bank are open for business.
ADDITIONAL INVESTMENTS
You may add to your account at any time (minimum additional investment is
$1,000) by purchasing shares at net asset value through your Service Agent or
by
14
<PAGE>
mailing a check to the UAM Funds Service Center (payable to "UAM Funds, Inc.")
at the above address or by wiring monies to the Custodian Bank using the in-
structions outlined above. The minimum additional investment is $1,000. It is
very important that your account number, account name, class of shares, and
the Portfolio to be purchased, are specified on the check or wire to insure
proper crediting to your account. In order to insure that your wire orders are
invested promptly, you are requested to notify the Fund (toll-free 1-800-638-
7983) prior to the wire date. Mail orders should include, when possible, the
"Invest by Mail" stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Non-securities dealer Service Agents may receive transaction fees that are
the same as distribution fees paid to dealers.
The purchase price of the shares of the Portfolio is the net asset value
next determined after the order and payment is received. (See "Valuation of
Shares.") An order and payment received prior to the close of the New York
Stock Exchange (the "NYSE") will be executed at the price computed on the date
of receipt; an order received after the close of the NYSE will be executed at
the price computed on the next day the NYSE is open.
The Fund reserves the right, in its sole discretion, to suspend the offering
of shares of either Class of the Portfolio or reject purchase orders when, in
the judgment of management, such suspension or rejection is in the best inter-
ests of the Fund.
Purchases will be made in full and fractional shares calculated to three
decimal places. In the interest of economy and convenience, certificates for
shares will not be issued except at the written request of the shareholder.
Certificates for fractional shares, however, will not be issued.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolio may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolio as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "Valuation of Shares" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued by a Portfolio in exchange for securities will be issued at net asset
value determined as of the same time. All dividends, interest, subscription,
or other rights pertaining to such securities shall become the property of the
Portfolio and must be delivered to the Fund by the investor upon receipt from
the issuer. Securities acquired through an in-kind purchase will be acquired
for investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless: (1) such securities are, at the time of the exchange, eligible to be
included
15
<PAGE>
in the Portfolio and current market quotations are readily available for such
securities as evidenced by listing on the American Stock Exchange, the New
York Stock Exchange or NASDAQ; (2) the investor represents and agrees that all
securities offered to be exchanged are not subject to any restrictions upon
their sale by the Portfolio under the Securities Act of 1933, or otherwise;
and (3) the value of any such security (except U.S. Government Securities) be-
ing exchanged together with other securities of the same issuer owned by the
Portfolio will not exceed 5% of the net assets of the Portfolio immediately
after the transaction.
A gain or loss for Federal income tax purposes will be realized by investors
who are subject to Federal taxation upon the exchange depending upon the cost
of the securities or local currency exchanged. Investors interested in such
exchanges should contact the Adviser.
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed by mail or telephone, at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of your shares depending
on the market value of the investment securities held by the Portfolio.
BY MAIL
The Portfolio will redeem its shares at the net asset value next determined
on the date the request is received in "good order." Your request should be
addressed to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
or to your Service Agent
"Good order" means that the request to redeem shares must include the fol-
lowing documentation:
(a)The stock certificates, if issued;
(b) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered own-
ers of the shares in the exact names in which they are registered;
(c) Any required signature guarantees (see "Signature Guarantees" below);
and
16
<PAGE>
(d) Other supporting legal documentation, if required, in the case of es-
tates, trusts, guardianships, custodianships, corporations, pension
and profit sharing plans and other organizations.
Shareholders who are uncertain of requirements for redemption should contact
the UAM Funds Service Center.
SIGNATURE GUARANTEES
To protect your account, the Fund and the Administrator from fraud, signa-
ture guarantees are required for certain redemptions. Signature guarantees are
required for (1) redemptions where the proceeds are to be sent to someone
other than the registered shareowner(s) or the registered address, or (2)
share transfer requests. The purpose of signature guarantees is to verify the
identity of the party who has authorized a redemption or transfer.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from the Administrator. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital
of at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
BY TELEPHONE
Provided you have previously established the telephone redemption privilege
by completing an Account Registration Form, you may request a redemption of
your shares by calling the Fund and requesting the redemption proceeds be
mailed to you or wired to your bank. The Fund and the Fund's Transfer Agent
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and they may be liable for losses if they fail to do
so. These procedures include requiring the investor to provide certain per-
sonal identification at the time an account is opened and prior to effecting
each transaction requested by telephone. In addition, all telephone transac-
tion requests will be recorded, and investors may be required to provide addi-
tional telecopied written instructions of such transaction requests. Neither
the Fund nor the Transfer Agent will be responsible for any loss, liability,
cost or expense for following instructions received by telephone that it rea-
sonably believes to be genuine.
17
<PAGE>
To change the name of the commercial bank or the account designated to re-
ceive redemption proceeds, a written request must be sent to the Fund at the
address above. Requests to change the bank or account must be signed by each
shareholder and each signature must be guaranteed. You cannot redeem shares by
telephone if you hold stock certificates for these shares. Please contact one
of the Fund's representatives at the Administrator for further details.
FURTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under this pro-
cedure within one business day of receipt of the request, but in no event will
payment be made more than seven days after receipt of a redemption request in
good order. The Fund may suspend the right of redemption or postpone the date
at times when both the NYSE and Custodian Bank are closed, or under any emer-
gency circumstances as determined by the Commission.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the Commission. Any
such distributions in-kind will be made in securities for which an active and
substantial secondary market exists. Investors may incur brokerage charges on
the sale of portfolio securities so received in payment of redemptions.
SERVICE AND DISTRIBUTION PLANS
Under the Service Plan for Service Class Shares, adopted pursuant to Rule
12b-1 under the 1940 Act, the Fund may enter into service agreements with
Service Agents (broker-dealers or other financial institutions) who receive
fees with respect to the Fund's Service Class Shares owned by shareholders for
whom the Service Agent is the dealer or holder of record, or for whom the
Service Agent performs Servicing, as defined below. These fees are paid out of
the assets allocable to Service Class Shares to the Distributor, to the Serv-
ice Agent directly or through the Distributor. The Fund reimburses the Dis-
tributor or the Service Agent, as the case may be, for payments made at an an-
nual rate of up to .15 of 1% of the average daily value of Service Class
Shares owned by clients of such Service Organization during the period pay-
ments for Servicing are being made to it. Such payments are borne exclusively
by the Service Class Shares. Each item for which a payment may be made under
the Service Plan constitutes personal service and/or shareholder account main-
tenance and may constitute an expense of distributing Fund shares as the Com-
mission construes such term under Rule 12b-1. The fees payable for Servicing
are payable without regard to actual expenses incurred, subject to adjustment
of the fee prospectively to reflect actual expenses.
18
<PAGE>
Servicing may include, among other things, one or more of the following ren-
dered with respect to the Service Class shareholders: answering client inqui-
ries regarding the Fund; assisting clients in changing dividend options, ac-
count designations and addresses; performing sub-accounting; establishing and
maintaining shareholder accounts and records; processing purchase and redemp-
tion transactions; investing client cash account balances automatically in
Service Class Shares; providing periodic statements showing a client's account
balance and integrating such statements with those of other transactions and
balances in the client's other accounts serviced by the Service Agent; arrang-
ing for bank wires; and such other services as the Fund may request, to the
extent the Service Agent is permitted by applicable statute, rule or regula-
tion.
The Glass-Steagall Act and other applicable laws prohibit Federally chart-
ered or supervised banks from engaging in certain aspects of the business of
issuing, underwriting, selling and/or distributing securities. Accordingly,
banks will be engaged to act as Service Agents only to perform administrative
and shareholder servicing functions, including transaction-related agency
services for their customers. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain Fund shareholders and alter-
native means for continuing the Servicing of such shareholders would be
sought.
The Distributor promotes the distribution of the Service Class Shares in ac-
cordance with the terms of a Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act. The Distribution Plan provides for the use of Fund assets
allocable to Service Class Shares to pay expenses of distributing such shares.
The Distribution Plan and Service Plan (the "Plans") were approved by the
Board of Directors, including a majority of the directors who are not "inter-
ested persons" of the Fund as defined in the 1940 Act (and each of whom has no
direct or indirect financial interest in the Plans or any agreement related
thereto, referred to herein as the "12b-1 Directors"). The Plans may be termi-
nated at any time by the vote of the Board or the 12b-1 Directors, or by the
vote of a majority of the outstanding Service Class Shares of the FMA Small
Company Portfolio.
While the Plans continue in effect, the selection of the 12b-1 Directors is
committed to the discretion of such persons then in office. The Plans provide
generally that a Portfolio may incur distribution and service costs under the
Plans which may not exceed in the aggregate .75% per annum of that Portfolio's
net assets. The Board has currently limited aggregate payments under the Plans
to .50% per annum of a Portfolio's net assets. Under the Plans, as implemented
for the FMA Small Company Portfolio Service Class Shares, Distribution Plan
expenses may be no more than 0.15% and Service Plan expenses may be no more
than 0.25%, although the maximum limit may be paid following appropriate Board
approval. Upon implementation, the Distribution Plan would permit payments to
the Distributor, broker-dealers, other financial institutions, sales repre-
sentatives or other third parties
19
<PAGE>
who render promotional and distribution services, for items such as advertis-
ing expenses, selling expenses, commissions or travel reasonably intended to
result in sales of Service Class Shares and for the printing of prospectuses
sent to prospective purchasers of Service Class Shares of the FMA Small Com-
pany Portfolio.
Although the Plans may be amended by the Board of Directors, any changes in
the Plans which would materially increase the amounts authorized to be paid
under the Plans must be approved by shareholders of the Class involved. The
total amounts paid under the foregoing arrangements may not exceed the maximum
limits specified above, and the amounts and purposes of expenditures under the
Plans must be reported to the 12b-1 Directors quarterly. The amounts allowable
under the Plans for each Class of Shares of the Portfolio are also limited un-
der certain rules of the National Association of Securities Dealers, Inc.
In addition to payments by the Fund under the Plans, the Distributor, United
Asset Management Corporation ("UAM"), the parent company of the Adviser, the
Adviser, or any of their affiliates, may, at its own expense, compensate a
Service Agent or other person for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to the Fund, a Portfolio
or any Class of Shares of a Portfolio. The person making such payments may do
so out of its revenues, its profits or any other source available to it. Such
services arrangements, when in effect, are made generally available to all
qualified service providers. The Adviser may compensate its affiliated compa-
nies by referring investors to the Portfolios.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Service Class Shares of the FMA Small Company Portfolio may be exchanged for
any other Service Class Shares of a Portfolio included in the UAM Funds which
is comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of
the UAM Funds -- Service Class Shares at the end of this Prospectus.) Exchange
requests should be made by calling the Fund (1-800-638-7983) or by writing to
UAM Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company,
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only available
however, in states in which both Portfolios' Service Class Shares are regis-
tered.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made by mail, telephone or through a Service Agent.
Telephone exchanges will be accepted only if the certificates for the shares
20
<PAGE>
to be exchanged are held by the Fund for the account of the shareholder and
the registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close
of business on the same day. Exchanges may also be subject to limitations as
to amounts or frequency and to other restrictions established by the Board of
Directors to assure that such exchanges do not disadvantage the Fund and its
shareholders. For additional information regarding responsibility for the au-
thenticity of telephone instructions, See "Redemption of Shares -- By Tele-
phone" above.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF REGISTRATION
You may transfer the registration of any of your Fund shares to another per-
son by writing to the UAM Funds, Inc., at the above address. As in the case of
redemptions, the written request must be received in good order including sig-
nature guarantees before any transfer can be made. (See "Redemption of Shares"
for a definition of "good order.")
VALUATION OF SHARES
The net asset value per share of each class is determined by dividing the
sum of the total market value of the underlying Portfolio's investments and
other assets, less any liabilities, by the total outstanding shares of the
Class. The net asset value per share is determined as of the close of the NYSE
on each day that the NYSE is open for business (currently 4:00 p.m. Eastern
Time). The per share net asset value of the Service Class Shares may be lower
than the per share net asset value of the Institutional Class Shares reflect-
ing the daily expense accruals of the shareholder servicing, distribution and
transfer agency fees applicable to the Service Class Shares.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken
from the exchange where the security is primarily traded. Securities listed on
a foreign exchange are valued at their closing price. Unlisted equity securi-
ties and listed securities not traded on the valuation date for which market
quotations are readily available are valued not exceeding the current asked
prices nor less than the current bid prices.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
21
<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income to shareholders of both of its Classes in the form of quarterly
dividends. If any net capital gains are realized, the Portfolio will normally
distribute such gains with the last dividend for the fiscal year. The per
share dividends and distributions on Service Class Shares generally will be
lower than the per share dividends and distributions on Institutional Class
Shares as a result of the shareholder servicing, distribution and any transfer
agency fees, applicable to the Service Class Shares.
Undistributed net investment income is included in the Portfolio's net as-
sets for the purpose of calculating net asset value per share. Therefore, on
the "ex- dividend" date, the net asset value per share excludes the dividend
(i.e., is reduced by the per share amount of the dividend). Dividends paid
shortly after the purchase of shares by an investor, although in effect a re-
turn of capital, are taxable to shareholders.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of the Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
The Portfolio intends to qualify each year as a "regulated investment compa-
ny" under the Internal Revenue Code of 1986, as amended (the "Code"), and if
it qualifies, will not be liable for Federal income taxes to the extent it
distributes its net investment income and net realized capital gains. Divi-
dends, either in cash or reinvested in shares, paid by the Portfolio from net
investment income will be taxable to shareholders as ordinary income and will
generally qualify in part for the 70% dividends received deduction for corpo-
rations, but the portion of the dividends so qualified depends on the ratio of
the aggregate taxable qualifying dividend income received by the Portfolio
from domestic (U.S.) sources to the total taxable income of the Portfolio, ex-
clusive of long-term capital gains.
Whether paid in cash or additional shares of the Portfolio and regardless of
the length of time the shares in the Portfolio have been owned by the share-
holder, distributions from long-term capital gains are taxable to shareholders
as such, but are not eligible for the dividends received deduction. Sharehold-
ers are notified annually by the Fund as to Federal tax status of dividends
and distributions paid by the Portfolio. Such dividends and distributions may
also be subject to state and local taxes.
Exchanges and redemptions of shares in the Portfolio are taxable events for
Federal income tax purposes. A shareholder may also be subject to state and
local taxes on such redemptions.
22
<PAGE>
The Portfolio intends to declare and pay dividends and capital gains distri-
butions so as to avoid imposition of the Federal Excise Tax. To do so, the
Portfolio expects to distribute an amount equal to (1) 98% of its calendar
year ordinary income, (2) 98% of its capital gains net income (the excess of
short and long-term capital gains over short and long-term capital losses) for
the one-year period ending October 31st, and (3) 100% of any undistributed or-
dinary or capital gains net income from the prior year. Dividends declared in
October, November, or December to shareholders of record in such month will be
deemed to have been paid by the Portfolio and received by the shareholders on
December 31 of such calendar year, provided that the dividends are paid before
February 1 of the following year.
The Portfolio is required by Federal law to withhold 31% of reportable pay-
ments (which may include dividends, capital gains distributions, and redemp-
tions) paid to shareholders who have not complied with IRS taxpayer identifi-
cation regulations. In order to avoid this withholding requirement, you must
certify on the Account Registration Form or on a separate form supplied by the
Fund that your Social Security or Taxpayer Identification Number provided is
correct and that you are not currently subject to backup withholding, or that
you are exempt from backup withholding.
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from the Fund. Shareholders should consult with their tax advisers with re-
spect to the tax status of distributions from the Fund in their state and lo-
cality.
INVESTMENT ADVISER
Fiduciary Management Associates, Inc. is an Illinois corporation formed in
1980 and is located at 55 West Monroe Street, Suite #2550, Chicago, Illinois
60603. The Adviser is a wholly-owned subsidiary of United Asset Management
Corporation ("UAM") and provides investment management services to corpora-
tions, foundations, endowments, pension and profit sharing plans, trusts, es-
tates and other institutions as well as individuals. As of the date of this
Prospectus, the Adviser had over $1.2 billion in assets under management.
The investment professionals of the Adviser primarily responsible for the
day-to-day management of the Portfolio and a description of their business ex-
perience are as follows:
PATRICIA A. FALKOWSKI
PRESIDENT AND CHIEF
INVESTMENT OFFICER
1993-present Fiduciary Management Associates, Inc. President and Chief In-
vestment Officer
23
<PAGE>
1992-1993 Fiduciary Management Associates, Inc. Executive Vice President
and Chief Investment Officer
1991-1992 Vice President, Portfolio Manager
1989-1991 STR Analysis, Inc. President
1983-1989 Kemper Financial Services Associate-Director of Equity Research
1981-1983 Harris Trust & Savings Sector Head, Equity Research
1979-1981 Kemper Financial Services, Inc. Research Analyst
1970-1979 Federal government positions Financial Analyst
1980 M.B.A., University of Chicago
1969 B.S., Rider College
Ms. Falkowski began managing the FMA Small Company Portfolio in July of
1992.
ALBERT F. GUSTAFSON
SENIOR VICE PRESIDENT
AND PORTFOLIO MANAGER
1995-present Fiduciary Management Associates, Inc. Senior Vice President and
Portfolio Manger
1992-1995 Praire State Advisory, Inc.
President
1990-1992 Weiss, Peek & Greer
Research Analyst
1988-1992 Oakwood Asset Management
Partner
1988-1988 Gabelli and Company
Investment Manager & Research
1985-1988 Kemper Financial Services
1981-1985 Alliance Capital Management
Research Analyst
1974 M.B.A., DePaul University
1967 B.S., University of Illinois
Mr. Gustafson began managing the FMA Small Company Portfolio in November of
1995.
24
<PAGE>
Additional members of the Fiduciary Management Associates, Inc. team of pro-
fessionals are as follows:
ROBERT F. "TAD" CARR, III
CHAIRMAN
1980-present Fiduciary Management Associates, Inc.; Chairman and Co founder
Client Relations
1972-1980 New Business Investment and Capital Management Corp., Executive
Vice President
1966-1972 Murine Company, Treasurer, Abbott Laboratories, Manager of Op-
tical Division
1964-1966 Northern Trust Bank, Banking Department--Corporate Accounts
1962 B.S., Babson College
ROBERT W. THORNBURGH, JR., C.F.A.
EXECUTIVE VICE PRESIDENT
AND ACCOUNT MANAGER
1984-present Fiduciary Management Associates, Inc. Executive Vice President
and Account Manager
1970-1984 Scudder, Stevens & Clark Vice President and Senior Portfolio
Manager
1969 M.B.A., Northwestern University
1964 B.S., Northwestern University
LLOYD J. SPICER, C.F.A.
SENIOR VICE PRESIDENT
AND PORTFOLIO MANAGER
1994-present Fiduciary Management Associates, Inc., Senior Vice President
and Portfolio Manager
1982-1994 La Salle National Corporation, Senior Vice President
1979 M.B.A., Illinois Institute of Technology
1974 B.S., Indiana State University
Under an Investment Advisory Agreement (the "Agreement") with the Fund,
dated as of October 8, 1990, the Adviser, subject to the control and supervi-
sion of the Fund's Board of Directors and in conformance with the stated in-
vestment objective and policies of the Portfolio, manages the investment and
reinvestment of the assets of the Portfolio. In this regard, it is the respon-
sibility of the Adviser to make investment decisions for the Portfolio and to
place purchase and sales orders for the Portfolio.
As compensation for the services rendered by the Adviser under the Agree-
ment, the Portfolio pays the Adviser an annual fee, in monthly installments,
calcu-
25
<PAGE>
lated by applying the following annual percentage rate to the Portfolio's av-
erage daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
FMA Small Company Portfolio............................................ 0.75%
</TABLE>
ADMINISTRATIVE SERVICES
Pursuant to a Fund Administration Agreement dated April 15, 1996, which was
approved by the Fund's Directors, UAM Fund Services, Inc., a wholly-owned sub-
sidiary of UAM, with its principal office located at 211 Congress Street, Bos-
ton, MA 02110, is responsible for performing and overseeing administration,
fund accounting, dividend disbursing and transfer agency services provided to
the Fund and its Portfolios. The Fund pays UAM Fund Services, Inc. a monthly
fee for its services which on an annual basis equals: 0.19 of 1% of the first
$200 million of the aggregate net assets of the Fund; 0.11 of 1% of the next
$800 million of the aggregate net assets of the Fund; 0.07 of 1% of the aggre-
gate net assets in excess of $1 billion but less than $3 billion; and 0.05 of
1% of the aggregate assets in excess of $3 billion. The fees are allocated
among the Portfolios on the basis of their relative assets and are subject to
a graduated minimum fee schedule per Portfolio of $1,250 per month upon incep-
tion of a Portfolio to $70,000 annually after two years. If a separate class
of shares is added to a Portfolio, the minimum annual fee payable to UAM Fund
Services, Inc. by that Portfolio may be increased by up to $20,000. In addi-
tion, each Portfolio will pay to UAM Fund Services, Inc. a Fund-specific fee
of between 0.02% to 0.06% of the aggregate net assets of each Portfolio. The
Directors of the Fund have also approved a Mutual Funds Service Agreement
dated April 15, 1996 between UAM Fund Services, Inc. and Chase Global Funds
Services Company, an affiliate of The Chase Manhattan Bank, N.A. under which
Chase Global Funds Services Company provides the Fund and its Portfolios with
certain services, including, but not limited to, fund accounting, transfer
agency, maintenance of Fund records, preparation of reports, assistance in the
preparation of the Fund's registration statements and general day-to-day ad-
ministration of matters related to the Fund's corporate existence. UAM Fund
Services, Inc. pays Chase Global Funds Services Company a monthly fee for its
services from the fees that UAM Fund Services, Inc. receives from the Fund un-
der its Fund Administration Agreement. Chase Global Funds Services Company is
located at 73 Tremont Street, Boston, MA 02108-3913. Effective April 1, 1996,
The Chase Manhattan Corporation, the parent of The Chase Manhattan Bank, N.A.
merged with and into Chemical Banking Corporation, the parent company of Chem-
ical Bank. Chemical Banking Corporation is the surviving corporation and will
continue its existence under the name "The Chase Manhattan Corporation."
26
<PAGE>
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM Corporation
with its principal office located at 211 Congress Street, Boston, Massachu-
setts 02110, distributes the shares of the Fund. Under the Fund's Distribution
Agreement (the "Distribution Agreement"), the Distributor, as agent of the
Fund, agrees to use its best efforts as sole distributor of the Fund's shares.
The Distributor does not receive any fee or other compensation under the Dis-
tribution Agreement (except as described under "Service and Distribution
Plans" above). The Distribution Agreement continues in effect so long as such
continuance is approved at least annually by the Fund's Board of Directors,
including a majority of those Directors who are not parties to such Agreement
or interested persons of any such party. The Distribution Agreement provides
that the Fund will bear the costs of the registration of its shares with the
Commission and various states, and the printing of its prospectuses, state-
ments of additional information and reports to stockholders.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to
all transactions for the Portfolio. The Adviser may, however, consistent with
the interests of the Portfolio, select brokers on the basis of the research,
statistical and pricing services they (or their affiliates) provide to the
Portfolio. Information and research received from such brokers will be in ad-
dition to, and not in lieu of, the services required to be performed by the
Adviser under the Investment Advisory Agreement. A commission paid to such
brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that such commissions are
paid in compliance with the Securities Exchange Act of 1934, as amended, and
that the Adviser determines in good faith that such commission is reasonable
in terms either of the transaction or the overall responsibility of the Ad-
viser to the Portfolio and the Adviser's other clients.
It is not the Fund's practice to allocate brokerage or effect principal
transactions with dealers on the basis of sales of shares which may be made
through intermediary brokers or dealers that market shares of the FMA Small
Company Portfolio. However, the Adviser may place portfolio orders with quali-
fied broker-dealers who recommend the Portfolio or who act as agents in the
purchase of shares of the Portfolio for their clients.
Some securities considered for investment by the Portfolio may also be ap-
propriate for other clients served by the Adviser. If purchase or sale of se-
curities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, trans-
27
<PAGE>
actions in such securities will be allocated among the Portfolio and clients
in a manner deemed fair and reasonable by the Adviser. Although there is no
specified formula for allocating such transactions, the various allocation
methods used by the Adviser, and the results of such allocations, are subject
to periodic review by the Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name was changed to
"UAM Funds, Inc." The Fund's Articles of Incorporation permit the Directors to
issue three billion shares of common stock, with an $.001 par value. The Di-
rectors have the power to designate one or more series ("Portfolios") or clas-
ses of shares of common stock and to classify or reclassify any unissued
shares with respect to such Portfolios, without further action by sharehold-
ers. Currently the Fund consists of 30 Portfolios. The Board of Directors may
create additional Portfolios or Classes of shares of the Fund in the future at
its discretion.
The shares of each Portfolio and Class of the Fund are fully paid and nonas-
sessable, have no preference as to conversion, exchange, dividends, retirement
or other features and have no pre-emptive rights. The shares of each Portfolio
and Class have noncumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Directors can elect
100% of the Directors if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his name on the books of the Fund. Both Institu-
tional Class and Service Class Shares represent an interest in the same assets
of a Portfolio and are identical in all respects except that the Service Class
Shares bear certain expenses related to shareholder servicing and distribution
of such shares, and have exclusive voting rights with respect to matters re-
lating to such distribution expenditures. Information about the Institutional
Class Shares of the Portfolios, along with the fees and expenses associated
with such shares is available upon request by contacting the Fund at 1-800-
638-7983. The Fund will not hold annual meetings except as required by the
1940 Act and other applicable laws. The Fund has undertaken that its Directors
will call a meeting of shareholders if such a meeting is requested in writing
by the holders of not less than 10% of the outstanding shares of the Fund. To
the extent required by the undertaking, the Fund will assist shareholder com-
munications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
28
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by writing to the Fund at the address
listed on the cover of this Prospectus or by calling 1-800-638-7983.
LITIGATION
The Fund is not involved in any litigation.
29
<PAGE>
DIRECTORS AND OFFICERS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
JOHN T. BENNETT, JR. Director of the Fund; President of Squam In-
College Road -- RFD3 vestment Management Company, Inc. and Great
Meredith, NH 03253 Island Investment Company, Inc.; President
Age 67 of Bennett Management Company from 1988 to
1993.
PHILIP D. ENGLISH Director of the Fund; President and 16 Chief
West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
Age 47 poration, and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert Price
1717 Arch Street & Rhoads; Director, Philadelphia, PA 19103
Age 54 Hofler Corp.
NORTON H. REAMER Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer and
Boston, MA 02110 Director of United Asset Management Corpora-
Age 60 tion; Director, Partner or Trustee of each
of the Investment Companies of the Eaton
Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.(*) Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Investors
Boston, MA 02111 Corporation ("DSI") since 1988; Director and
Age 52 Chief Executive Officer of H.T Investors,
Inc., formerly a subsidiary of DSI.
WILLIAM H. PARK(*) Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age 49
30
<PAGE>
GARY L. FRENCH(*) Treasurer of the Fund; President and Chief
211 Congress Street Executive Officer of UAM Fund Services,
Boston, MA 02110 Inc.; formerly Vice President -- Operations
Age [45] Develop- ment and Control of Fidelity In-
vestment Institutional Services from Febru-
ary 1995 to August 1995; Treasurer of the
Fidelity Group of Mutual Funds from 1991 to
February 1995.
MICHAEL E. DEFAO(*) Secretary to the Fund; Vice President and
211 Congress Street General Counsel to UAM Fund Services, Inc.;
Boston, MA 02110 formerly an Associate of Ropes & Gray (a law
Age [28] firm) from 1993-1996.
ROBERT R. FLAHERTY(*) Assistant Treasurer of the Fund; Senior Man-
73 Tremont Street ager of Fund Administration and Compliance
Boston, MA 02108 of Sub-Administrator since March 1995; for-
Age 32 merly Senior Manager of Deloitte & Touche
LLP from 1985 to 1995.
KARL O. HARTMANN(*) Assistant Secretary of the Fund; Senior Vice
73 Tremont Street President and General Counsel of Sub-Admin-
Boston, MA 02108 istrator; formerly Senior Vice President,
Age 41 Secretary and General Counsel of Leland,
O'Brien, Rubinstein Associates, Inc. from
November 1990 to November 1991.
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
UAM FUNDS -- SERVICE CLASS SHARES
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC.
BHM&S Total Return Bond Portfolio
NWQ INVESTMENT MANAGEMENT COMPANY
NWQ Balanced Portfolio
SIRACH CAPITAL MANAGEMENT, INC.
Sirach Equity Portfolio
Sirach Growth Portfolio
Sirach Special Equity Portfolio
TOM JOHNSON INVESTMENT MANAGEMENT, INC.
TJ Core Equity Portfolio
31
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Fiduciary Management Associates, Inc.
55 West Monroe Street
Suite 2550
Chicago, IL 60603-5093
(312) 930-6850
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
ICM Fixed Income
Portfolio
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
ICM FIXED INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: INVESTMENT COUNSELORS OF MARYLAND, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund". The Fund consists of multiple series of shares
(known as "Portfolios") each of which has different investment objectives and
policies. The ICM Fixed Income Portfolio currently offers only one class of
shares. The securities offered in this Prospectus are Institutional Class
Shares of one diversified, no-load Portfolio of the Fund managed by Investment
Counselors of Maryland, Inc.
ICM FIXED INCOME PORTFOLIO. The objective of the ICM Fixed Income Portfolio
(the "Portfolio") is to provide maximum, long-term total return consistent
with reasonable risk to principal by investing primarily in investment grade
fixed income securities of varying maturities.
There can be no assurance that the Portfolio will achieve its stated objec-
tive.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI,
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 6
Investment Policies........................................................ 6
Other Investment Policies.................................................. 8
Investment Limitations..................................................... 15
Purchase of Shares......................................................... 16
Redemption of Shares....................................................... 19
Shareholder Services....................................................... 21
Valuation of Shares........................................................ 21
Performance Calculations................................................... 22
Dividends, Capital Gains Distributions and Taxes........................... 22
Investment Adviser......................................................... 23
Administrative Services.................................................... 26
Distributor................................................................ 26
Portfolio Transactions..................................................... 27
General Information........................................................ 27
UAM Funds -- Institutional Class Shares.................................... 29
</TABLE>
<PAGE>
ICM FIXED INCOME INSTITUTIONAL CLASS
FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolio would incur. Transaction fees may be charged if a broker-dealer or
other financial intermediary deals with the Fund on your behalf. (See "PUR-
CHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases......................................... NONE
Sales Load Imposed on Reinvested Dividends.............................. NONE
Deferred Sales Load..................................................... NONE
Redemption Fees......................................................... NONE
Exchange Fees........................................................... NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Investment Advisory Fees............................................ 0.50 %
Administrative Fees................................................. 0.46 %
12b-1 Fees.......................................................... NONE
Distribution Costs.................................................. NONE
Other Expenses...................................................... 0.38 %
Advisory Fees Waived and Expenses Assumed........................... (0.84)%
-----
Total Operating Expenses (After Fee Waiver and Expenses Assumed).... 0.50 %*
</TABLE>
- -----------
* Absent fee waivers and expenses assumed by the Adviser, annualized Total Op-
erating Expenses of the Portfolio for the fiscal year ended October 31, 1996
would have been 1.34%. The annualized Total Operating Expenses includes the
effect of expense offsets. If expense offsets were excluded, the annualized
Total Operating Expenses of the Portfolio would not differ.
The table above shows the various fees and expenses that an investor would
bear directly or indirectly. The expenses and fees listed above are based on
the Portfolio's operations during the fiscal year ended October 31, 1996, ex-
cept that Advisory Fees Waived and Expenses Assumed have been restated to re-
flect the Portfolio's current expense cap and Administrative Fees have been
restated to reflect current fees. (See "ADMINISTRATIVE SERVICES" herein and in
the SAI.)
Until further notice, the Adviser has voluntarily agreed to waive a portion
of its advisory fees and to assume expenses otherwise payable by the Portfolio
to keep the Portfolio's total annual operating expenses from exceeding 0.50%
of its average daily net assets. The Fund will not reimburse the Adviser for
any advisory fees that are waived or Portfolio expenses that the Adviser may
bear on behalf of the Portfolio for a given fiscal year.
1
<PAGE>
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. The Portfolio
charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ICM Fixed Income Portfolio................... $ 5 $16 $28 $63
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc. (the "Adviser"), an investment coun-
seling firm founded in 1972, serves as investment adviser to the Portfolio.
The Adviser presently manages over $4 billion in assets for institutional cli-
ents and high net worth individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor"), to investors at net asset value without a sales commission.
Share purchases may be made by sending investments directly to the Fund. The
minimum initial investment is $100,000. The minimum for subsequent investment
is $1,000. Certain exceptions to the initial or minimum investment amounts may
be made by the officers of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. The Portfolio will distribute any realized
net capital gains annually. Distributions will be reinvested in Portfolio
shares automatically unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of the Portfolio may be redeemed, without cost, at any time at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES" and "SHAREHOLDER SERVICES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolio's shares will fluctuate in response to changes in
market and economic conditions as well as the financial conditions and pros-
pects of the issuers in which the Portfolio invests. Prospective investors
should consider the following: (1) The fixed income securities held by the
Portfolio will be affected by general changes in interest rates that result in
increases or decreases in their value. The value of the securities held by the
Portfolio can be expected to vary inversely with changes in interest rates; as
interest rates decline, market value tends to increase and vice versa. (2) The
Portfolio may invest in the securities of foreign issuers. (See "INVESTMENT
POLICIES."); (3) The Portfolio may engage in various portfolio strategies to
seek to hedge its portfolio against movements in interest rates and exchange
rates between currencies by the use of derivatives including options, futures
and options on futures. Utilization of options and futures transactions in-
volves the risk of imperfect correlation in movements in the price of options
and futures and movements in the price of the securities, interest rates or
currencies which are the subject of the hedge. Options and futures transac-
tions in foreign markets are also subject to the risk factors associated with
foreign investments generally. There can be no assurance that a liquid second-
ary market for options and futures contracts will exist at any specific time.
(See "FUTURES CONTRACTS AND OPTIONS."); (4) The Portfolio may use various in-
vestment practices including investing in repurchase agreements, when-issued,
forward delivery and delayed settlement securities and lending of securities.
(See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides selected per share information for a share out-
standing throughout the periods presented and is part of the Portfolio's Fi-
nancial Statements, which are included in the Portfolio's 1996 Annual Report
to Shareholders. The Financial Statements are incorporated into the Portfo-
lio's SAI. Please read the following information in conjunction with the Port-
folio's Financial Statements as of October 31, 1996. The Financial Statements
have been audited by Price Waterhouse LLP. Their unqualified opinion on the
Financial Statements is also incorporated into the SAI.
<TABLE>
<CAPTION>
NOVEMBER 3, YEARS ENDED
1992** TO OCTOBER 31,
OCTOBER 31, -------------------------
1993 1994 1995 1996
----------- ------- ------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.00 $ 10.58 $ 9.55 $ 10.43
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+................ 0.51 0.52 0.59 0.59
------- ------- ------- -------
Net Realized and Unrealized Gain
(Loss)............................... 0.51 (0.98) 0.82 (0.07)
------- ------- ------- -------
Total from Investment Operations...... 1.02 (0.46) 1.41 0.52
DISTRIBUTIONS
Net Investment Income................. (0.44) (0.48) (0.53) (0.59)
Net Realized Gain..................... -- (0.09) -- --
------- ------- ------- -------
Total Distributions................... (0.44) (0.57) (0.53) (0.59)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD......... $ 10.58 $ 9.55 $ 10.43 $ 10.36
======= ======= ======= =======
Total Return+.......................... 10.38% (4.43%) 15.11% 5.17%
======= ======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (Thousands).. $12,465 $12,601 $16,765 $24,358
Ratio of Expenses to Average Net
Assets................................ 0.84%* 0.84% 0.63% 0.50%
Ratio of Net Investment Income to
Average Net Assets.................... 5.41%* 5.26% 6.04% 5.98%
Portfolio Turnover Rate................ 65% 82% 49% 46%
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per Share...... $ 0.03 $ 0.04 $ 0.08 $ 0.08
Ratio of Expenses to Average Net Assets
Including Expenses Offsets............ N/A N/A 0.61% 0.50%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Adviser during the period.
5
<PAGE>
INVESTMENT OBJECTIVE
The objective of the Portfolio is to provide maximum, long-term total return
consistent with reasonable risk to principal. The Adviser intends to pursue
this objective by investing the Portfolio's assets primarily in investment
grade fixed income securities of varying maturities. These include securities
of the U.S. Government and its agencies, corporate bonds, mortgage-backed se-
curities, asset-backed securities, and various short-term instruments such as
commercial paper, Treasury bills, and certificates of deposit. Income return
is expected to be a predominant portion of the Portfolio's total return. Any
capital return on the Portfolio is dependent upon interest rate movements. The
capital return from the Portfolio will vary according to, among other factors,
interest rate changes and the average weighted maturity (duration) of the
Portfolio.
INVESTMENT POLICIES
The Adviser employs a conservative fixed income investment strategy. This
strategy seeks to provide superior, risk-adjusted returns with an emphasis on
consistently outperforming the broad intermediate-term market as interest
rates climb and participating in market rallies as rates fall. The Adviser's
investment process is largely driven by independent research on relative value
along the yield curve and a view on interest rate trends. The Adviser consid-
ers events affecting both the U.S. and international capital markets in its
analysis. Market models developed in-house and other internal systems quantify
and monitor a broad set of risk measures used to identify relative value be-
tween sectors and within security groups. The Adviser has found that relative
value generally exists when a security or sector offers the prospect of supe-
rior rewards for a given amount of risk.
The Portfolio seeks to achieve its objective by investing primarily in in-
vestment grade fixed income securities of varying maturities. These include
securities of the U.S. Government and its agencies, corporate bonds, mortgage-
backed securities, asset-backed securities, and various short-term instruments
such as commercial paper, Treasury bills, and certificates of deposit.
The Portfolio will invest in investment grade bonds having one of the three
highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa,
Aa, A) or Standard & Poor's Corporation ("S&P") (AAA, AA, A). The Adviser will
seek to achieve the Portfolio's objective by investing in the following secu-
rities: mortgage-backed securities including collateralized mortgage obliga-
tions ("CMOs") and asset-backed securities which are deemed by the Adviser and
the rating agencies cited above to be of investment grade quality; variable
rate and fixed rate debt securities which at the time of purchase are rated as
"investment grade"; short-term securities deemed by the Adviser to have compa-
rable ratings; and securities of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities.
6
<PAGE>
It is the Adviser's intention that the Portfolio's investments will be lim-
ited to the investment grade securities described above. However, the Adviser
reserves the right to retain securities which are downgraded by one or both of
the rating agencies if, in the Adviser's judgment, the retention of the secu-
rities is warranted. In addition, the Adviser may invest up to 10% of the
Portfolio's assets in fixed income securities split rated by Moody's and by
S&P, with one service an A, the other Baa/BBB (or which, if unrated, are in
the Adviser's opinion of comparable quality or better), preferred stocks and
convertible securities. In the case of convertible securities, the conversion
privilege may be exercised, but the common stocks received will be sold. Secu-
rities which are rated Baa or lower by Moody's or BBB or lower by S&P are con-
sidered to be more speculative with regard to the payment of interest and
principal (according to the terms of the indenture) than securities in the
three highest rating categories. Such securities normally carry with them a
greater degree of investment risk than securities with higher ratings.
While the Adviser anticipates that the majority of the assets in the Portfo-
lio will be U.S. dollar-denominated securities, it reserves the right to pur-
chase obligations of foreign governments, agencies, or corporations denomi-
nated either in U.S. dollars or foreign currencies. The credit quality stan-
dards applied to foreign obligations are the same as those applied to the se-
lection of U.S. based securities.
Investors should recognize that investing in foreign companies involves spe-
cial considerations which are not typically associated with investing in U.S.
companies. Since the securities of foreign companies are frequently denomi-
nated in foreign currencies and the Portfolio may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the Portfolio will be af-
fected favorably or unfavorably by changes in currency rates and in exchange
control regulations and may incur costs in connection with conversions between
various currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, there may be less publicly available information
about certain foreign companies than about U.S. companies. Securities of some
non-U.S. companies may be less liquid and more volatile than securities of
comparable U.S. companies. There is generally less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in
the U.S. Many foreign securities markets have substantially less volume than
United States national securities exchanges, and securities of some foreign
issuers are less liquid and more volatile than securities of comparable domes-
tic issuers. Brokerage commissions and other transactions costs on foreign se-
curities exchanges are generally higher than in the United States. In addi-
tion, with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, dip-
lomatic developments or the possible adoption of foreign governmental restric-
tions such as exchange controls which could affect U.S. investments in those
countries.
7
<PAGE>
It is the policy of the Portfolio to invest, under normal circumstances, at
least 80% of its assets in fixed income securities. For temporary defensive
purposes, the Portfolio may reduce its holdings of fixed income securities and
increase, up to 100%, its holdings in short-term investments. The Adviser may
employ a defensive investment posture either when it anticipates that prevail-
ing interest rates will rise or that the spread between treasuries and other
fixed income securities will widen. When the Portfolio is in a defensive mode,
it is not pursuing long-term total return.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT
COMPANIES.")
8
<PAGE>
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, the Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price. The Administrator and the Adviser will mark to
market daily the value of the securities purchased. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause the Portfolio to experience a loss or delay in the liqui-
dation of the collateral securing the repurchase agreement. The Portfolio
might also incur disposition costs in liquidating the collateral. While the
Fund's management acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and careful monitor-
ing procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into joint repurchase agree-
ments, the Portfolio may incur lower transaction costs and earn higher rates
of interest on joint repurchase agreements. The Portfolio's contribution would
determine its return from a joint repurchase agreement. (See "SHORT TERM IN-
VESTMENTS.")
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. The Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolio will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward de
9
<PAGE>
livery" refers to securities whose terms and indenture are available, and for
which a market exists, but which are not available for immediate delivery.
When-issued and forward delivery transactions may be expected to occur a month
or more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will oc-
cur sometime in the future. No payment or delivery is made by the Portfolio
until it receives payment or delivery from the other party to any of the above
transactions. It is possible that the market price of the securities at the
time of delivery may be higher or lower than the purchase price. The Portfolio
will maintain a separate account of cash or liquid securities at least equal
to the value of purchase commitments until payment is made. Typically, no in-
come accrues on securities purchased on a delayed delivery basis prior to the
time delivery is made although the Portfolio may earn income on securities it
has deposited in a segregated account.
The Portfolio may engage in these types of purchases in order to buy securi-
ties that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover is not anticipated to exceed 80%. In addition to Portfo-
lio trading costs, higher rates of portfolio turnover may result in the reali-
zation of capital gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX-
ES" for more information on taxation). The Portfolio will not normally engage
in short-term trading, but each reserves the right to do so. The table set
forth in "Financial Highlights" presents the Portfolio's historical portfolio
turnover ratios.
INVESTMENT COMPANIES
The Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory and any other fees earned
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as a result of the Portfolio's investment in the DSI Money Market Portfolio.
The investing Portfolio will bear expenses of the DSI Money Market Portfolio
on the same basis as all of its other shareholders.
FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
Futures Contracts and Options on Futures. To hedge its portfolio against ad-
verse movements of the market, remain fully invested and reduce transaction
costs or implement its investment strategies, the Portfolio may purchase and
sell futures and related options on such futures in connection with the secu-
rities in which it invests (such as bond futures and options, interest rate
futures and options and foreign currency futures and options) traded on either
U.S. or foreign exchanges or boards of trade, similar entities, or quoted on
an automated quotation system. Such futures contracts are third-party con-
tracts (i.e., performance of the parties' obligations is guaranteed by an ex-
change or clearing corporation) which, in general, have standardized strike
prices and expiration dates.
The Portfolio may use futures contracts and options to simulate or replicate
other types of investments according to its investment strategies.
Because the Portfolio will engage in options and futures transactions gener-
ally only for hedging purposes, the Adviser believes that the options and
futures portfolio strategies of the Portfolio will not subject it to the risks
frequently associated with the speculative use of options and futures transac-
tions. There can be no assurance that the Portfolio's hedging transactions
will be effective. Also, the Portfolio may not necessarily be engaging in
hedging activities when movements in any particular market occur.
The Portfolio may purchase and sell futures contracts as a hedge against ad-
verse changes in the market value of its portfolio securities as described be-
low. A futures contract is an agreement between two parties which obligates
the purchaser of the futures contract to buy and the seller of a futures con-
tract to sell a security for a set price on a future date. Transactions by the
Portfolio in futures are subject to limitation as described below under "Re-
strictions on the Use of Futures Transactions."
The Portfolio may sell futures contracts in anticipation of or during a mar-
ket decline to attempt to offset the decrease in market value of its securi-
ties portfolio that might otherwise result. When the Portfolio is not fully
invested in the securities markets and anticipates a significant market ad-
vance, it may purchase futures in order to gain rapid market exposure that may
in part or entirely offset increases in the cost of securities that the Port-
folio intends to purchase. The Adviser does not consider purchases of futures
contracts to be a speculative practice under these circumstances.
The Portfolio also has authority to purchase call and put options on futures
contracts in connection with its hedging activities. Generally, these strate-
gies are
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utilized under the same market and market sector conditions in which the Port-
folio enters into futures transactions. The Portfolio may purchase put options
on futures contracts rather than selling the underlying futures contract in
anticipation of a decrease in the market value of its securities. Similarly,
the Portfolio may purchase call options on futures contracts as a substitute
for the purchase of futures to hedge against increased cost resulting from an
increase in the market value of securities which the Portfolio intends to pur-
chase.
As a means of reducing the risks associated with investing in securities de-
nominated in foreign currencies, the Portfolio may enter into contracts for
the future acquisition or delivery of foreign currencies and may purchase for-
eign currency options. The Portfolio will incur brokerage fees when it pur-
chases or sells futures contracts or options, and it will be required to main-
tain margin deposits.
Restrictions on the Use of Futures Transactions. The Portfolio will only en-
ter into futures contracts or futures options which are standardized and
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system. The Portfolio uses futures contracts
and related options for "bona fide hedging" purposes, as such term is defined
by the Commodity Futures Trading Commission ("CFTC"). Positions in financial
futures and related options that do not qualify as "bona fide hedging" posi-
tions, will enter such non-hedging positions only to the extent that aggregate
initial margin deposits plus premiums paid by it for open futures option posi-
tions, less the amount by which any such positions are "in-the-money," would
not exceed 5% of the Portfolio's total net assets.
Risk Factors in Futures and Options Transactions. Futures and options can be
volatile and involve various degrees and types of risk. If the Portfolio
judges market conditions incorrectly or employs a strategy that does not cor-
relate well with its investments, use of futures and options contracts could
result in a loss. Although the Portfolio intends to enter into options and
futures transactions only if there appears to be a liquid secondary market, it
could also suffer losses if it is unable to liquidate its position due to an
illiquid secondary market. Options and futures transactions in foreign markets
are subject to the risk factors associated with foreign investments generally.
(See "INVESTMENT POLICIES.")
The Portfolio intends to enter into options and futures transactions, only
if there appears to be a liquid secondary market for such options or futures.
There can be no assurance, however, that a liquid secondary market will exist
at any specific time. Thus, it may not be possible to close an options or
futures position. The inability to close options and futures positions also
could have an adverse impact on the Portfolio's ability to hedge effectively.
There is also the risk of loss by the Portfolio of margin deposits or collat-
eral in the event of bankruptcy of a broker with whom the Portfolio has an
open position in an option, a futures contract or related option.
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<PAGE>
Forward Foreign Currency Exchange Contracts. The Portfolio may enter into
forward foreign currency exchange contracts, which provide for the purchase or
sale of an amount of a specified foreign currency at a future date. The gen-
eral purpose of these contracts is both to put currencies in place to settle
trades and to generally protect the United States dollar value of securities
held by the Portfolio against exchange rate fluctuation. While such forward
contracts may limit losses to the Portfolio as a result of exchange rate fluc-
tuation, they will also limit any gains that may otherwise have been realized.
The Portfolio will enter into such contracts only to protect against the ef-
fects of fluctuating rates of currency exchange and exchange control regula-
tions. (See "Investment Objectives and Policies -- Forward Foreign Currency
Exchange Contracts" in the SAI.)
Options on Securities and Currencies. The Portfolio may also purchase put
and call options on securities. The Portfolio may sell ("write") put or call
options it has previously purchased, which could result in a net gain or loss
depending on whether the amount realized on the sale is more or less than the
premium and other transaction costs paid on the put or call option which is
sold. The Portfolio may write a put or call option only if the option is "cov-
ered" by the Portfolio holding a position in the underlying securities or by
other means which would permit immediate satisfaction of the Portfolio's obli-
gation as a writer of the option. Prior to exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option of the same
series.
The purchase and writing of options involves certain risks. During the op-
tion period, the covered call writer has, in return for the premium on an op-
tion, given up the opportunity to profit from an increase above the exercise
price in the underlying securities, and has retained the risk of loss should
the price of the underlying security decline. The writer of an option has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. If a put or call option purchased by the Portfolio is
not sold when it has remaining value, the Portfolio will lose its entire in-
vestment in the option. Also, where a put or call option on a particular secu-
rity is purchased to hedge against price movements in a related security, the
price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist
when the Portfolio seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options markets, the
Portfolio may be unable to close out a position.
The Portfolio may buy or sell put and call options on foreign currencies.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of the Portfolio to reduce foreign currency
risk using such options. Over-the-counter options differ from traded options
in that they are two-party contracts with price and other terms negotiated be-
tween buyer and seller and generally do not have as much market liquidity as
exchange-traded
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<PAGE>
options. The Portfolio may be required to treat as illiquid over-the-counter
options purchased and securities being used to cover certain written over-the-
counter options.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Mortgage-backed securities in which the Portfolio will invest either carry a
guaranty from an agency of the U.S. Government or a private issuer of the
timely payment of principal and interest or are sufficiently seasoned to be
considered by the Adviser to be of investment grade quality. Mortgage-backed
securities differ from bonds in that the principal is paid back by the bor-
rower over the length of the loan rather than returned in a lump sum at matu-
rity. Mortgage-backed securities are called "Pass-Through" securities because
both interest and principal payments (including pre-payments) are passed
through to the holder of the security. When prevailing interest rates rise,
the value of a mortgage-backed security may decrease as do other types of debt
securities. When prevailing interest rates decline, however, the value of
mortgage-backed securities may not rise on a comparable basis with other debt
securities because of the prepayment feature. Additionally, if a mortgage-
backed security is purchased at a premium above its principal value because
its fixed rate of interest exceeds the prevailing level of yields, the decline
in price to par may result in a loss of the premium in the event of prepay-
ment.
CMOs are securities which are collateralized by mortgage pass-through secu-
rities. Cash flows from the mortgage pass-through are allocated to various
tranches in a predetermined, specified order. Each tranch has a "stated matu-
rity" -- the latest date by which the tranch can be completely repaid, assum-
ing no prepayments -- and has an "average life" -- the average time to receipt
of a principal payment weighted by the size of the principal payment.
Asset-backed securities are collateralized by shorter term loans such as au-
tomobile loans, computer leases, or credit card receivables. The payments from
the collateral are passed through to the security holder. The collateral be-
hind asset-backed securities tends to have prepayment rates that do not vary
with interest rates. In addition, the short-term nature of the loans reduces
the impact of any change in prepayment level.
RISKS: Due to the possibility that prepayments (on home mortgages, automo-
bile loans and other collateral) will alter the cash flow on CMOs and asset-
backed securities, it is not possible to determine in advance the actual final
maturity date or average life. Faster prepayment will shorten the average
life, and slower prepayments will lengthen it. However, it is possible to de-
termine what the range of that movement could be and to calculate the effect
that it will have on the price of the security. In selecting these securities,
the Adviser looks for those securities that offer a higher yield to compensate
for any variation in average maturity.
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DURATION
Duration is a measure of the expected timing of the cash flows (principal
and interest) of a fixed income security. It was developed as a more precise
alternative to the concept of "term to maturity". Duration incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure. Most debt obligations provide interest ("coupon") payments in ad-
dition to a final ("par") payment at maturity. Some obligations also have call
provisions. Depending on the relative magnitude of these payments, the market
values of debt obligations may respond differently to changes in the level and
structure of interest rates.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a majority of the out-
standing voting securities of the Portfolio, as defined in the 1940 Act.
INVESTMENT LIMITATIONS
The Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 10%
of the Portfolio's gross assets valued at the lower of market or cost,
and (ii) the Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
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<PAGE>
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment objective of the Portfolio is fundamental and may be changed
only with the approval of the holders of a majority of the outstanding shares
of the Portfolio. Except for investment limitations (a) and (b) above, the
Portfolio's investment limitations and policies described in this Prospectus
and in the SAI are not fundamental and may be changed by the Fund's Board of
Directors.
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor"), without a sales commission, at the net asset value per share
next determined after an order is received by the Fund and payment is received
by the Custodian. (See "VALUATION OF SHARES.") The minimum initial investment
required is $100,000. Certain exceptions may be determined by the officers of
the Fund.
Shares of the Portfolio may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase
or redemption of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or differ-
ent conditions. Shareholders who are customers of Service Agents should con-
sult their Service Agent for information regarding these fees and conditions.
Amounts paid to Service Agents may include transaction fees and/or service
fees paid by the Fund from the Fund assets attributable to the Service Agent,
and which would not be imposed if shares of the Portfolio were purchased di-
rectly from the Fund or the Distributor. Service Agents may provide share-
holder services to their customers that are not available to a shareholder
dealing directly with the Fund. A salesperson and any other person entitled to
receive compensation for selling or servicing Portfolio shares may receive
different compensation with respect to one particular class of shares over an-
other in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior to the close of its business day to receive that day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
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<PAGE>
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it, together with a check pay-
able to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (monies
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $1,000. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
the Custodian Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be
17
<PAGE>
purchased is identified on the check or wire. Prior to wiring additional in-
vestments, notify the UAM Funds Service Center by calling the number on the
cover of this Prospectus. Mail orders should include, when possible, the "In-
vest by Mail" stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional shares will not be issued. Certif-
icates for whole shares will not be issued except at the written request of
the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolio may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolio as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "Valuation of Shares" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued by a Portfolio in exchange for securities will be issued at net asset
value determined as of the same time. All dividends, interest, subscription,
or other rights pertaining to such securities shall become the property of the
Portfolio and must be delivered to the Fund by the investor upon receipt from
the issuer. Securities acquired through an in-kind purchase are acquired for
investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are not subject to any restrictions upon their sale by
the Portfolio under the Securities Act of 1933 or otherwise; and
. the value of any such security (except U.S. Government securities)
being exchanged together with other securities of the same issuer
owned by the Portfolio will not exceed 5% of the net assets of the
Portfolio immediately after the transaction.
Investors who are subject to Federal taxation may realize a gain or loss for
Federal income tax purposes upon the exchange, depending upon the cost of the
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<PAGE>
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of your shares depending
on the market value of the investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and the Fund's Sub-Transfer Agent will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and they
may be liable for any losses if they fail to do so. These procedures include
requir
19
<PAGE>
ing the investor to provide certain personal identification at the time an ac-
count is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after re-
ceipt of the request or earlier if required under applicable law. The Fund may
suspend the right of redemption or postpone the date at times when both the
NYSE and Custodian Bank are closed, or under any emergency circumstances as
determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the SEC. Investors may
incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
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<PAGE>
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of the Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by calling or writing to the UAM Funds Service Center.
Any such exchange will be based on the respective net assets of the shares
involved. There is no sales commission or charge of any kind. Before making an
exchange into a Portfolio, a shareholder should read its Prospectus and con-
sider the investment objectives of the Portfolio to be purchased. Call the UAM
Funds Service Center to obtain a Prospectus for the Portfolio(s) in which you
are interested. Exchanges can only be made for Portfolios that are qualified
for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued and if the registration of the two accounts will
be identical. Requests for exchange received prior to 4 p.m. (ET) will be
processed as of the close of business on the same day. The Board of Directors
may limit frequency and amount of exchanges permitted. For additional informa-
tion regarding responsibility for the authenticity of telecopied instructions,
see "REDEMPTION OF SHARES -- BY TELEPHONE" above. An exchange into another UAM
Funds Portfolio may result in a capital gain or loss for income tax purposes.
The Fund may modify or terminate the exchange privilege at any time.
VALUATION OF SHARES
The net asset value of the Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the total number of shares
outstanding. Net asset value per share of the Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. Quotations of foreign securities in
a foreign currency are converted to U.S. dollar equivalents. The converted
value is based upon the bid price of the foreign currency against U.S. dollars
quoted by any major bank or by a broker.
Securities purchased with remaining maturities of 60 days or less are valued
at amortized cost if the Board of Directors determines that amortized cost re-
flects fair value.
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<PAGE>
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Fund's Directors.
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. Con-
tact the UAM Funds Service Center at the address or telephone number on the
cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolio will normally distribute them
annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of the Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
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<PAGE>
FEDERAL TAXES
The Portfolio intends to qualify each year as a "regulated investment
company" under subchapter M of the Internal Revenue Code of 1986, as amended,
for federal income tax purposes and to meet all other requirements that are
necessary for it (but not its shareholders) to be exempt from federal taxes on
income and gains paid to shareholders in the form of dividends. To do this,
the Portfolio must, among other things, distribute substantially all of its
ordinary income and net capital gains on a current basis and maintain a port-
folio of investments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by the Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce the Port-
folio's dividends but are included in the taxable income reported on your tax
statement if the Portfolio qualifies for this tax treatment and elects to pass
it through to you. Consult a tax adviser for more information regarding deduc-
tions and credits for foreign taxes.
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc. is a Maryland corporation formed in
1972 and is located at 803 Cathedral Street, Baltimore, MD 21201. The Adviser
is a wholly-owned subsidiary of United Asset Management Corporation ("UAM")
and provides investment management services to corporations, pension and
profit sharing plans, trusts, estates and other institutions and individuals.
As of the date of this Prospectus, the Adviser had over $4 billion in assets
under management.
23
<PAGE>
The investment professionals of the Adviser who are primarily responsible
for the day-to-day operations of the Portfolios and a description of their
business experience during the past five years are as follows:
LINDA W. MCCLEARY -- PRINCIPAL. Ms. McCleary is responsible for the organi-
zation and administration of the Fixed Income Group at the Adviser and manages
fixed income portfolios. She joined the Adviser in 1978 having worked previ-
ously as a Trust Investment Officer at Equitable Trust Company. She is a cum
laude graduate of Smith College and holds an M.B.A. from Loyola College. Ms.
McCleary has managed the ICM Fixed Income Portfolio since its inception.
DANIEL O. SHACKELFORD -- SENIOR VICE PRESIDENT. Mr. Shackelford joined the
Adviser in November, 1993 as a fixed income portfolio manager. He has 15 years
of fixed income experience, most recently as a portfolio manager for the Uni-
versity of North Carolina at Chapel Hill ("UNC") from 1991 through 1993. Mr.
Shackelford is a graduate of UNC and received his M.B.A. from the Fuqua School
of Business at Duke University, which he attended from 1989 to 1991. Mr.
Shackelford is a Chartered Financial Analyst. Prior to 1989, Mr. Shackelford
held the position of portfolio manager at UNC. Mr. Shackelford has managed the
ICM Fixed Income Portfolio since November, 1993.
Additional members of the Adviser's team of professionals are as follows:
CRAIG LEWIS -- PRINCIPAL AND CHIEF INVESTMENT OFFICER. Prior to founding the
Adviser in 1972, Mr. Lewis was Vice President of Investments at First National
Bank of Maryland. Before that, he served as Vice President and Director of Re-
search at Robert Garrett & Sons, Inc., a NYSE member firm. Mr. Lewis is a
Chartered Financial Analyst and past President of the Baltimore Security Ana-
lysts Society. He is a graduate of Princeton University.
PAUL L. BORSSUCK -- PRINCIPAL. Mr. Borssuck heads the Individual Capital
Management Division at ICM. Prior to joining the Adviser, he served as Chair-
man of the Investment Policy Committee at Mercantile Safe-Deposit and Trust
Company where he managed the portfolios of high net worth clients. Prior to
that, he headed the institutional funds management section at American Secu-
rity and Trust Company in Washington, D.C. Mr. Borssuck earned his B.S. degree
and M.B.A. from Lehigh University. He is a Chartered Financial Analyst.
ROBERT D. MCDORMAN, JR. -- PRINCIPAL. Mr. McDorman joined the Adviser in
June, 1985. His primary responsibilities are the management of the ICM Small
Company Portfolio and related separate accounts and equity security analysis.
Prior to joining the Adviser, Mr. McDorman managed the Financial Industrial
Income Fund. Mr. McDorman earned his B.A. degree at Trinity College and his
law degree at the University of Baltimore. He is a Chartered Financial Ana-
lyst.
DAVID E. NELSON -- PRINCIPAL AND DIRECTOR OF EQUITY RESEARCH. Mr. Nelson
joined the Adviser in October, 1989. Prior to that, he was Senior Vice Presi-
24
<PAGE>
dent, Director of Research for Legg Mason. Mr. Nelson is an honors graduate of
Wesleyan University and received his M.B.A. in Finance from Washington Univer-
sity in 1976. He is a Chartered Financial Analyst.
ROBERT F. BOYD -- EXECUTIVE VICE PRESIDENT. Mr. Boyd joined the Adviser in
December, 1995 as a Senior Security and Quantitative Analyst and Portfolio
Manager. Prior to joining the Adviser, he was a Managing Director and Portfo-
lio Manager at Brandywine Asset Management. Prior to that he was Director of
Equity and Quantitative Research at Mercantile Safe Deposit & Trust Company
for 15 years. Mr. Boyd earned his B.S. degree from the University of Virginia
and his M.B.A. from Columbia University. He is a Chartered Financial Analyst.
CHARLES W. NEUHAUSER -- SENIOR VICE PRESIDENT. Mr. Neuhauser joined the Ad-
viser in August, 1991 as a security analyst in the Equity Research Department.
Prior to that, he served as a security analyst at Bear, Stearns & Company,
Inc. in New York and then Legg Mason in Baltimore. He began in the investment
business as an analyst with Ruane, Cunniff & Company, managers of the Sequoia
Fund. Mr. Neuhauser is a graduate of Columbia University. He is a Chartered
Financial Analyst.
Under an Investment Advisory Agreement with the Fund dated March 20, 1989,
as amended June 2, 1992, (the "Agreement"), the Adviser, subject to the con-
trol and supervision of the Fund's Board of Directors and in conformance with
the stated investment objective and policies of the Portfolio, manages the in-
vestment and reinvestment of the assets of the Portfolio. In this regard, it
is the responsibility of the Adviser to make investment decisions for the
Portfolio and to place purchase and sales orders for the Portfolio.
As compensation for the services rendered by the Adviser under the Agree-
ment, the Portfolio pays the Adviser an annual fee, in monthly installments,
calculated by applying an annual percentage rate of 0.50% to the Portfolio's
average daily net assets for the month:
The Adviser has voluntarily agreed to keep the Portfolio's total annual op-
erating expenses from exceeding 0.50% of its average daily net assets. The
Fund will not reimburse the Adviser for any advisory fees that are waived or
Portfolio expenses that the Adviser may bear on behalf of the Portfolio for a
given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any class of shares of a Port-
folio. Payments made for any of these purposes may be made from the paying
entity's revenues, its profits or any other source available to it. When serv-
ice arrangements are in effect, they are made generally available to all qual-
ified service providers.
25
<PAGE>
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fee is .04% of aggregate net assets.
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, with its
principal office located at 211 Congress Street, Boston, Massachusetts 02110,
distributes the shares of the Fund. Under the Distribution Agreement (the
"Agreement"), the Distributor, as agent for the Fund, agrees to use its best
efforts as sole distributor of the Fund's shares. The Distributor does not re-
ceive any fee or other compensation under the Agreement with the Portfolio.
The Agreement continues in effect so long as it is approved at least annually
by the Fund's Board of Direc
26
<PAGE>
tors. Those approving the agreements must include a majority of Directors who
are neither parties to such Agreement nor interested persons of any such par-
ty. The Agreement provides that the Fund will bear the costs of the registra-
tion of its shares with the SEC and various states and the printing of its
prospectuses, SAIs and reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements for the Fund's Portfolios authorize the Adviser to
select the brokers or dealers that will execute the purchases and sales of in-
vestment securities for each Portfolio. The Agreements direct the Adviser to
use its best efforts to obtain the best available price and most favorable ex-
ecution for all transactions of the Portfolios. If consistent with the inter-
ests of the Portfolios, the Adviser may select brokers on the basis of re-
search, statistical and pricing services these brokers provide to the Portfo-
lios in addition to required Adviser services. Such brokers may be paid a
higher commission than that which another qualified broker would have charged
for effecting the same transaction, provided that such commissions are paid in
compliance with the Securities Exchange Act of 1934, as amended, and that the
Adviser determines in good faith that the commission is reasonable in terms
either of the transaction or the overall responsibility of the Adviser to the
Portfolios and the Adviser's other clients. Although not a typical practice,
the Adviser may place portfolio orders with qualified broker-dealers who refer
clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series or classes of shares of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios, without further action by
shareholders. At its discretion, the Board of Directors may create additional
Portfolios and Classes of shares of the Fund.
27
<PAGE>
The shares of each Portfolio and Class are fully paid and nonassessable and
have no preference as to conversion, exchange, dividends, retirement or other
features and no pre-emptive rights. They have non-cumulative voting rights
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors. A shareholder is enti-
tled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his name on the books of the Fund.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
28
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
29
<PAGE>
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
30
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Investment Counselors of Maryland, Inc.
803 Cathedral Street
Baltimore, Maryland 21201
(410) 539-3838
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
ICM Small Company Portfolio
&
ICM Equity Portfolio
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
ICM SMALL COMPANY PORTFOLIO
&
ICM EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: INVESTMENT COUNSELORS OF MARYLAND, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series of shares
(known as "Portfolios") each of which has different investment objectives and
policies. The ICM Portfolios currently offer only one class of shares. The se-
curities offered in this Prospectus are Institutional Class Shares of two di-
versified, no-load Portfolios of the Fund managed by Investment Counselors of
Maryland, Inc.
ICM SMALL COMPANY PORTFOLIO. The objective of the ICM Small Company Portfo-
lio ("Small Company Portfolio") is to provide maximum, long-term total return
consistent with reasonable risk to principal, by investing primarily in the
common stocks of smaller companies in terms of revenues and assets and, more
importantly, in terms of market capitalization.
ICM EQUITY PORTFOLIO. The objective of the ICM Equity Portfolio ("Equity
Portfolio") is to provide maximum long-term total return, consistent with rea-
sonable risk to principal, by investing primarily in common stocks of rela-
tively large companies measured in terms of revenues, assets and market capi-
talization. It is anticipated that nearly all of the companies represented in
the Portfolio will have a market capitalization exceeding the median market
capitalization of the stocks listed on the New York Stock Exchange.
There can be no assurance that either of the Portfolios will achieve its
stated objective.
Keep this Prospectus for future reference. It contains information you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 7
Investment Policies........................................................ 7
Other Investment Policies.................................................. 9
Investment Limitations..................................................... 13
Purchase of Shares......................................................... 14
Redemption of Shares....................................................... 17
Shareholder Services....................................................... 18
Valuation of Shares........................................................ 19
Performance Calculations................................................... 20
Dividends, Capital Gains Distributions and Taxes........................... 20
Investment Adviser......................................................... 21
Administrative Services.................................................... 24
Distributor................................................................ 24
Portfolio Transactions..................................................... 25
General Information........................................................ 25
UAM Funds -- Institutional Class Shares.................................... 27
</TABLE>
<PAGE>
FUND EXPENSES
The following table shows the expenses and fees that a shareholder of the
Portfolios would incur. Transaction fees may be charged if a broker-dealer or
other financial intermediary deals with the Fund on your behalf. (See "PUR-
CHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SMALL
COMPANY EQUITY
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Sales Load Imposed on Purchases.......................... NONE NONE
Sales Load Imposed on Reinvested Dividends............... NONE NONE
Deferred Sales Load...................................... NONE NONE
Redemption Fees.......................................... NONE NONE
Exchange Fees............................................ NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
ICM SMALL ICM
COMPANY EQUITY
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Investment Advisory Fees............................... 0.70% 0.625 %
Administrative Fees.................................... 0.15% 1.11 %
12b-1 Fees............................................. NONE NONE
Distribution Costs..................................... NONE NONE
Other Expenses......................................... 0.05% 1.022 %
Advisory Fees Waived and Expenses Assumed.............. 0% (1.853)%
---- ------
Total Operating Expenses (After Fee Waiver and Expenses
Assumed)............................................. 0.90%* 0.90 %*
==== ======
</TABLE>
- -----------
* Absent the fee waiver and expenses assumed by the Adviser, annualized Total
Operating Expenses of the Equity Portfolio for the fiscal year ended October
31, 1996 would have been 2.753%. The annualized Total Operating Expenses in-
cludes the effect of expense offsets. If expense offsets were excluded,
annualized Total Operating Expenses of the Small Company and Equity Portfo-
lios would not have differed.
The table above shows various fees and expenses that an investor in the
Portfolio would bear directly or indirectly. The expenses and fees listed are
based on the Portfolios' operations during the fiscal year ended October 31,
1996, except that Advisory Fees waived and Expenses Assumed have been restated
to reflect the
1
<PAGE>
Portfolio's current expense cap, and Administrative Fees have been restated to
reflect current fees. See "ADMINISTRATIVE SERVICES" herein and in the SAI.
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume operating expenses otherwise payable by the Portfolio, if neces-
sary, in order to keep the Equity Portfolio's total annual operating expenses
from exceeding 0.90% of its average daily net assets. The Fund will not reim-
burse the Adviser for any advisory fees that are waived or Portfolio expenses
that the Adviser may bear on behalf of the Portfolio for a given fiscal year.
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Fund charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Small Company Portfolio......................... $ 9 $29 $50 $111
Equity Portfolio................................ $ 9 $29 $50 $111
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc. (the "Adviser"), an investment coun-
seling firm founded in 1972, serves as investment adviser to three of the
Fund's Portfolios. In addition to the Portfolios, the Adviser serves as in-
vestment adviser to the ICM Fixed Income Portfolio. The Adviser presently man-
ages over $4 billion in assets for institutional clients and high net worth
individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor") to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment for the ICM Small Company Portfolio is
$5,000,000. The minimum initial investment for the ICM Equity Portfolio is
$2,500. The minimum for subsequent investments for the ICM Small Company and
ICM Equity Portfolios are $1,000 and $100, respectively. The minimum initial
investment for IRA accounts is $500. The minimum initial investment for
spousal IRA accounts is $250. (See "PURCHASE OF SHARES.") Certain exceptions
to the initial or minimum investment amounts may be determined by the officers
of the Fund.
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will be reinvested in Portfolio
shares automatically unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors should consider the following: (1) Common stocks of companies which
have small market capitalization may exhibit greater market volatility than
common stock of companies which have larger capitalization; (2) Each Portfolio
may invest a portion of its assets in derivatives including futures contracts
and options. (See "FUTURES CONTRACTS AND OPTIONS."); (3) Each Portfolio may
use various investment practices that involve special consideration, including
investing in repurchase agreements, when-issued, forward delivery and delayed
settlement securities and lending of securities. (See "OTHER INVESTMENT POLI-
CIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables show selected per share information for a share out-
standing throughout each of the periods presented. The tables are part of the
Portfolios' Financial Statements included in each Portfolio's 1996 Annual Re-
port to Shareholders. The Annual Reports are incorporated into the Portfolios'
SAI. The Portfolios' Financial Statements for the period ended October 31,
1996 have been audited by Price Waterhouse LLP. Their unqualified opinions on
the Financial Statements are also incorporated into the SAI. Please read the
following information in conjunction with the Portfolios' 1996 Annual Reports
to Shareholders.
ICM SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
APRIL 19**
TO YEARS ENDED OCTOBER 31,
OCTOBER ----------------------------------------------------------------------
31, 1989 1990 1991 1992 1993 1994 1995 1996
---------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $10.00 $ 9.92 $ 7.78 $ 12.50 $ 14.96 $ 18.75 $ 17.05 $ 19.04
------ ------- ------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment
Income................. 0.08 0.13 0.14 0.11 0.08 0.09 0.16 0.24
Net Realized and
Unrealized Gain (Loss)
on Investments......... (0.09) (2.05) 4.73 2.81 4.94 0.64 2.70 2.59
------ ------- ------- ------- ------- -------- -------- --------
Total from Investment
Operation............ (0.01) (1.92) 4.87 2.92 5.02 0.73 2.86 2.83
------ ------- ------- ------- ------- -------- -------- --------
DISTRIBUTIONS
Net Investment
Income................. (0.07) (0.14) (0.15) (0.10) (0.07) (0.09) (0.14) (0.24)
Net Realized Gain...... (0.08) (0.36) (1.16) (2.34) (0.73) (0.92)
------ ------- ------- ------- ------- -------- -------- --------
Total Distributions.. (0.07) (0.22) (0.15) (0.46) (1.23) (2.43) (0.87) (1.16)
------ ------- ------- ------- ------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD.................. $ 9.92 $ 7.78 $ 12.50 $ 14.96 $ 18.75 $ 17.05 $ 19.04 $ 20.71
====== ======= ======= ======= ======= ======== ======== ========
TOTAL RETURN............ (.13)% (19.77)% 62.79 % 23.96 % 35.20 % 4.59 % 17.73 % 15.62 %
====== ======= ======= ======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL
DATA:
Net Assets, End of
Period (Thousands)..... $9,487 $18,732 $43,559 $58,483 $81,870 $115,761 $250,798 $320,982
Ratio of Expenses to
Average Net Assets..... 2.43 %* 1.14 % 1.02 % 0.95 % 0.95 % 0.93 % 0.87 % 0.88 %
Ratio of Net
Investment Income to
Average Net Assets..... 1.81 %* 1.52 % 1.32 % 0.77 % 0.46 % 0.58 % 1.02 % 1.20 %
Portfolio Turnover
Rate................... 18 % 40 % 49 % 34 % 47 % 21 % 20 % 23 %
Average Commission
Rate # ................ N/A N/A N/A N/A N/A N/A N/A $ 0.0595
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A N/A N/A 0.86 % 0.88 %
</TABLE>
- ----
* Annualized
** Commencement of Operations
# For fiscal years beginning on or after September 30, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
ICM EQUITY PORTFOLIO
<TABLE>
<CAPTION>
OCTOBER 1, YEARS ENDED
1993* TO OCTOBER 31,
OCTOBER 31, ------------------------
1993 1994 1995 1996
----------- ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $10.00 $ 9.94 $10.41 $12.14
------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income................ 0.01 0.20 0.26 0.30
Net Realized and Unrealized Gain
(Loss) on Investments............... (0.07) 0.45 1.75 2.76
------ ------ ------ -------
Total from Investment Operations... (0.06) 0.65 2.01 3.06
------ ------ ------ -------
DISTRIBUTIONS
Net Investment Income................ -- (0.18) (0.26) (0.28)
Net Realized Gain.................... -- -- (0.02) (0.43)
------ ------ ------ -------
Total Distributions................ -- (0.18) (0.28) (0.71)
------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD........ $ 9.94 $10.41 $12.14 $14.49
====== ====== ====== =======
TOTAL RETURN+......................... (0.60)% 6.63% 19.62% 26.23%
====== ====== ====== =======
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands)......................... $1,977 $3,659 $6,865 $7,868
Ratio of Expenses to Average Net
Assets.............................. 0.90 %** 0.90% 0.92%# 0.90%
Ratio of Net Investment Income to
Average Net Assets.................. 1.06 %** 2.15% 2.44% 2.30%
PORTFOLIO TURNOVER RATE............... 11 % 17% 37% 57%
Average Commission Rate#.............. N/A N/A N/A $0.0661
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per Share..... $0.04 $0.21 $0.16 $0.24
Ratio of Expenses to Average Net
Assets Including Expense Offers...... N/A N/A 0.90% 0.90%
</TABLE>
- -----------
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain expenses not been waived
and expenses assumed by the Adviser during the period.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
6
<PAGE>
INVESTMENT OBJECTIVES
ICM SMALL COMPANY PORTFOLIO. The objective of the Small Company Portfolio is
to provide maximum, long-term total return consistent with reasonable risk to
principal, by investing primarily in common stocks of smaller companies mea-
sured in terms of revenues and assets and, more importantly, in terms of mar-
ket capitalization and which, in the Adviser's opinion, are undervalued at the
time of purchase. Capital return is likely to be the predominant component of
the Portfolio's total return.
ICM EQUITY PORTFOLIO. The objective of the Equity Portfolio is to provide
maximum long-term return consistent with reasonable risk to principal, by in-
vesting primarily in common stocks of relatively large companies measured in
terms of revenues, assets and market capitalization and which, in the Advis-
er's opinion, are undervalued at the time of purchase. The Adviser anticipates
that at least 80% of all the companies represented in the Portfolio will have
a market capitalization exceeding the median market capitalization of the
stocks listed on the New York Stock Exchange. Capital return is likely to be
the predominant component of the Portfolio's total return.
There can be no assurance that either of the Portfolios will achieve its
stated objective.
INVESTMENT POLICIES
ICM SMALL COMPANY PORTFOLIO. The Small Company Portfolio seeks to achieve
its objective by investing, under normal circumstances, at least 80% of its
assets in common stocks of smaller, less established companies in terms of
revenues and assets and, more importantly, market capitalization. In addition,
the Portfolio may, to a limited extent, invest in convertible bonds or con-
vertible preferred stocks. Securities selected for the Portfolio will be cho-
sen from the New York and American Stock Exchanges or from the over-the-
counter markets operated by the National Association of Securities Dealers.
For a company's securities to be considered for purchase, the company's stock
market capitalization (the total market value of its outstanding shares) gen-
erally must range from $50 million to $700 million.
The security selection process for the Portfolio focuses on those companies
within the market capitalization range outlined above and which also sell at a
price-earnings (P/E) ratio less than the P/E ratio of the Standard & Poor's
500 Index. The Adviser believes that shares in companies with relatively small
market capitalizations and low P/E ratios are likely to provide superior rates
of return over an extended period of time relative to both the stock market in
general and larger companies with high P/E ratios. Using screening parameters
such as relative P/E ratio, relative return on equity, and other financial ra-
tios, the Adviser screens a
7
<PAGE>
universe of several thousand small capitalization companies to identify poten-
tially undervalued securities. The list of potential investments is narrowed
further by the use of traditional fundamental security analysis. In addition,
the Adviser tends to focus on those companies whose earnings momentum is ac-
celerating and/or recent earnings have exceeded general expectations.
It is anticipated that cash reserves will represent a relatively small per-
centage of the Portfolio's assets (less than 20% under normal circumstances)
as market timing is not a part of the Adviser's investment strategy. For tem-
porary defensive purposes, the Portfolio may reduce its holdings of equity se-
curities and increase its holdings in short-term investments.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased if they pass the selection
process outlined above. In addition, if shares of a foreign company are pur-
chased, they must be traded in the United States as sponsored American Deposi-
tary Receipts ("ADRs") which are U.S. domestic securities representing owner-
ship rights in foreign companies. Under normal circumstances ADRs will not
comprise more than 20% of the Portfolio's assets.
ICM EQUITY PORTFOLIO. The Equity Portfolio seeks to achieve its objective by
investing, under normal circumstances, at least 80% of its assets in common
stocks of relatively large companies in terms of revenues, assets, and market
capitalization. The Portfolio may also invest in convertible bonds or convert-
ible preferred stocks to a limited extent. The Portfolio's securities will be
chosen primarily from the New York and American Stock Exchanges or from the
over-the-counter markets operated by the National Association of Securities
Dealers.
The security selection process for the Portfolio focuses upon those stocks
with low price-earnings (P/E) ratios relative to the price-earnings ratio of
the Standard & Poor's 500 Index ("S&P 500 Index"). In the Adviser's opinion,
stocks with low P/E ratios have been shown to provide superior rates of return
to investors when compared to high P/E stocks over extended periods of time
and through a variety of economic and market cycles. Using screening parame-
ters such as relative P/E ratio, relative return on equity, and other finan-
cial ratios, the Adviser screens several thousand stocks to identify poten-
tially undervalued securities. The list of potential investments is narrowed
further by the use of traditional fundamental security analysis. The Adviser
conducts interviews with company managements and reviews the assessments and
opinions of outside analysts and consultants. Typically, the Adviser invests
in companies that have an above-average return on equity, are financially
strong, and yet are selling at a P/E ratio below that of the S&P 500 Index.
Securities are sold when, in the Adviser's opinion, the shares become rela-
tively overvalued or more attractive alternatives are found.
8
<PAGE>
It is anticipated that cash reserves will represent a relatively small per-
centage of the Portfolio's assets (less than 20% under normal circumstances)
as market timing is not a part of the Adviser's investment strategy. For tem-
porary defensive purposes, the Portfolio may reduce its holdings or equity se-
curities and increase its holdings in short-term investments.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased, if they pass the selection
process outlined above. In addition, if shares of a foreign company are pur-
chased, they must be traded in the United States as sponsored American Deposi-
tary Receipts which are U.S. domestic securities representing ownership rights
in foreign companies. Under normal circumstances, foreign securities will not
comprise more than 20% of the Portfolio's assets.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these in
9
<PAGE>
vestments on a joint basis, it is expected that a Portfolio may earn a higher
rate of return on investments relative to what it could earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT
COMPANIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price. The Sub-Administrator and the Adviser will mark
to market daily the value of the securities purchased. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause a Portfolio to experience a loss or delay in the liquida-
tion of the collateral securing the repurchase agreement. The Portfolio might
also incur disposition costs in liquidating the collateral. While the Fund's
management acknowledges these risks, it is expected that they can be con-
trolled through stringent security selection criteria and careful monitoring
procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into joint repurchase agree-
ments, a Portfolio may incur lower transactions costs and earn higher rates of
interest on joint repurchase agreements. Each Portfolio's contribution would
determine its return from a joint repurchase agreement. (See "SHORT TERM IN-
VESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
10
<PAGE>
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued" or "for-
ward delivery" basis. "When-issued" or "forward delivery" refers to securities
whose terms and indenture are available and for which a market exists, but
which are not available for immediate delivery. When-issued or delayed deliv-
ery transactions may be expected to occur a month or more before delivery is
due. However, no payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to the transaction. It is possible
that the market price of the securities at the time of delivery may be higher
or lower than the purchase price. The Portfolios will maintain a separate ac-
count of cash or liquid securities at least equal to the value of purchase
commitments until payment is made. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery is made al-
though a Portfolio may earn income on securities it has deposited in a segre-
gated account.
The Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices -- not to in-
crease its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for each Portfolio is not anticipated to exceed 80%. In
addition to Portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" for more information on taxation). The Portfolios
will not normally engage in short-term trading, but each reserves the right to
do so. The tables set forth in "Financial Highlights" present the Portfolios'
historical portfolio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. The Portfolio will indirectly bear its proportionate share of any
management fees paid by an investment company in which it invests in addition
to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based
11
<PAGE>
upon the Portfolio's assets invested in the DSI Money Market Portfolio, the
investing Portfolio's adviser will waive its investment advisory fee and any
other fees earned as a result of the Portfolio's investment in the DSI Money
Market Portfolio. The investing Portfolio will bear expenses of the DSI Money
Market Portfolio on the same basis as all of its other shareholders.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, each
Portfolio is authorized to invest in stock futures and options. Because trans-
action costs associated with futures and options may be lower than the costs
of investing in stocks and bonds directly, it is expected that the use of in-
dex futures and options to facilitate cash flows may reduce a Portfolio's
overall transaction costs.
Each Portfolio may enter into futures contracts provided that not more than
5% of the Portfolio's assets are required as margin deposit to secure obliga-
tions under such contracts. The Portfolios will engage in futures and options
transactions for hedging purposes only. A Portfolio will maintain assets suf-
ficient to meet its obligations under such contracts in a segregated account
with the Fund's custodian bank.
Futures and options can be volatile and involve various degrees and types of
risk. If the Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts could result in a loss. The Portfolio could also suffer
losses if it is unable to liquidate its position due to an illiquid secondary
market. In the opinion of the Fund's Directors, the risk that a Portfolio will
be unable to close out a futures position or options contract will be mini-
mized by only entering into futures contracts or options transactions traded
on national exchanges and for which there appears to be a liquid secondary
market.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. Each Portfolio will invest no more than
10% of its net assets in illiquid securities. The prices realized from the
sales of these securities could be more or less than those originally paid by
the Portfolio or less than what may be considered the fair value of such secu-
rities.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Directors
12
<PAGE>
may change such policies without an affirmative vote of a majority of the out-
standing voting securities of the Portfolio.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio has adopted a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 33
1/3% of the Portfolio's gross assets (10% for the ICM Small Company
Portfolio) valued at the lower of market or cost, and (ii) a Portfolio
may not purchase additional securities when borrowings exceed 5% of
total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment objective of each Portfolio is fundamental and may be changed
only with the approval of the holders of a majority of the outstanding shares
of that Portfolio. Except with respect to limitations (a), (b), (d), (e) and
(f)(i), the Equity Portfolio's investment limitations and policies described
in this Prospectus and in the SAI are not fundamental and may be changed by
the Fund's Board of Directors upon reasonable notice to investors. All of the
above limitations are fundamental for the Small Company Portfolio and may be
changed only with the approval of the holders of a majority of the outstanding
shares of the Portfolio. If a
13
<PAGE>
percentage limitation on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in per-
centage resulting from changes in the value or total cost of the Portfolio's
assets will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission, at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "VALUATION OF SHARES.") The minimum initial
investment required for the Small Company Portfolio is $5,000,000. The minimum
initial investment for IRA accounts is $500. The minimum initial investment
for spousal IRA accounts is $250. The minimum initial investment required for
the Equity Portfolio is $2,500. Certain exceptions may be determined by the
officers of the Fund.
Shares of the Portfolios may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase
or redemption of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or differ-
ent conditions. Shareholders who are customers of Service Agents should con-
sult their Service Agent for information regarding these fees and conditions.
Amounts paid to Service Agents may include transaction fees and/or service
fees paid by the Fund from the Fund assets attributable to the Service Agent,
and which would not be imposed if shares of the Portfolio were purchased di-
rectly from the Fund or the Distributor. Service Agents may provide share-
holder services to their customers that are not available to a shareholder
dealing directly with the Fund. A salesperson and any other person entitled to
receive compensation for selling or servicing Portfolio shares may receive
different compensation with respect to one particular class of shares over an-
other in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If you buy shares of a Portfolio in this manner, the Service Agent
must receive your investment order before the close of trading on the New York
Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer Agent
prior to the close of its business day to receive that day's share price.
Proper payment for the order must be received by the Sub-Transfer Agent no
later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
14
<PAGE>
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it, together with a check pay-
able to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (monies
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept if for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $1,000 for the Small Company Portfolio and $100 for the Equity
Portfolio. Shares can be purchased at net asset value by mailing a check to
the UAM Funds Service Center (payable to "UAM Funds") by wiring monies to the
Custodian Bank as outlined above. When making additional investments, be sure
15
<PAGE>
that the account number, account name, and the Portfolio to be purchased are
specified on the check or wire. Prior to wiring additional investments, notify
the UAM Funds Service Center. Mail orders should include, when possible, the
"Invest by Mail" stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional shares will not be issued. Certif-
icates for whole shares will not be issued except at the written request of
the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolios may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolios as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "VALUATION OF SHARES" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued by a Portfolio in exchange for securities will be issued at net asset
value determined as of the same time. All dividends, interest, subscription,
or other rights pertaining to such securities shall become the property of a
Portfolio and must be delivered to the Fund by the investor upon receipt from
the issuer. Securities acquired through an in-kind purchase will be acquired
for investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are not subject to any restrictions upon their sale by
the Portfolio under the Securities Act of 1933, or otherwise; and
. the value of any such security (except U.S. Government Securities)
being exchanged together with other securities of the same issuer
owned by the Portfolio will not exceed 5% of the net assets of the
Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of the
secu
16
<PAGE>
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone, at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the investment
securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition,
17
<PAGE>
all telephone transaction requests will be recorded and investors may be re-
quired to provide additional telecopied written instructions of such transac-
tion requests. The Fund or Sub-Transfer Agent may be liable for any losses due
to unauthorized or fraudulent telephone instructions if the Fund or Sub-Trans-
fer Agent does not employ the procedures described above. Neither the Fund nor
the Sub-Transfer Agent will be responsible for any loss, liability, cost or
expense for following instructions received by telephone that it reasonably
believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of receipt of and no more than seven days
after receipt of the request, or earlier if required under applicable law. The
Fund may suspend the right of redemption or postpone the date at times when
both the NYSE and Custodian Bank are closed, or under any emergency circum-
stances as determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the SEC. Investors may
incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each ICM Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in the Fund or UAM
Funds
18
<PAGE>
Trust. (See the list of Portfolios of the UAM Funds at the end of this Pro-
spectus.) Exchange requests should be made by contacting the UAM Funds Service
Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES BY TELEPHONE". An exchange
into another UAM Funds Portfolio is a sale of shares and may result in a gain
or loss for income tax purposes. The Fund may modify or terminate the exchange
privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the total number of shares
outstanding. Net asset value per share is determined as of the close of the
NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken
from the exchange where the security is primarily traded. Unlisted equity se-
curities and listed securities not traded on the valuation date for which mar-
ket quotations are readily available are valued not exceeding the asked prices
nor less than the bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Securities purchased with remaining maturities of 60 days or less are valued
at amortized cost using methods approved by the Fund's Directors.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods approved by the Fund's Directors.
19
<PAGE>
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating total return. Both yield
and total return figures are based on historical earnings and are not intended
to indicate future performance.
Total return is the change in value of an investment in the Portfolios over
a given period, assuming reinvestment of any dividends and capital gains. A
cumulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report, contact the UAM Funds Service Center at the address
or telephone number on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolios will normally distribute them
annually.
All dividend and capital gains distributions made by a Portfolio will be au-
tomatically reinvested in additional shares of the Portfolio unless the Fund
is notified in writing that the shareholder elects to receive distributions in
cash.
FEDERAL TAXES
Each Portfolio intends to qualify each year as a "regulated investment com-
pany" under subchapter M of the Internal Revenue Code of 1986, as amended, for
federal income tax purposes and to meet all other requirements that are neces-
sary for it (but not its shareholders) to be exempt from federal taxes on in-
come and gains paid to shareholders in the form of dividends. To do this, each
Portfolio must, among other things, distribute substantially all of its ordi-
nary income and net capital gains on a current basis and maintain a portfolio
of investments which satisfies certain diversification criteria.
20
<PAGE>
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November, or December to shareholders of rec-
ord in such month will be deemed to have been paid by the Fund and received by
the shareholders on December 31 of such calendar year, provided that the divi-
dends are paid before February 1 of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number provided is correct and that either you are
not currently subject to backup withholding or you are exempt from backup
withholding. This certification must be made either on the Application or on a
separate form supplied by the Fund.
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc. is a Maryland corporation formed in
1972 and is located at 803 Cathedral Street, Baltimore, MD 21201. The Adviser
is a wholly-owned subsidiary of United Asset Management Corporation ("UAM")
and provides investment management services to corporations, pension and
profit sharing plans, trusts, estates and other institutions and individuals.
As of the date of this Prospectus, the Adviser had over $4 billion in assets
under management.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day operations of the Portfolios and a description of their
business experience during the past five years are as follows:
Small Company Portfolio -- Robert D. McDorman, Jr.
Equity Portfolio -- David E. Nelson
ROBERT D. MCDORMAN, JR. -- Principal. Mr. McDorman joined ICM in June, 1985.
His primary responsibilities are the management of the ICM Small Company Port-
folio and related separate accounts and equity security analysis. Prior to
joining ICM, Mr. McDorman managed the Financial Industrial Income Fund. Mr.
McDorman earned his B.A. degree at Trinity College and his law degree at the
University of Baltimore. He is a Chartered Financial Analyst. Mr. McDorman has
managed the ICM Small Company Portfolio since its inception.
DAVID E. NELSON -- Principal and Director of Equity Research. Mr. Nelson
joined ICM in October, 1989. Prior to that, he was Senior Vice President, Di-
rector of Research for Legg Mason. Mr. Nelson is an honors graduate of Wes-
leyan University and received his M.B.A. in Finance from Washington University
in 1976.
21
<PAGE>
He is a Chartered Financial Analyst. Mr. Nelson has managed the ICM Equity
Portfolio since its inception.
Additional members of the Investment Counselors of Maryland ("ICM") team of
professionals are as follows:
CRAIG LEWIS -- Principal and Chief Investment Officer. Prior to founding ICM
in 1972, he was Vice President of Investments at First National Bank of Mary-
land. Before that, he served as Vice President and Director of Research at
Robert Garrett & Sons, Inc., a NYSE member firm. Mr. Lewis is a Chartered Fi-
nancial Analyst and past President of the Baltimore Security Analysts Society.
He is a graduate of Princeton University.
PAUL L. BORSSUCK -- Principal. Mr. Borssuck heads the Individual Capital
Management Division at ICM. Prior to joining ICM, he served as Chairman of the
Investment Policy Committee at Mercantile Safe-Deposit and Trust Company where
he managed the portfolios of high net worth clients. Prior to that, he headed
the institutional funds management section at American Security and Trust Com-
pany in Washington, D.C. Mr. Borssuck earned his B.S. degree and M.B.A. from
Lehigh University. He is a Chartered Financial Analyst.
LINDA W. MCCLEARY -- Principal. Ms. McCleary is responsible for the organi-
zation and administration of the Fixed Income Group at ICM and manages fixed
income portfolios. She joined ICM in 1978 having worked previously as a Trust
Investment Officer at Equitable Trust Company. She is a cum laude graduate of
Smith College and holds an M.B.A. from Loyola College.
STEPHEN T. SCOTT -- Principal. Mr. Scott specializes in the management of
private foundations and endowments. He joined ICM in 1973 after having served
as portfolio manager at Chase Manhattan Bank and Mercantile Safe-Deposit and
Trust Company. He is a graduate of Randolph-Macon College and Columbia Univer-
sity Graduate School of Business.
ROBERT F. BOYD -- Executive Vice President. Mr. Boyd joined ICM in December,
1995 as a Senior Security and Quantitative Analyst and Portfolio Manager.
Prior to joining ICM, he was a Managing Director and Portfolio Manager at
Brandywine Asset Management. Prior to that he was Director of Equity and Quan-
titative Research at Mercantile Safe Deposit & Trust Company for 15 years. Mr.
Boyd earned his B.S. degree from the University of Virginia, and his M.B.A.
degree from Columbia University. He is a Chartered Financial Analyst.
CHARLES W. NEUHAUSER -- Senior Vice President. Mr. Neuhauser joined ICM in
August, 1991 as a security analyst in the equity research department. Prior to
that, he served as a security analyst at Bear, Stearns & Company, Inc. in New
York and then Legg Mason in Baltimore. He began in the investment business as
an analyst with Ruane, Cunniff & Company, managers of the Sequoia Fund.
22
<PAGE>
Mr. Neuhauser is a graduate of Columbia University. He is a Chartered Finan-
cial Analyst.
DANIEL O. SHACKELFORD -- Senior Vice President. Mr. Shackelford joined ICM
in November, 1993 as a fixed income portfolio manager. He has 15 years of
fixed income experience, most recently as a portfolio manager for the Univer-
sity of North Carolina at Chapel Hill ("UNC") from 1991 through 1993. Mr.
Shackelford is a graduate of UNC and received his M.B.A. from the Fuqua School
of Business at Duke University, which he attended from 1989 to 1991. Mr.
Shackelford is a Chartered Financial Analyst. Prior to 1989, Mr. Shackelford
held the position of portfolio manager at UNC.
Under Investment Advisory Agreements with the Fund, dated as of March 20,
1989 and June 28, 1993, the Adviser manages the investment and reinvestment of
the assets of the Portfolios. The Adviser must adhere to the stated investment
objectives and policies of the Portfolios, and is subject to the control and
supervision of the Funds Board of Directors.
As compensation for the services rendered by the Adviser under the Agree-
ments, each Portfolio pays the Adviser an annual fee, in monthly installments,
calculated by applying the following annual percentage rates to the Portfo-
lio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
-----
<S> <C>
Small Company Portfolio............................................... 0.700%
Equity Portfolio...................................................... 0.625%
</TABLE>
The Adviser has voluntarily agreed to keep the total annual operating ex-
penses of the Equity Portfolio from exceeding 0.90% of its average daily net
assets. The Fund will not reimburse the Adviser for any advisory fees which
are waived or Portfolio expenses which the Adviser may bear on behalf of the
Portfolio for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares of a Port-
folio. Payments made for any of these purposes may be made from the paying
entity's revenues, its profits or any other source available to it. When such
services arrangements, are in effect, they are made generally available to all
qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value
23
<PAGE>
of Institutional Class Shares held by Smith Barney's eligible customer ac-
counts in addition to amounts payable to all selling dealers.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of
aggregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Small Company Portfolio................................................ 0.04%
Equity Portfolio....................................................... 0.06%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent for the
Fund, agrees to use its best efforts as sole distributor of Fund shares. The
Distributor does not receive any fee or other compensation under the Agreement
with respect to the Portfolios included in this Prospectus. The Agreement con-
tinues in effect so long
24
<PAGE>
as it is approved at least annually by the Fund's Board of Directors. Those
approving the agreements must include a majority of Directors who are neither
parties to such Agreement nor interested persons of any such party. The Agree-
ment provides that the Fund will bear costs of registration of its shares with
the SEC and various states and the printing of its prospectuses, its SAIs and
its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each Portfolio. The Agreements direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of research, statistical and pric-
ing services these brokers provide to the Portfolios in addition to required
Adviser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients. Although not a typical practice, the Adviser may place portfo-
lio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Advisor. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Board of Directors has the power to designate one
or more series or classes of shares of common stock and to classify or reclas-
sify any unissued shares. At its discretion, the Board of Directors may create
additional Portfolios and Classes of shares of the Fund.
The shares of each Portfolio and Class are fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no pre-emptive rights. They have non-cumulative voting
rights, which
25
<PAGE>
means that the holders of more than 50% of the shares voting for the election
of Directors can elect 100% of the Directors. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held), then standing in his name on the books of the Fund. As of December 6,
1996, Bryn Mawr School, c/o Investment Counselors of Maryland, Baltimore, MD
held of record 30.0% and ICM/United Asset Management Corporation Profit Shar-
ing & 401(k) Plan, Baltimore, MD held of record 27.0% of the outstanding
shares of the ICM Equity Portfolio Institutional Class Shares. The persons or
organizations owning 25% or more of the outstanding shares of a Portfolio may
be presumed to "control" (as that term is defined in the 1940 Act) such Port-
folio. As a result, those persons or organizations could have the ability to
vote a majority of the shares of the Portfolio on any matter requiring the ap-
proval of shareholders of such Portfolio.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
26
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
DSI Balanced Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
27
<PAGE>
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
28
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Investment Counselors of Maryland, Inc.
803 Cathedral Street
Baltimore, Maryland 21201
(410) 539-3838
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
The McKee Portfolios
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
THE MCKEE PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: C.S. MCKEE & CO.
- -------------------------------------------------------------------------------
PROSPECTUS--JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series, (known as
"Portfolios") each of which has different investment objectives and investment
policies. The McKee Portfolios currently offer only one class of shares. The
securities offered in this Prospectus are Institutional Class Shares of three
non-diversified, no-load Portfolios of the Fund managed by C.S. McKee & Co.,
Inc.
McKee U.S. Government Portfolio. The objective of the McKee U.S. Government
Portfolio (the "U.S. Government Portfolio") is to achieve a high level of cur-
rent income consistent with preservation of capital by investing primarily in
U.S. Treasury and Government agency securities.
McKee Domestic Equity Portfolio. The objective of the McKee Domestic Equity
Portfolio (the "Domestic Equity Portfolio") is to achieve a superior long-term
total return over a market cycle by investing primarily in equity securities
of U.S. issuers.
McKee International Equity Portfolio. The objective of the McKee Interna-
tional Equity Portfolio (the "International Equity Portfolio") is to achieve a
superior long-term total return over a market cycle by investing primarily in
the equity securities of non-U.S. issuers.
There can be no assurance that any of the Portfolios will achieve their
stated objective.
Keep this Prospectus for future reference. It contains information you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 8
Investment Policies........................................................ 8
Other Investment Policies.................................................. 12
Investment Limitations..................................................... 16
Purchase of Shares......................................................... 17
Redemption of Shares....................................................... 20
Shareholder Services....................................................... 22
Valuation of Shares........................................................ 23
Performance Calculations................................................... 23
Dividends, Capital Gains Distributions and Taxes........................... 24
Investment Adviser......................................................... 25
Administrative Services.................................................... 26
Distributor................................................................ 27
Portfolio Transactions..................................................... 28
General Information........................................................ 28
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees which shareholders of
the Portfolios would incur. Transaction fees may be charged if a broker-dealer
or other financial intermediary deals with the Fund on your behalf. (See "PUR-
CHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
U.S. DOMESTIC INTERNATIONAL
GOVERNMENT EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- -------------
<S> <C> <C> <C>
Sales Load Imposed on
Purchases............. NONE NONE NONE
Sales Load Imposed on
Reinvested Dividends.. NONE NONE NONE
Deferred Sales Load..... NONE NONE NONE
Redemption Fees......... NONE NONE NONE
Exchange Fees........... NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
U.S. DOMESTIC INTERNATIONAL
GOVERNMENT EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- -------------
<S> <C> <C> <C>
Investment Advisory Fees.................... 0.45% 0.65% 0.70%
Administrative Fees......................... 0.46% 0.21% 0.18%
12b-1 Fees.................................. NONE NONE NONE
Distribution Costs.......................... NONE NONE NONE
Other Expenses.............................. 0.47% 0.22% 0.15%
Advisory Fees Waived and Expenses Assumed... (0.12)% (0.04)% --
Total Operating Expenses+................... 1.26% 1.04% 1.03%
</TABLE>
- -----------
* Absent fee waivers and expenses assumed by the Adviser, annualized Total Op-
erating Expenses of the McKee U.S. Government and Domestic Equity Portfolios
for the fiscal year ended October 31, 1996 would have been 1.38% and 1.08%,
respectively.
+ The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, annualized Total Operating Expenses
of the U.S. Government, Domestic Equity and International Equity Portfolios
would not differ.
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolios (if necessary) in
order to
1
<PAGE>
keep the expense ratios of (i) the U.S. Government Portfolio Institutional
Class Shares from exceeding 0.85% of its average daily net assets; (ii) the
Domestic Equity Portfolio Institutional Class Shares from exceeding 1.00% of
its average daily net assets; (iii) the International Equity Portfolio Insti-
tutional Class Shares from exceeding % of its average daily net assets. The
Fund will not reimburse the Adviser for any advisory fees that are waived or
Portfolio expenses that the Adviser may bear on behalf of a Portfolio.
The above table shows the various fees and expenses an investor in the Port-
folios would bear directly or indirectly. The fees and expenses are based on
the Portfolios' operations during the fiscal year ended October 31, 1996, ex-
cept that Administrative Fees have been restated to reflect the current fees.
(See "ADMINISTRATIVE SERVICES" herein and in the SAI.)
The following example illustrates the expenses which a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Portfolios charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
McKee U.S. Government Portfolio............. $13 $40 $70 $153
McKee Domestic Equity Portfolio............. $11 $33 $58 $128
McKee International Equity Portfolio........ $11 $33 $57 $126
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
C.S. McKee & Co., Inc. (the "Adviser"), an investment counseling firm estab-
lished in 1931, serves as investment adviser to the Portfolios. The Adviser
presently manages over $2.9 billion in assets for institutional clients. (See
"INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor") to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment for the U.S. Government and Domestic Equity
Portfolios is $100,000; the minimum for subsequent investments is $1,000. The
minimum initial investment for the International Equity Portfolio is $2,500;
the minimum for subsequent investments is $100. The minimum initial investment
for IRA accounts is $500. The minimum initial investment for spousal IRA ac-
counts is $250. Certain exceptions to the initial and minimum investment
amounts may be made by officers of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will be reinvested in Portfolio
shares automatically unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors should consider the following: (1) The Domestic Equity Portfolio and
the International Equity Portfolio may each invest in securities of foreign
issuers, which may involve greater risks than investments in domestic securi-
ties, such as foreign currency risks. In addition, since the International Eq-
uity Portfolio may invest in the securities of foreign issuers of developing
countries, the Portfolio may be subject to additional risks. (See "INVESTMENT
POLICIES."); (2) Fixed income securities in which the Portfolios may invest
will be affected by general changes in interest rates resulting in increases
or decreases in the value of the obligations held by the Portfolios. The value
of fixed income securities held by a Portfolio can be expected to vary in-
versely with changes in interest rates; as interest rates decline, the market
value of fixed income securities tends to increase and vice versa; (3) Each
Portfolio is classified as non-diversified under the Investment Company Act of
1940, as amended (the "1940 Act"). The Portfolios may invest a greater propor-
tion of their total assets in the securities of a smaller number of issuers
and, as a result, will be subject to a greater risk with respect to their se-
curities; (4) Each Portfolio may use investment practices such as repurchase
agreements, when-issued, forward delivery and delayed settlement securities
and lending of securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide selected per share information for a share out-
standing throughout each of the respective periods presented for the Portfo-
lios' Institutional Class Shares. These tables are part of the Portfolios' Fi-
nancial Statements, which are included in the Portfolios' 1996 Annual Report
to Shareholders. The Annual Report is incorporated into the Portfolios' SAI.
The Portfolio's Financial Statements have been audited by Price Waterhouse
LLP. Their unqualified opinion on the Financial Statements is also incorpo-
rated into the SAI. Please read the following information in conjunction with
the Portfolios' 1996 Annual Report to Shareholders.
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------
MAY 26, 1994**
TO OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1995 1996
-------------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 10.00 $ 10.40 $ 10.03
Income From Investment Operations
Net Investment Income.................. 0.04 0.11 0.09
Net Realized and Unrealized Gain
(Loss)............................... 0.39 (0.39)+ 0.73
------- ------- -------
Total From Investment Operations....... 0.43 (0.28) 0.82
------- ------- -------
Distributions:
Net Realized Gain...................... -- -- (0.21)
Net Investment Income.................. (0.03) (0.09) (0.09)
------- ------- -------
Net Asset Value, End of Period......... $ 10.40 $ 10.03 $ 10.55
======= ======= =======
Total Return........................... 4.31% (2.69)% 8.29%
======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (Thousands).. $37,257 $74,893 $91,224
Ratio of Expenses to Average Net
Assets............................... 1.12%* 0.97%# 1.01%
Ratio of Net Investment Income to
Average Net Assets................... 0.97%* 1.16% 0.92%
Portfolio Turnover Rate................ 11% 7% 9%
Average Commission Rate Paid#.......... N/A N/A $0.0560
Ratio of Expenses to Average Net Assets
Including Expense Offsets............ N/A 0.96% 1.01%
</TABLE>
- -----------
* Annualized.
** Commencement of Operations.
+ The amount shown for the year ended October 31, 1995 for a share outstand-
ing 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 invest-
ments of the Portfolio.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
DOMESTIC EQUITY PORTFOLIO
<TABLE>
<CAPTION>
MARCH 2, 1995** YEAR ENDED
TO OCTOBER 31, OCTOBER 31,
1995 1996
--------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period.............. $10.00 $ 11.44
Income From Investment Operations
Net Investment Income............................. 0.08 0.10
Net Realized and Unrealized Gain.................. 1.43 2.08
------ -------
Total From Investment Operations.................. 1.51 2.18
------ -------
Distributions:
Net Investment Income............................. (0.07) (0.09)
Net Realized Gain................................. (0.07) (0.15)
------ -------
Total Distributions............................... (0.24)
------ -------
Net Asset Value, End of Period.................... $11.44 $ 13.38
====== =======
Total Return+..................................... 15.13% 19.31%
====== =======
Ratios and Supplemental Data
Net Assets, End of Period (Thousands)............. $6,427 $62,170
Ratio of Expenses to Average Net Assets+.......... 1.08%* 0.99%
Ratio of Net Investment Income to Average Net As-
sets+........................................... 1.12%* 0.93%
Portfolio Turnover Rate........................... 27% 42%
Average Commission Rate Paid#..................... N/A $0.0482
Voluntary Waived Fees and Expenses Assumed by the
Adviser Per Share............................... $0.11 $0.00
Ratio of Expenses to Average Net Assets Including
Expense Offsets................................. 1.00% 0.99%
</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.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
6
<PAGE>
U.S. GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
MARCH 2, 1995** YEAR ENDED
TO OCTOBER 31, OCTOBER 31,
1995 1996
--------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period.............. $10.00 $10.76
Income From Investment Operations
Net Investment Income............................. 0.28 0.46
Net Realized and Unrealized Gain (Loss)........... 0.71 (0.07)
------ -------
Total From Investment Operations.................. 0.99 0.39
------ -------
Distributions:
Net Investment Income............................. (0.23) (0.44)
Net Realized Gain................................. 0.00 (0.13)
------ -------
Total Distributions............................... (0.23) (0.57)
------ -------
Net Asset Value, End of Period.................... $10.76 $10.58
====== =======
Total Return+..................................... 9.96% 3.77%
====== =======
Ratios and Supplemental Data
Net Assets, End of Period (Thousands)............. $6,069 $23,118
Ratio of Expenses to Average Net Assets........... 0.89%* 1.13%
Ratio of Net Investment Income to Average Net
Assets.......................................... 5.39%* 5.39%
Portfolio Turnover Rate........................... 104% 83%
Voluntary Waived Fees and Expenses Assumed by the
Adviser Per Share............................... $0.10 $0.01
Ratio of Expenses to Average Net Assets Including
Expense Offsets................................. 0.85%* 1.13%
</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.
++ The amount shown for the year ended October 31, 1996 for a share outstand-
ing 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 invest-
ments of the Portfolio.
7
<PAGE>
INVESTMENT OBJECTIVES
The objective of the U.S. GOVERNMENT PORTFOLIO is to achieve a high level of
current income consistent with preservation of capital by investing primarily
in U.S. Treasury and Government agency securities.
The objective of the DOMESTIC EQUITY PORTFOLIO is to achieve a superior
long-term total return over a market cycle by investing primarily in equity
securities of U.S. issuers.
The objective of the INTERNATIONAL EQUITY PORTFOLIO is to achieve a superior
long-term total return over a market cycle by investing primarily in equity
securities of non-U.S. issuers.
There can be no assurance that any of the Portfolios will achieve its stated
objective.
INVESTMENT POLICIES
U.S. GOVERNMENT PORTFOLIO. The U.S. Government Portfolio intends to achieve
its objective by investing, under normal circumstances, at least 65% of its
total assets in securities issued by the U.S. Treasury and Government agencies
and instrumentalities. Because the Adviser will actively manage the Portfolio,
investments in U.S. Government and agency securities will reflect the Advis-
er's outlook for the direction of interest rates. Based on this outlook, the
average weighted maturity of the Portfolio is expected to fluctuate between 5
years and 15 years.
U.S. Government Securities in which the Portfolio will invest are U.S. Trea-
sury securities consisting of Treasury Bills, Treasury Notes and Treasury
Bonds. Some other government securities in which the Portfolio may invest are
securities of the Federal Housing Administration, the Government National
Mortgage Association, the Department of Housing and Urban Development, the Ex-
port-Import Bank, the Farmers Home Administration, the General Services Admin-
istration, the Maritime Administration and the Small Business Administration.
The balance of the Portfolio's assets may be invested in repurchase agree-
ments collateralized by such securities mentioned above, investment grade cor-
porate asset-backed securities and agency mortgage-backed securities. The
Portfolio will invest in corporate bonds rated no lower than Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Corporation
("S&P") at the time of their purchase. Securities rated Baa by Moody's or BBB
by S&P may possess speculative characteristics and may be more sensitive to
changes in the economy and the financial condition of issuers than higher
rated bonds. It is the
8
<PAGE>
Adviser's intention that the Portfolio's investments will be limited to in-
vestment grade securities. However, the Adviser reserves the right to retain
securities which are downgraded by one or both of the rating agencies if, in
the Adviser's judgement, the retention of the securities is warranted. The SAI
for the Portfolios contains a description of corporate bond ratings. The Port-
folio will invest in asset-backed securities rated no lower than the top two
rating categories by Moody's and S&P at the time of their purchase. The Port-
folio may also invest up to 25% of its assets in short-term securities and
cash equivalents. (See "SHORT-TERM INVESTMENTS.")
DOMESTIC EQUITY PORTFOLIO. The Domestic Equity Portfolio intends to achieve
its objective by investing, under normal circumstances, at least 65% of its
total assets in equity securities of U.S. companies with medium to large mar-
ket capitalizations. These issuers will be listed on a national exchange or
traded over the counter. The stock selection process begins with an initial
screening of over 1,200 stocks by price/earnings ratios, earnings momentum and
earnings surprise to identify potentially undervalued securities. Through the
use of fundamental security analysis, company management interviews and as-
sessment of opinions of street analysts and consultants, a portfolio of stocks
is selected that demonstrates the best combination of value and earnings mo-
mentum. Broad allocation is achieved by maintaining exposure to most major
economic sectors and industries. The Adviser plans to maintain a fully in-
vested posture, holding limited cash reserves only when the market appears
vulnerable to decline.
The Portfolio intends to invest primarily in U.S. based companies. In addi-
tion, the Portfolio may purchase shares of foreign based companies in the form
of American Depositary Receipts (ADRs). Investments in ADRs, which are domes-
tic securities representing ownership rights in foreign companies, will not
exceed 10% of the Portfolio's assets. ADRs may be sponsored or unsponsored.
Sponsored ADRs are established jointly by a depositary and the underlying is-
suer, whereas unsponsored ADRs may be established without participation by the
underlying issuer. Holders of an unsponsored ADR generally bear all the costs
associated with establishing the unsponsored ADR. The depositary of an
unsponsored ADR is under no obligation to distribute shareholder communica-
tions received from the underlying issuer or to pass through to the holders of
the unsponsored ADR voting rights with respect to the deposited securities or
pool of securities.
The Portfolio may also purchase U.S. Treasury and Government agency securi-
ties, short-term securities and cash equivalents. (See "SHORT-TERM INVEST-
MENTS.")
INTERNATIONAL EQUITY PORTFOLIO. The International Equity Portfolio intends
to achieve its objective by investing at least 65% of its total assets in the
equity securities of at least three countries other than the U.S. The invest-
ment process
9
<PAGE>
employed by the Adviser begins with an initial screening of over 2,000 stocks
which are generally traded on a national exchange and selected from the
investable non-U.S. markets. These securities are ranked by their price/earnings
ratios, price/cash flow ratios and earnings momentum. Stock selection is then
based on identifying the most fundamentally attractive securities as defined by
the screening process.
The Portfolio will attempt to minimize risk through systematic country and
economic sector designation. The Portfolio will be managed in a manner which
will maintain deliberate allocations to most major markets and industries
within the Morgan Stanley Capital International EAFE Index (the "Index"). How-
ever, stocks may be purchased which are not included in countries and indus-
tries comprising the Index. When the strategy is fully implemented, the Port-
folio is expected to hold more than 40 stocks selected from at least 10 coun-
tries.
Investments in securities of foreign issuers involve somewhat different in-
vestment risks from those affecting securities of domestic issuers. There may
be limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those of domestic compa-
nies. There may also be less government supervision and regulation of foreign
securities exchanges, brokers and listed companies than in the United States.
Many foreign securities markets have substantially less volume than United
States securities exchanges, and securities of some foreign issuers are less
liquid and more volatile than securities of comparable domestic issuers. Bro-
kerage commissions and other transaction costs on foreign securities exchanges
are generally higher than in the United States. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes which
may decrease the net return on foreign investments as compared to dividends
and interest paid by domestic companies. Additional risks include future po-
litical and economic developments, the possibility that a foreign jurisdiction
might impose or change withholding taxes on income payable with respect to
foreign securities, the possible adoption of foreign governmental restrictions
such as exchange controls, and in the event of a default on a foreign debt ob-
ligation, it may be more difficult for the Portfolio to obtain or enforce a
judgement against the issuers of the obligation.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other emerg-
ing countries. Foreign ownership limitations also may be imposed by the char-
ters of individual companies in emerging countries to prevent, among other
concerns, violation of foreign investment limitations.
The Portfolio may invest a portion of its assets in securities of issuers in
developing countries. Investing in the foreign securities of developing coun-
tries
10
<PAGE>
presents additional considerations. The economies of individual developing
countries may differ favorably or unfavorably from the United States economy
in such respects as growth of gross domestic product, rate of inflation, cur-
rency depreciation, capital reinvestment, resource self-sufficiency and bal-
ance of payments position. Further, the economies of developing countries gen-
erally are heavily dependent upon international trade and accordingly, have
been and may continue to be adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. The economies also have been, and may continue to be, adversely af-
fected by economic conditions in the countries with which they trade.
With respect to any developing country, there is a possibility of national-
ization, or confiscatory taxation, repatriation of investment income, capital
and the proceeds of sales by foreign investors, political changes, governmen-
tal regulation, social instability or diplomatic developments (including war)
which could adversely affect the economies of such countries or the value of
the Portfolio's investment in those countries. In addition, it may be diffi-
cult to obtain and enforce a judgment in a court outside the United States.
The Portfolio may also invest in American Depositary Receipts, which are
discussed above, and may purchase short-term collective investment funds and
money market funds. The Portfolio's investment policy provides for it to be
fully invested in common stocks and stock equivalents. However, the Portfolio
may hold a portion of its assets in cash to meet day-to-day operating needs
and for other appropriate purposes. The Portfolio may also invest a portion of
its assets in short-term securities and cash equivalents. (See "SHORT-TERM IN-
VESTMENTS.")
The Portfolio may also enter into forward foreign currency exchange con-
tracts. Forward foreign currency exchange contracts provide for the purchase
or sale of an amount of a specified foreign currency at a future date. The
general purpose of these contracts is both to put currencies in place to set-
tle trades and to generally protect the United States dollar value of securi-
ties held by the Portfolio against exchange rate fluctuation. While such for-
ward contracts may limit losses to the Portfolio as a result of exchange rate
fluctuation, they will also limit any gains that may otherwise have been real-
ized. The Portfolio will enter into such contracts only to protect against the
effects of fluctuating rates of currency exchange and exchange control regula-
tions. (See "Investment Objectives And Policies--Forward Foreign Currency Ex-
change Contracts" in the SAI.)
11
<PAGE>
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 15% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT
COMPANIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to
12
<PAGE>
sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price. The Sub-Administrator and the Adviser will mark
to market daily the value of the securities purchased. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause a Portfolio to experience a loss or delay in the liquida-
tion of the collateral securing the repurchase agreement. The Portfolio might
also incur disposition costs in liquidating the collateral. While the Fund's
management acknowledges these risks, it is expected that they can be con-
trolled through stringent security selection criteria and careful monitoring
procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into joint repurchase agree-
ments, a Portfolio may incur lower transaction costs and earn higher rates of
interest on joint repurchase agreements. Each Portfolio's contribution would
determine its return from a joint repurchase agreement. (See "SHORT TERM IN-
VESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on a loan, the loan must be called and the securities
voted.
WHEN-ISSUED, DELAYED SETTLEMENT AND FORWARD DELIVERY SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. Such transactions will be limited to
20% of the Portfolios' assets. "When-issued" or "forward delivery" refers to
securities whose terms and indenture are available and for which a market ex-
ists, but which are not available for immediate delivery. When-issued and for-
ward de
13
<PAGE>
livery transactions may be expected to occur a month or more before delivery
is due. Delayed settlement is a term used to describe settlement of securities
transactions in the secondary market, which will occur sometime in the future.
No payment or delivery is made by the Portfolio until it receives payment or
delivery from the other party to any of the above transactions. It is possible
that the market price of the securities at the time of delivery may be higher
or lower than the purchase price. Each Portfolio will maintains cash or liquid
securities at least equal to the value of purchase commitments until payment
is made. Such segregated securities will either mature or, if necessary, be
sold on or before the settlement date. A Portfolio receives no income from
"when-issued," "delayed settlement," or "forward-delivery" securities prior to
delivery of such securities although it may earn income on securities it has
deposited in a segregated account.
The Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices--not to increase
its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for the U.S. Government Portfolio, the Domestic Equity
Portfolio and the International Equity Portfolio is not anticipated to exceed,
respectively, 104%, 75% and 50%. In addition to Portfolio trading costs,
higher rates of portfolio turnover may result in the realization of capital
gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES" for more infor-
mation on taxation). The Portfolios will not normally engage in short-term
trading, but each reserves the right to do so. The tables set forth in "Finan-
cial Highlights" present the Portfolios' historical portfolio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. The Portfolio will indirectly bear its proportionate share of any
management fees paid by an investment company in which it invests in addition
to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the invest
14
<PAGE>
ing Portfolio's adviser will waive its investment advisory fee and any other
fees earned as a result of the Portfolio's investment in the DSI Money Market
Portfolio. The investing Portfolio will bear expenses of the DSI Money Market
Portfolio on the same basis as all of its other shareholders.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Fund's Directors
may change such policies without an affirmative vote of a majority of the out-
standing voting securities of a Portfolio, as defined in the 1940 Act.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. A Portfolio will invest no more than 10%
of its net assets in illiquid securities. The prices realized from the sales
of these securities could be less than those originally paid by the Portfolio
or less than what would be considered fair value of such securities.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, each
Portfolio may invest in futures and options and interest rate futures con-
tracts. Because transaction costs associated with futures and options may be
lower than the costs of investing in the securities directly, it is expected
that use of index futures and options to facilitate cash flows may reduce the
Portfolio's overall transaction costs. Each Portfolio may enter into futures
contracts provided that not more than 5% of its total assets are at the time
of acquisition required as margin deposit to secure obligations under such
contracts. A Portfolio will engage in futures and options transactions for
hedging purposes only.
Futures and options can be volatile and involve various degrees and types of
risk. If a Portfolio judges market conditions incorrectly or employs a strat-
egy that does not correlate well with its investments, use of futures and op-
tions contracts could result in a loss. A Portfolio could also suffer losses
if it is unable to liquidate its position due to an illiquid secondary market.
In the opinion of the Directors of the Fund, the risk that a Portfolio will be
unable to close out a futures position or options contract will be minimized
only by entering into futures contracts or options transactions traded on na-
tional exchanges and for which there appears to be a liquid secondary market.
15
<PAGE>
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 50% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
(b) with respect to 50% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 33
1/3% of the Portfolio's gross assets valued at the lower of market or
cost, and (ii) the Portfolio may not purchase additional securities
when borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 33 1/3% of its total assets at fair market value.
The Portfolios' investment objectives and investment limitations (a), (b),
(d), (e) and (f)(i) are fundamental and may be changed only with the approval
of the holders of a majority of the outstanding shares of each Portfolio. If a
percentage limitation on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in per-
centage resulting from changes in the value or total cost of a Portfolio's as-
sets will not be considered a violation of the restriction.
16
<PAGE>
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission, at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "VALUATION OF SHARES.") The required minimum
initial investment for the International Equity Portfolio is $2,500. The re-
quired minimum initial investment for the U.S. Government and Domestic Equity
Portfolios is $100,000. For all the Portfolios, the minimum initial investment
for IRA accounts is $500. The minimum initial investment for spousal IRA ac-
counts is $250. Certain exceptions may be determined by the officers of the
Fund.
Shares of the Portfolios may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase
or redemption of Portfolio shares and may charge transaction or other account
fees on purchases and redemptions. Each Service Agent is responsible for
transmitting to its customers a schedule of any such fees and information re-
garding any additional or different purchase and redemption conditions. Share-
holders who are customers of Service Agents should consult their Service Agent
for information regarding these fees and conditions. Amounts paid to Service
Agents may include transaction fees and/or service fees paid by the Fund from
the Fund assets attributable to the Service Agent, and which would not be im-
posed if shares of the Portfolio were purchased directly from the Fund or the
Distributor. Service Agents may provide shareholder services to their custom-
ers that are not available to a shareholder dealing directly with the Fund. A
salesperson and any other person entitled to receive compensation for selling
or servicing Portfolio shares may receive different compensation with respect
to one particular class of shares over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior to the close of its business day to receive that day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
17
<PAGE>
INITIAL INVESTMENTS
BY MAIL
Complete and sign an Application, and mail it, together with a check payable
to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (monies
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account
name, address, telephone number, social security or taxpayer iden-
tification number, Portfolio selected, amount being wired and the
name of the bank wiring the funds. An account number will then be
provided to you. Next,
. Instruct your bank to wire the specified amount to the Fund's Cus-
todian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund. Federal Funds pur-
chases will be accepted only on a day on which both the NYSE and
the Custodian Bank are open for business.
18
<PAGE>
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $1,000 for the U.S. Government and Domestic Equity Portfolios and
$100 for the International Equity Portfolio. Shares may be purchased at net
asset value by mailing a check to the UAM Funds Service Center (payable to
"UAM Funds) at the above address or by wiring monies to the Custodian Bank us-
ing the instructions outlined above. When making additional investments, be
sure that the account number, account name, and the Portfolio to be purchased
are specified on the check or wire. Prior to wiring additional investments,
notify the UAM Funds Service Center at the telephone number on the cover of
this Prospectus. Mail orders should include, when possible, the "Invest by
Mail" stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. Eastern Time (ET) (the close of the NYSE)
will be invested at the share price calculated after the NYSE closes on that
day. Investments received after the close of the NYSE will be executed at the
price computed on the next day the NYSE is open. The Fund reserves the right,
in its sole discretion, to suspend the offering of shares of each Portfolio or
to reject purchase orders when, in the judgment of management, such suspension
or rejection is in the best interests of the Fund. Purchases of a Portfolio's
shares will be made in full and fractional shares of the Portfolio calculated
to three decimal places. Certificates for fractional shares will not be is-
sued. Certificates for whole shares will not be issued except at the written
request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of each Portfolio may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolio, as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as detailed under "VALUATION OF SHARES" at the time of
the next determination of net asset value after such acceptance. Shares issued
in exchange for securities will be issued at net asset value determined as of
the same time. All dividends, interest, subscription, or other rights pertain-
ing to such securities shall become the property of the Portfolio and must be
delivered to the Fund by the investor upon receipt from the issuer. Securities
acquired through an in-kind purchase will be acquired for investment and not
for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange, such securities are eligible for in-
vestment by the Portfolio (current market quotations must be read-
ily available for such securities);
19
<PAGE>
. the investor represents and agrees that all securities offered to
be exchanged are not subject to any restrictions upon their sale by
the Portfolio under the Securities Act of 1933, or otherwise and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation may realize a gain or loss for
Federal income tax purposes upon the exchange depending upon the cost of the
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of any Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value next determined after receipt of the re-
demption request. No charge is made for redemptions. Any redemption may be
more or less than the purchase price of shares depending on the market value
of the investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
20
<PAGE>
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instruction
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. A complete definition
of eligible guarantor institutions is available from UAMFSI.
The signature guarantee must appear either:
. on the written request for redemption;
21
<PAGE>
. on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or
. on all stock certificates tendered for redemption and, if shares
held by the Fund are also being redeemed, on the letter or stock
power.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after re-
ceipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
as determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities received in payment
of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for any other
Institutional Class Shares of any other UAM Funds Portfolio. (See the list of
Portfolios of the UAM Funds at the end of this Prospectus.) Exchange requests
should be made by contacting the UAM Funds Service Center.
Any such exchange will be based on the net asset value of the shares in-
volved. There is no sales commission or charge of any kind for an exchange.
Before making an exchange into a Portfolio, a shareholder should read its Pro-
spectus and consider the investment objectives of the Portfolio to be pur-
chased. Call the UAM Funds Service Center for a copy of the Prospectus for the
Portfolio(s) in which you are interested. Exchanges can only be made with
Portfolios that are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued and if the registration of the two accounts will
be identical. Requests for exchange received prior to 4 p.m. (ET) will be
processed as of the close of business on the same day. The Board of Directors
may limit the frequency and
22
<PAGE>
amount of exchanges permitted. For additional information regarding responsi-
bility for the authenticity of telephoned instructions, see "REDEMPTION OF
SHARES--BY TELEPHONE" above. An exchange into another UAM Funds Portfolio may
result in a capital gain or loss for income tax purposes. The Fund may modify
or terminate the exchange privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a U.S. securities exchange for which market quo-
tations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken
from the exchange where the security is primarily traded. Unlisted equity se-
curities and listed securities not traded on the valuation date for which mar-
ket quotations are readily available are valued not exceeding the current
asked prices nor less than the current bid prices. Quotations of foreign secu-
rities in a foreign currency are converted to U.S. dollar equivalents. The
converted value is based upon the bid price of the foreign currency against
U.S. dollars quoted by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. In addition, bonds and other fixed income securities may be valued on
the basis of prices provided by a pricing service when such prices are be-
lieved to reflect the fair market value of such securities. Securities pur-
chased with remaining maturities of 60 days or less are valued at amortized
cost using methods approved by the Fund's Board of Directors.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods approved by the Fund's Board of Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated
23
<PAGE>
according to a standard that is required for all bond funds. As this differs
from other accounting methods, the quoted yield may not equal the income actu-
ally paid to shareholders.
Total return is the change in value of an investment in the Portfolios over
a given period, assuming reinvestment of any dividends and capital gains. A
cumulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. For a free copy of the Annual Report, contact the
UAM Funds Service Center at the address or telephone number on the cover of
this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolios will normally distribute them
annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares unless the Fund is notified in writing that the
shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify each year as a "regulated investment com-
pany" under subchapter M of the Internal Revenue Code of 1986, as amended, for
federal income tax purposes and to meet all other requirements that are neces-
sary for it (but not its shareholders) to be exempt from federal taxes on in-
come and gains paid to shareholders in the form of dividends. To do this, each
Portfolio must, among other things, distribute substantially all of its ordi-
nary income and net capital gains on a current basis and maintain a portfolio
of investments which satisfies certain diversification criteria.
24
<PAGE>
Dividends paid by a Portfolio from net investment income, whether in cash or
reinvested in shares, are taxable to shareholders as ordinary income. Short-
term capital gains will be taxed as ordinary income. Long-term capital gains
distributions are taxed as long-term capital gains. Shareholders will be noti-
fied annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be deemed to have been paid by the Fund and received
by the shareholders on December 31 of such calendar year, provided that the
dividends are paid before February 1 of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS taxpayer identification
regulations. To avoid this withholding requirement, you must certify that your
Social Security or Taxpayer Identification Number provided is correct and that
either you are not currently subject to backup withholding or you are exempt
from backup withholding. This certification must be made on the Application or
on a separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
C.S. McKee & Co., Inc. was founded in 1931 and is located at One Gateway
Center, Pittsburgh, PA 15222. The Adviser is a wholly-owned subsidiary of
United Asset Management Corporation ("UAM") and provides investment management
services to pension and profit sharing plans, trusts and endowments, 401(k)
and thrift plans, corporations and other institutions and individuals. As of
the date of this Prospectus, the Adviser manages over $2.9 billion in assets
under management.
Under Investment Advisory Agreements dated as of January 24, 1994, C.S. Mc-
Kee & Co., Inc. manages the investment and reinvestment of the assets of the
Portfolios. The Adviser must adhere to the stated investment objectives and
policies of the Portfolios, and is subject to the control and supervision of
the Fund's Board of Directors.
JOSEPH F. BONOMO, JR. is responsible for the management of the McKee U.S.
Government Portfolio. Mr. Bonomo is Director of Fixed Income and Chief Econo-
mist with the Adviser and has 29 years of investment experience. He
25
<PAGE>
joined the Adviser as Senior Vice President and Director of Fixed Income in
1994 and was previously Senior Vice President of Paul Revere Insurance Compa-
ny. He is a graduate of Temple University from which he received his B.S. and
M.B.A., in Finance and Insurance, and a Ph.D. in Economics.
WALTER C. BEAN is responsible for the management of the McKee Domestic Eq-
uity Portfolio and the McKee International Equity Portfolio. Mr. Bean is Di-
rector of Equities with the Adviser and has 26 years of investment experience.
He joined the Adviser as Senior Vice President and Director of Equities in
1987 and became an Executive Vice President in 1995. He was previously Manag-
ing Director of First Chicago Investment Advisers. He is a graduate of Ohio
University (BA) and Penn State University (MBA) and is a Chartered Financial
Analyst.
As compensation for its services as an Adviser, the Portfolios pay the Ad-
viser annual fees, in monthly installments, calculated by applying the follow-
ing annual percentage rates to the Portfolios' average daily net assets for
the month:
<TABLE>
<S> <C>
U.S. Government Portfolio.............................................. 0.45%
Domestic Equity Portfolio.............................................. 0.65%
International Equity Portfolio......................................... 0.70%
</TABLE>
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares of a Port-
folio. Payments made for any of these purposes may be made from its revenues,
its profits or any other source available to it. When in effect, such services
arrangements are made generally available to all qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this Prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at
26
<PAGE>
211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of these
services to Chase Global Funds Services Company ("CGFSC"), an affiliate of The
Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April 15,
1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of
aggregate net assets:
<TABLE>
<CAPTION>
RATE
-----
<S> <C>
U.S. Government Portfolio.............................................. 0.04%
Domestic Equity Portfolio.............................................. 0.04%
International Equity Portfolio......................................... 0.06%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but
less than $3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent for the
Fund, agrees to use its best efforts as sole distributor of Fund shares. The
Distributor does not receive any fee or other compensation under the Agreement
with respect to the McKee Portfolios included in this Prospectus. The Agree-
ment continues in effect so long as it is approved at least annually by the
Fund's Board of Directors. Those approving the Agreement must include a major-
ity of Directors who are neither
27
<PAGE>
parties to such Agreement nor interested persons of any such party. The Agree-
ment provides that the Fund will bear the costs of the registration of its
shares with the SEC and various states and the printing of its prospectuses,
its SAIs and its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each Portfolio. The Agreements direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of research, statistical and pric-
ing services these brokers provide to the Portfolios in addition to required
Adviser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients. Although not a typical practice, the Adviser may place portfo-
lio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Board of Directors to issue three billion shares of common
stock, with a $.001 par value. The Directors have the power to designate one
or more series or classes of shares of common stock and to classify or reclas-
sify any unissued shares with respect to such Portfolios, without further ac-
tion by shareholders. The Board of Directors may create additional Portfolios
and Classes of shares of the Fund at its discretion.
28
<PAGE>
The shares of each Portfolio and Class are fully paid and nonassessable and
have no preference as to conversion, exchange, dividends, retirement or other
features and have no pre-emptive rights. The shares of each Portfolio and
Class have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Directors can elect 100% of
the Directors. A shareholder is entitled to one vote for each full share held
(and a fractional vote for each fractional share held), then standing in his
name on the books of the Fund. As of December 6, 1996, Chase Manhattan Bank,
Trustee for Servistar Corp. Profit Plan Sharing Trust, New York, N.Y. held of
record 69.1% of the outstanding shares of the U.S. Government Portfolio and
65.1% of the outstanding shares of the Domestic Equity Portfolio for which
ownership is disclaimed or presumed disclaimed. The persons or organizations
owning 25% or more of the outstanding shares of a Portfolio may be presumed to
"control" (as that term is defined in the 1940 Act) such Portfolio. As a re-
sult, those persons or organizations could have the ability to vote a majority
of the shares of the Portfolio on any matter requiring the approval of share-
holders of such Portfolio.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
29
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
30
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
31
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
C.S. McKee & CO., INC.
One Gateway Center
Pittsburgh, PA 15222
(412) 566-1234
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
LOGO
NWQ Balanced Portfolio &
NWQ Value Equity Portfolio
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
LOGO
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
NWQ BALANCED PORTFOLIO
&
NWQ VALUE EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: NWQ INVESTMENT MANAGEMENT COMPANY
- -------------------------------------------------------------------------------
PROSPECTUS--JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios") each of which has different investment objectives and policies.
The NWQ Portfolios currently offer two separate classes of shares: Institu-
tional Class Shares and Institutional Service Class Shares ("Service Class
Shares"). Shares of each class represent equal, pro rata interests in a Port-
folio and accrue dividends in the same manner except that Service Class Shares
bear fees payable by the class (at the rate of .40% per annum) to financial
institutions for services they provide to the owners of such shares. The secu-
rities offered in this Prospectus are Institutional Class Shares of two diver-
sified, no-load Portfolios of the Fund managed by NWQ Investment Management
Company.
NWQ BALANCED PORTFOLIO. The objective of the NWQ Balanced Portfolio (the
"Balanced Portfolio") is to achieve consistent, above-average returns with
minimum risk to principal by investing primarily in a combination of invest-
ment grade fixed income securities and common stocks of companies with above-
average statistical value which are in fundamentally attractive industries and
which, in the Adviser's opinion, are undervalued at the time of purchase.
NWQ VALUE EQUITY PORTFOLIO. The objective of the NWQ Value Equity Portfolio
(the "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 indus-
tries and which, in the Adviser's opinion, are undervalued at the time of pur-
chase.
There can be no assurance that either of the Portfolios will achieve their
stated objective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 7
Investment Policies........................................................ 7
Other Investment Policies.................................................. 9
Investment Limitations..................................................... 12
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 16
Shareholder Services....................................................... 18
Valuation of Shares........................................................ 19
Performance Calculations................................................... 19
Dividends, Capital Gains Distributions and Taxes........................... 20
Investment Adviser......................................................... 21
Administrative Services.................................................... 23
Distributor................................................................ 24
Portfolio Transactions..................................................... 24
General Information........................................................ 24
UAM Funds -- Institutional Class Shares.................................... 27
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that shareholders of
the Portfolios' Institutional Class Shares would incur. Transaction fees may
be charged if a broker-dealer or other financial intermediary deals with the
Fund on your behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
BALANCED VALUE EQUITY
PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES
------------- -------------
<S> <C> <C>
Sales Load Imposed on Purchases................. NONE NONE
Sales Load Imposed on Reinvested Dividends...... NONE NONE
Deferred Sales Load............................. NONE NONE
Redemption Fees................................. NONE NONE
Exchange Fees................................... NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
BALANCED VALUE EQUITY
PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES
------------- -------------
<S> <C> <C>
Investment Advisory Fees....................... 0.70 %+ 0.70 %+
Administrative Fees............................ 0.86 % 2.47 %
12b-1 Fees..................................... NONE NONE
Other Expenses................................. 0.61 % 1.99 %
Advisory Fees Waived and Expenses Assumed...... (1.17)% (4.16)%
Total Operating Expenses (After Fee Waivers and
Expenses Assumed)............................ 1.00 %+* 1.00 %+*
</TABLE>
- -----------
+ Until February 28, 1998, the Adviser has voluntarily agreed to waive all or
part of its advisory fee for each Portfolio and to assume operating expenses
otherwise payable by the Portfolios, if necessary, in order to keep the to-
tal annual operating expenses of the Portfolios Institutional Class Shares
from exceeding 1.00% of average daily net assets. Without waiving fees and
assuming expenses, the total annual operating expenses of the Balanced and
Value Equity Portfolios Institutional Class Shares for the fiscal year ended
October 31, 1996 would have been 2.15% and 5.16%, respectively, of average
daily net assets. The Fund will not reimburse the Adviser for advisory fees
waived or Portfolio expenses that the Adviser may bear on behalf of the
Portfolios for a given fiscal year.
1
<PAGE>
* The annualized Total Operating Expenses excludes the effect of expense off-
sets. If expense offsets were included, the annualized Total Operating Ex-
penses of the Balanced and Value Equity Portfolios Institutional Class Shares
would be 1.01% and 1.03%, respectively.
The above table shows various fees and expenses that an investor in the Port-
folio would bear directly or indirectly. The expenses and fees listed are based
on the Portfolios' operations during the fiscal year ended October 31, 1996,
except that Administrative fees have been related to reflect current fees. (See
"ADMINISTRATIVE FEES" herein and in the SAI.)
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Portfolio charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Portfolio Institutional Class
Shares................................... $10 $32 $55 $123
Value Equity Portfolio Institutional Class
Shares................................... $10 $32 $55 $123
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
NWQ Investment Management Company (the "Adviser"), an investment counseling
firm established in 1982, serves as investment adviser to the Portfolios. The
Adviser presently manages over $6.3 billion in assets for institutions and
high net worth individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment for each Portfolio is $2,500. The minimum for
subsequent investments is $100. Certain exceptions to the initial minimum in-
vestment amounts may be made by the officers of the Fund. (See "PURCHASE OF
SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will also distribute any
realized net capital gains annually. Distributions will be reinvested in each
Portfolio's shares unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agency pro-
vided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors should consider the following: (1) The Balanced Portfolio may invest
in securities rated lower than Baa by Moody's Investors Services, Inc. or BBB
by Standard & Poor's Corporation. These securities carry a high degree of
credit risk, and are considered speculative by the major credit rating agen-
cies and are sometimes referred to as "junk bonds". (See "INVESTMENT POLICIES
OF THE NWQ BALANCED PORTFOLIO."); (2) The fixed income securities held by the
Balanced Portfolio will be affected by general changes in interest rates that
may result in an increase or decreases in the value of the obligations held by
the Portfolio. The value of the securities held by the Portfolio can be ex-
pected to vary inversely with the changes in interest rates; as interest rates
decline, market value tends to increase and vice versa; (3) Each Portfolio may
use various investment practices including investing in repurchase agreements,
when-issued, forward delivery and delayed settlement securities and lending of
securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS SHARES
The following tables provide selected per share information for a share out-
standing throughout each period presented of the Portfolios' Institutional
Class Shares and is part of the Portfolios' Financial Statements, which are
included in the Portfolios' 1996 Annual Report to Shareholders. The Financial
Statements are incorporated into the Fund's SAI. The Portfolios' Financial
Statements have been audited by Price Waterhouse LLP. Their unqualified opin-
ion on the Financial Statements is also incorporated into the SAI. Please read
the following information in conjunction with the Portfolios' 1996 Annual Re-
port to Shareholders.
<TABLE>
<CAPTION>
BALANCED VALUE
PORTFOLIO EQUITY PORTFOLIO
------------------------------------- --------------------------------------
AUGUST 2, YEAR YEAR SEPTEMBER 21, YEAR YEAR
1994** TO ENDED ENDED 1994** TO ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1995 1996 1994 1995 1996
----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $ 9.84 $ 11.24 $10.00 $ 9.98 $ 11.65
------ ------ ------- ------ ------ -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.06 0.32 0.31 0.01 0.12 0.14
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.19) 1.40 1.21 (0.03) 1.65 2.49
------ ------ ------- ------ ------ -------
Total from Investment
Operations........... (0.13) 1.72 1.52 (0.02) 1.77 2.63
------ ------ ------- ------ ------ -------
DISTRIBUTIONS
Net Investment Income.. (0.03) (0.32) (0.30) -- (0.10) (0.14)
Net Realized Gain...... -- -- (0.07) -- -- (0.01)
------ ------ ------- ------ ------ -------
Total Distributions... (0.03) (0.32) (0.37) -- (0.10) (0.15)
------ ------ ------- ------ ------ -------
NET ASSET VALUE, END OF
PERIOD................. $ 9.84 $11.24 $ 12.39 $ 9.98 $11.65 $ 14.13
====== ====== ======= ====== ====== =======
TOTAL RETURN+........... (1.30)% 17.80 % 13.68 % (0.20)% 17.84 % 22.69 %
====== ====== ======= ====== ====== =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of
Period (Thousands).... $1,584 $5,334 $ 8,624 $ 253 $2,464 $ 3,283
Ratio of Expenses to
Average Net Assets.... 1.00 %* 1.04 %# 1.01 % 1.00 %* 1.21 %# 1.03 %
Ratio of Net Investment
Income to Average Net
Assets+............... 3.59 %* 3.30 % 2.79 % 1.36 %* 1.39 % 1.11 %
Portfolio Turnover
Rate.................. 1 % 31 % 31 % 0 % 4 % 25 %
Average Commission
Rate##................ N/A N/A $0.0717 N/A N/A $0.0705
Voluntary Waived Fees
and Expenses Assumed
by the Advisor Per
Share................. $ 0.21 $ 0.26 $ 0.14 $ 1.06 $ 0.82 $ 0.52
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... N/A 1.00 % 1.00 % N/A 1.00 % 1.00 %
</TABLE>
5
<PAGE>
- -----------
* Annualized.
** Commencement of Operations.
+ Total return would have been lower had the Advisor not waived and assumed
certain expenses during the periods.
# The amount shown for the year ended October 31, 1995 for a share outstand-
ing throughout the period does not accord with the aggregate net gains on
investments for that period because of the timing of sales and repurchase
of Portfolio shares in relation to fluctuating market value of the invest-
ments of the portfolio.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
INVESTMENT OBJECTIVES
The objective of the BALANCED PORTFOLIO is to achieve consistent, above-av-
erage returns with minimum risk to principal by investing primarily in a com-
bination of investment grade fixed income securities and common stocks of com-
panies with above-average statistical value in fundamentally attractive indus-
tries and which, in the Adviser's opinion, are undervalued at the time of pur-
chase.
The objective of the VALUE EQUITY PORTFOLIO is to achieve consistent, supe-
rior 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 the Adviser's opinion, are undervalued at
the time of purchase.
INVESTMENT POLICIES
THE BALANCED PORTFOLIO is designed to provide shareholders with a single in-
vestment portfolio which combines the Adviser's equity strategy, fixed income
strategy and active asset allocation decisions. The Adviser's asset allocation
discipline recognizes the advantage of varying the asset mix among asset clas-
ses and is neither limited to the return, nor subject to the risks, of a sin-
gle asset class. The allocation process focuses on expected returns of each
asset class relative to the other asset classes, monetary conditions, and the
economic outlook. The Adviser actively adjusts the mix of common stocks, bonds
and cash equivalents in a disciplined manner designed to maximize the Portfo-
lio's return and limit the volatility of that return.
The Portfolio intends to achieve its objective by investing in a diversified
portfolio of common stocks and investment grade fixed income securities. The
proportion of the Portfolio's assets invested in fixed income or common stocks
will vary as market conditions warrant. A typical asset mix for the Portfolio,
however, is expected to be 60% in common stocks, 30% in fixed income securi-
ties and 10%
6
<PAGE>
in cash and cash equivalents. However, the percentage of the Portfolio's as-
sets committed to different securities may range as follows: 30% to 75% in
common stocks, 25% to 50% in fixed income securities, and 0% to 45% in cash
and cash equivalents. The Portfolio will invest at least 25% of its assets in
fixed income senior securities.
The Adviser's selection process of common stocks for the Portfolio is de-
signed to identify securities which are undervalued and are within fundamen-
tally attractive industries. The Portfolio will invest in individual common
stocks, either listed on a national exchange or traded over-the-counter, of
companies with medium to large market capitalizations. However, up to 10% of
the total assets of the Portfolio may be invested in common stocks of compa-
nies with market capitalizations of less than $500 million. Additionally, the
Portfolio may invest up to 20% of its total assets in American Depositary Re-
ceipts ("ADRs"), described in more detail below. Common stocks are selected
using approaches identical to those implemented for the Value Equity Portfolio
described below.
The Adviser uses an active fixed income strategy seeking to benefit during
periods of declining interest rates by increasing investment exposure and ex-
tending security maturities. During a rising rate environment, maturities are
shortened and exposure decreased to avoid capital loss. Value is added through
actively adjusting portfolio duration. Average duration may range from one to
ten years and maturities may range from one to thirty years.
The Portfolio will invest in fixed income securities of primarily investment
grade which include securities of or guaranteed by the U.S. Government and its
agencies or instrumentalities, corporate bonds, mortgage-backed securities,
variable rate debt securities, asset-backed securities and various short-term
instruments as described under "OTHER INVESTMENT POLICIES." Investment grade
securities are considered to be those rated either Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or BBB by Standard
& Poor's Corporation ("S&P"). The Portfolio may purchase any other publicly or
privately placed unrated security which in the Adviser's opinion, is of equiv-
alent quality to securities rated investment grade. Securities rated Baa by
Moody's or BBB by S&P may possess speculative characteristics and may be more
sensitive to changes in the economy and the financial condition of issuers
than higher rated bonds. Mortgage-backed securities in which the Portfolio may
invest will either carry a guarantee from an agency of the U.S. Government or
a private issuer for the timely payment of principal. The Portfolio may also
invest up to 10% of its total assets in securities rated less than BBB by S&P
or Baa by Moody's. Securities rated below Baa by Moody's or BBB by S&P are
commonly referred to as "junk bonds."
It is the Adviser's intention that the Portfolio's fixed income investments
will be limited to the ratings categories described above. However, the Ad-
viser reserves the right to retain securities which are downgraded by one or
both of the rating
7
<PAGE>
agencies if, in the Adviser's judgement, the retention of the securities is
warranted. The SAI for the Portfolios contains a description of corporate bond
ratings.
THE VALUE EQUITY PORTFOLIO seeks to achieve its objective by investing at
least 65% of its total assets in common stocks of companies with above-average
statistical value which are in fundamentally attractive industries and which
in the Adviser's opinion are undervalued at the time of purchase. The Portfo-
lio may also invest in other equity-related securities consisting of convert-
ible bonds, convertible preferred stocks, rights and warrants. The Adviser
will select from a universe of 1100 companies of medium to large capitaliza-
tion. Companies with market capitalization under $500 million will be limited
to 10% of the Portfolio's total assets. Statistical measures are applied to
screen for the companies with the best value characteristics such as below av-
erage price-to-earnings and price-to-book ratios, above-average dividend yield
and strong financial stability. The process is differentiated from other val-
ue-oriented investment managers in the following ways: the use of normalized
earnings to value cyclical companies, a focus on quality of earnings, invest-
ment in relative value, and concentration in industries/sectors having strong
long-term fundamentals.
As part of the multi-disciplined approach to capturing value, the Adviser
strives to identify market sectors early in their cycle of fundamental im-
provement, investor recognition and market exploitation. Industry fundamentals
used in the decision making process are business trend analysis to analyze in-
dustry and company fundamentals for the impact of changing worldwide product
demand/supply, direction of inflation and interest rates, and
expansion/contraction of business cycles. Following this phase, approximately
200 companies that have above-average statistical value and are in a sector
identified as having positive fundamentals on a secular basis will be actively
followed by the Adviser. Company visits and interviews with management provide
the fundamental research to verify the value in these potential investments.
The Adviser utilizes in-house research capabilities in addition to Wall Street
and numerous independent firms for economic, industry and securities research.
The Portfolio will be concentrated in those industries with positive fundamen-
tals and likewise will minimize risk by avoiding industries with deteriorating
secular fundamentals.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased, if they pass the selection
process outlined above. The Portfolio may invest up to 20% of its assets in
shares of foreign based companies through sponsored ADRs which are U.S. domes-
tic securities representing ownership rights in foreign companies. (See "For-
eign Securities" in the SAI for a description of the risks involved.)
8
<PAGE>
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 15% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of
9
<PAGE>
interest. Under a repurchase agreement, the seller is also required to main-
tain the value of securities subject to the agreement at not less than 100% of
the repurchase price if such securities mature in less than one year. The Ad-
ministrator and the Adviser will mark to market daily the value of the securi-
ties purchased. The use of repurchase agreements involves certain risks. For
example, a default by the seller of the agreement may cause a Portfolio to ex-
perience a loss or delay in the liquidation of the collateral securing the re-
purchase agreement. The Portfolio might also incur disposition costs in liqui-
dating the collateral. While the Fund's management acknowledges these risks,
it is expected that they can be controlled through stringent security selec-
tion criteria and careful monitoring procedures. The Fund has received permis-
sion from the SEC to pool daily uninvested cash balances of the Fund's Portfo-
lios in order to invest in repurchase agreements on a joint basis. By entering
into joint repurchase agreements, a Portfolio may incur lower transaction
costs and earn higher rates of interest on joint repurchase agreements. Each
Portfolio's contribution would determine its return from a joint repurchase
agreement. (See "SHORT TERM INVESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, DELAYED SETTLEMENT AND FORWARD DELIVERY SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. Such transactions will be limited to
no more than 10% of the equity portion of each Portfolio's assets. "When-
issued" or "forward delivery" refers to securities whose terms and indenture
are available, and for which a market exists, but which are not available for
immediate delivery. When-issued and forward delivery transactions may be ex-
pected to occur a month or more before delivery is due. Delayed settlement is
a term used to describe settlement of a securities transaction in the second-
ary market which will occur sometime in the future. No payment or delivery is
made by the Portfolio until
10
<PAGE>
it receives payment or delivery from the other party to any of the above
transactions. The Portfolio will maintain a separate account of cash or liquid
securities at least equal to the value of purchase commitments until payment
is made. Such segregated securities will either mature or, if necessary, be
sold on or before the settlement date. Typically, no income accrues on securi-
ties purchased on a delayed delivery basis prior to the time delivery is made,
although a Portfolio may earn income on securities it has deposited in a seg-
regated account.
Each Portfolio engages in these types of purchases in order to buy securi-
ties that fit with its investment objectives at attractive prices--not to in-
crease its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for each Portfolio will approximate 50%. In addition to
Portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES" for more information on taxation). The Portfolios will not normally en-
gage in short-term trading, but each reserves the right to do so. The tables
set forth in "Financial Highlights" present the Portfolios' historical portfo-
lio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. The Portfolio will indirectly bear its proportionate share of any
management fees paid by an investment company in which it invests in addition
to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Fund's Directors
may change such policies without an affirmative vote of a majority of the out-
standing voting securities of the Portfolio, as defined in the 1940 Act.
11
<PAGE>
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of a single issuer
(other than obligations issued by or guaranteed as to principal and
interest by the U.S. government or any agency or instrumentality
thereof);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position;
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 10%
of the Portfolio's gross assets valued at the lower of market or cost,
and (ii) the Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The Portfolios' investment objectives and investment limitations (a), (b),
(d), (e) and (f)(i), set forth above, are fundamental and may be changed only
with the approval of the holders of a majority of the outstanding shares of
each Portfolio. If a percentage limitation on investment or utilization of as-
sets as set forth above is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value or total cost
of a Portfolio's assets will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of the Portfolios are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission, at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the
12
<PAGE>
Custodian. (See "VALUATION OF SHARES.") The required minimum initial invest-
ment for each Portfolio is $2,500. Certain exceptions may be made by the offi-
cers of the Fund.
Shares of the Portfolios may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase
or redemption of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or differ-
ent purchase and redemption conditions. Shareholders who are customers of
Service Agents should consult their service agent for information regarding
these fees and conditions. Amounts paid to Service Agents may include transac-
tion fees and/or service fees paid by the Fund from the Fund assets attribut-
able to the Service Agent, and which would not be imposed if shares of the
Portfolio were purchased directly from the Fund or the Distributor. Service
Agents may provide shareholder services to their customers that are not avail-
able to a shareholder dealing directly with the Fund. A salesperson and any
other person entitled to receive compensation for selling or servicing Portfo-
lio shares may receive different compensation with respect to one particular
class of shares over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent, Chase Global Funds Services Company, prior to the close of its business
day to receive that day's share price. Proper payment for the order must be
received by the Sub-Transfer Agent no later than the time when the Portfolio
is priced on the following business day. Service Agents are responsible to
their customers and the Fund for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it, together with a check pay-
able to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter
13
<PAGE>
receipt. Payment need not be converted into Federal Funds (monies credited to
the Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will ac-
cept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #02100-0021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check to the UAM Funds Service Center (payable to "UAM Funds") or by wiring
monies to the Custodian Bank using the instructions outlined above. When mak-
ing additional investments, be sure that your account number, account name,
and the name of the Portfolio to be purchased are specified on the check or
wire. Prior to wiring additional investments, notify the Fund by calling the
number on the cover of this prospectus. Mail orders should include, when pos-
sible, the "Invest by Mail" stub which accompanies any Fund confirmation
statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional
14
<PAGE>
shares will not be issued. Certificates for whole shares will not be issued
except at the written request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "VALUATION OF SHARES" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued in exchange for securities will be issued at net asset value determined
as of the same time. All dividends, interest, subscription, or other rights
pertaining to such securities shall become the property of the Portfolio and
must be delivered to the Fund by the investor upon receipt from the issuer.
Securities acquired through an in-kind purchase will be acquired for invest-
ment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange, such securities are eligible for in-
vestment by the Portfolio (current market quotations must be read-
ily available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are not subject to any restrictions upon their sale by
the Portfolio under the Securities Act of 1933, or otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation may realize a gain or loss for
Federal Income Tax purposes upon the exchange, depending upon the cost of the
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of either Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value next determined after receipt of the re-
demption request. No charge is made for redemptions. Any redemption may be
more or less than the purchase price of your shares depending on the market
value of the investment securities held by the Portfolio.
15
<PAGE>
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instruction
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
16
<PAGE>
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after re-
ceipt of the request or earlier if required under applicable law. The Fund may
suspend the right of redemption or postpone the date at times when both the
NYSE and Custodian Bank are closed, or under any emergency circumstances as
determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities so received in pay-
ment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM
17
<PAGE>
Funds Service Center for a copy of the Prospectus for the Portfolio(s) in
which you are interested. Exchanges can only be made with Portfolios that are
qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE". An ex-
change into another UAM Funds Portfolio is a sale of shares and may result in
a gain or loss for income tax purposes. The Fund may modify or terminate the
exchange privilege at any time.
VALUATION OF SHARES
Each Portfolio's net asset value per share is determined by dividing the
value of the Portfolio's assets, less any liabilities, by the total number of
shares outstanding. The net asset value per share is determined as of the
close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a U.S. securities exchange for which market quo-
tations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken
from the exchange where the security is primarily traded. Securities listed on
a foreign exchange are valued at their closing price. Unlisted equity securi-
ties and listed securities not traded on the valuation date for which market
quotations are readily available are valued not exceeding the current asked
prices nor less than the current bid prices. Quotations of foreign securities
in a foreign currency are converted to U.S. dollar equivalents. The converted
value is based upon the bid price of the foreign currency against U.S. dollars
quoted by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost when the Board of
Directors determines that amortized cost reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Fund's Board of Directors.
18
<PAGE>
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Dividends paid by a Portfolio with respect to Institutional
Class and Service Class Shares, to the extent any dividends are paid, will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that service fees, distribution charges and any incre-
mental transfer agency costs relating to Service Class Shares will be borne
exclusively by that class.
Each Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Annual Report is available without charge. To receive an annual report,
contact the UAM Funds Service Center at the address or phone number on the
cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolios will normally distribute them
annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares unless the Fund is notified in writing that the
shareholder elects to receive distributions in cash.
19
<PAGE>
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
NWQ Investment Management Company was founded in 1982 and is located at 655
South Hope Street, 11th Floor, Los Angeles, California 90017. The Adviser is a
wholly-owned subsidiary of United Asset Management Corporation ("UAM") and
provides investment management services to institutional and high net worth
individuals. As of the date of this Prospectus, the Adviser had over $5.6 bil-
lion in assets under management.
20
<PAGE>
Under Investment Advisory Agreements dated as of January 24, 1994, the Ad-
viser manages the investment and reinvestment of the assets of the Portfolios.
The Adviser must adhere to the stated investment objectives and policies of
the Portfolios, and is subject to the control and supervision of the Fund's
Board of Directors.
An investment policy committee is responsible for the day-to-day management
of each Portfolio's investments. The following investment professionals are
the members of this committee who collectively make the Portfolios' investment
decisions:
DAVID A. POLAK, CFA, is the founder and has been President and Chief Invest-
ment Officer/Portfolio Manager of NWQ Investment Management Company from 1982
to the present. From 1979 to 1982, Mr. Polak was Chief Investment
Strategist/Portfolio Manager of Argus Investment Management Inc. and, from
1968 to 1979, he was a Portfolio Manager at Beneficial Standard Investment
Management. Mr. Polak is a graduate of Massachusetts Institute of Technology
(BS), Rensselaer Polytechnical Institute (MS) and the University of California
at Los Angeles (MBA).
EDWARD C. FRIEDEL, CFA, has been a Managing Director and Investment
Strategist/Portfolio Manager of NWQ Investment Management Company from 1983 to
the present. From 1971 to 1983, Mr. Friedel was a Portfolio Manager at Benefi-
cial Standard Investment Management. Mr. Friedel is a graduate of the Univer-
sity of California at Berkeley (BS) and Stanford University (MBA).
JAMES H. GALBREATH, CFA, has been a Managing Director and Investment
Strategist/Portfolio Manager at NWQ Investment Management Company from 1987 to
the present. From 1983 to 1987, Mr. Galbreath was President of Galbreath Fi-
nancial and, from 1974 to 1983, he was a Partner and Portfolio Manager at Ste-
phenson & Company. Mr. Galbreath is a graduate of the University of Denver (BS
and BA).
PHYLLIS G. THOMAS, CFA, has been a Managing Director and Investment
Strategist/Portfolio Manager at NWQ Investment Management Company from 1990 to
the present. From 1987 to 1990, Ms. Thomas was a Portfolio Manager with The
Boston Company Institutional Investors, Inc. and, from 1980 to 1987, she was a
Portfolio Manager with Beneficial Standard Investment Management. Ms. Thomas
is a graduate of Northern Illinois University (BS) and the University of Cali-
fornia at Los Angeles (MBA).
As compensation for its services as an Adviser each Portfolio pays the Ad-
viser an annual fee in monthly installments, calculated by applying the fol-
lowing annual percentage rates to each Portfolio's average daily net assets
for the month:
<TABLE>
<S> <C>
Balanced Portfolio.................................................... 0.70%
Value Equity Portfolio................................................ 0.70%
</TABLE>
21
<PAGE>
The Adviser may waive its advisory fees or assume operating expenses other-
wise payable by a Portfolio in order to reduce the Portfolio's expense ratio.
Until February 28, 1998, the Adviser has agreed to keep the total annual oper-
ating expenses of the Portfolios' Institutional Class Shares from exceeding
1.00% of average daily net assets. The Fund will not reimburse the Adviser for
any advisory fees which are waived or Portfolio expenses which the Adviser may
bear on behalf of the Portfolios for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares of a Port-
folio. Payments made for any of these purposes may be made from the paying
entity's revenues, its profits or any other source available to it. When such
service arrangements are in effect, they are made generally available to all
qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADVISER'S HISTORICAL PERFORMANCE
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, poli-
cies and strategies as those of the Balanced Portfolio. The investment returns
of the Balanced Portfolio may differ from those of the separately managed ac-
counts because such separately managed accounts may have fees and expenses
that differ from those of the Balanced Portfolio. Further, the separately man-
aged accounts are not subject to investment limitations, diversification re-
quirements and other restrictions imposed by the Investment Company Act of
1940 and Internal Revenue Code; such conditions, if applicable, may have low-
ered the returns for separately managed accounts. The results presented are
not intended to predict or suggest the return to be experienced by the Portfo-
lio or the return an investor might achieve by investing in the Balanced Port-
folio.
22
<PAGE>
NWQ INVESTMENT MANAGEMENT COMPANY--BALANCED STRATEGY
(PERCENTAGE RETURNS OF NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
NWQ
INVESTMENT
MANAGEMENT 60/30/10
YEARS THROUGH: COMPANY INDEX
- -------------- ---------- --------
<S> <C> <C>
1982........................................................ 33.61% 23.62%
1983........................................................ 16.65% 16.72%
1984........................................................ 7.29% 9.43%
1985........................................................ 24.50% 26.14%
1986........................................................ 25.17% 16.78%
1987........................................................ 5.57% 5.80%
1988........................................................ 11.76% 12.91%
1989........................................................ 22.05% 24.01%
1990........................................................ 0.89% 1.56%
1991........................................................ 23.07% 23.68%
1992........................................................ 3.74% 7.26%
1993........................................................ 16.75% 9.70%
1994........................................................ (3.25)% 0.21%
1995........................................................ 27.77% 28.46%
9 Months to 9/30/96......................................... 8.66% 8.36%
Annualized.................................................. 14.72% 14.22%
Cumulative.................................................. 658.00% 610.36%
Fourteen-Year Mean.......................................... 15.40% 14.73%
Value of $1 invested during (1/1/82-9/30/96)................ $7.58 $7.10
</TABLE>
Notes:
1. The ANNUALIZED RETURN is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods set
forth by the Association for Investment Management Research, the Bank Ad-
ministration Institute, and the Investment Counsel Association of America.
Market Value of the account was the sum of the account's total assets, in-
cluding cash, cash equivalents, short term investments, and securities val-
ued at current market prices.
2. The CUMULATIVE RETURN means that $1 invested in the composite account on
January 1, 1982 had grown to $7.58 by September 30, 1996.
3. The FOURTEEN-YEAR MEAN is the arithmetic average of the annual returns for
the calendar years listed.
4. The 60/30/10 INDEX is a weighted index comprised of 60% S&P 500, 30% Lehman
Bros. Gov. Corp., 10% 3 Mo. Treasury Bills and is an unmanaged index which
assumes reinvestment of dividends and is generally considered representa-
tive of securities similar to those invested in by the Adviser for the pur-
pose of the composite performance numbers set forth above.
5. The Adviser's average annual management fee over the period shown (1/1/82-
9/30/96) was .79% or 79 basis points. During the period, fees on the Advis-
er's individual accounts ranged from .27% to 1.00% (27 basis points to 100
basis points). Net returns to investors vary depending on the management
fee.
23
<PAGE>
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, poli-
cies and strategies as those of the Value Equity Portfolio. The investment re-
turns of the Value Equity Portfolio may differ from those of the separately
managed accounts because such separately managed accounts may have fees and
expenses that differ from those of the Value Equity Portfolio. Further, the
separately managed accounts are not subject to investment limitations, diver-
sification requirements and other restrictions imposed by the Investment Com-
pany Act of 1940 and Internal Revenue Code; such conditions, if applicable,
may have lowered the returns for separately managed accounts. The results pre-
sented are not intended to predict or suggest the return to be experienced by
the Portfolio or the return an investor might achieve by investing in the
Value Equity Portfolio.
NWQ INVESTMENT MANAGEMENT COMPANY--VALUE EQUITY STRATEGY
(PERCENTAGE RETURNS OF NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
NWQ
INVESTMENT
MANAGEMENT S&P
YEARS THROUGH: COMPANY 500
- -------------- ---------- ------
<S> <C> <C>
1982........................................................ 45.24% 21.54%
1983........................................................ 22.06% 22.55%
1984........................................................ 7.05% 6.27%
1985........................................................ 29.70% 31.73%
1986........................................................ 26.59% 18.66%
1987........................................................ (0.24)% 5.25%
1988........................................................ 19.51% 16.61%
1989........................................................ 33.33% 31.69%
1990........................................................ (2.21)% (3.10)%
1991........................................................ 29.54% 30.47%
1992........................................................ 1.31% 7.62%
1993........................................................ 17.50% 10.08%
1994........................................................ (.79)% 1.32%
1995........................................................ 30.91% 37.58%
9 Months to 9/30/96......................................... 13.16% 13.50%
Annualized.................................................. 17.64% 16.47%
Cumulative.................................................. 997.70% 847.60%
Fourteen-Year Mean.......................................... 18.54% 17.02%
Value of $1 invested during (1/1/82-9/30/96)................ $10.98 $9.48
</TABLE>
Notes:
1. The ANNUALIZED RETURN is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods set
forth by the Association for Investment Management Research, the Bank Admin
24
<PAGE>
istration Institute, and the Investment Counsel Association of America. Mar-
ket Value of the account was the sum of the account's total assets, including
cash, cash equivalents, short term investments, and securities valued at cur-
rent market prices.
2. The CUMULATIVE RETURN means that $1 invested in the composite account on
January 1, 1982 had grown to $10.98 by September 30, 1996.
3. The FOURTEEN-YEAR MEAN is the arithmetic average of the annual returns for
the calendar years listed.
4. The S&P 500 is an unmanaged index which assumes reinvestment of dividends
and is generally considered representative of securities similar to those
invested in by the Adviser for the purpose of the composite performance num-
bers set forth above.
5. The Adviser's average annual management fee over the period shown (1/1/82-
9/30/96) was 1.00% or 100 basis points. During the period, fees on the Ad-
viser's individual accounts were 100 basis points on all accounts. Net re-
turns to investors vary depending on the management fee.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
trative, fund accounting, dividend disbursing and transfer agent services pro-
vided to the Fund and its Portfolios. UAMFSI's principal office is located at
211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of these
services to Chase Global Funds Services Company ("CGFSC"), an affiliate of The
Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April 15, 1996.
CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of ag-
gregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Balanced Portfolio.................................................... 0.06%
Value Equity Portfolio................................................ 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
25
<PAGE>
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent of the
Fund, agrees to use its best efforts as sole distributor of Fund shares. The
Distributor does not receive any fee or other compensation under the Agreement
with respect to the Portfolios' Institutional Class Shares offered in this
Prospectus. The Agreement continues in effect as long as it is approved at
least annually by the Fund's Board of Directors. Those approving the Agreement
must include a majority of Directors who are not parties to the Agreement or
interested persons of any such party. The Agreement provides that the Fund
will bear costs of registration of its shares with the SEC and various states
as well as the printing of its prospectuses, its SAIs and its reports to
shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Portfolios. These Agreements direct the Adviser to use its best efforts to ob-
tain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of the research, statistical and
pricing services they provide to the Portfolios in addition to required Ad-
viser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients.
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
26
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Board of Directors to issue three billion shares of common
stock, with a $.001 par value. The Directors have the power to designate one
or more series ("Portfolios") or classes of shares of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. At its discretion, the Board of Direc-
tors may create additional Portfolios and Classes of shares of the Fund.
The shares of each Portfolio are fully paid and nonassessable and have no
preference as to conversion, exchange, dividends, retirement or other features
and have no pre-emptive rights. They have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election
of Directors can elect 100% of the Directors. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held), then standing in his name on the books of the Fund. As of December 6,
1996, Nabank & Co., Tulsa, OK held of record 56% of the outstanding shares of
the NWQ Balanced Portfolio Institutional Class Shares for which ownership is
disclaimed or presumed disclaimed; Hartnat & Co., Boston, MA held of record
25.7% of the outstanding shares of the NWQ Balanced Portfolio Institutional
Service Class Shares for which ownership is disclaimed or presumed disclaimed;
and Charles Schwab & Co., Inc., San Francisco, CA held of record 51.2% of the
outstanding shares of the NWQ Value Equity Portfolio Institutional Class
Shares for which ownership is disclaimed or presumed disclaimed. The persons
or organizations owning 25% or more of the outstanding shares of a Portfolio
may be presumed to "control" (as that term is defined in the 1940 Act) such
Portfolio. As a result, those persons or organizations could have the ability
to vote a majority of the shares of the Portfolio on any matter requiring the
approval of shareholders of such Portfolio. Both Institutional Class and In-
stitutional Service Class Shares represent an interest in the same assets of a
Portfolio. Service Class Shares bear certain expenses related to shareholder
servicing, may bear expenses related to the distribution of such shares and
have exclusive voting rights with respect to matters relating to such distri-
bution expenditures. Information about the Service Class Shares of the Portfo-
lios is available upon request by contacting the UAM Funds Service Center. An-
nual meetings will not be held except as required by the 1940 Act and other
applicable laws. The Fund has undertaken that its Directors will call a meet-
ing of shareholders if such a meeting is requested in writing by the holders
of not less than 10% of the outstanding shares of the Fund. The Fund will as-
sist shareholder communications in such matters.
27
<PAGE>
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or phone number listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
28
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee U.S. Government Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
29
<PAGE>
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
30
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
NWQ Investment Management Company
655 South Hope Street, 11th Floor
Los Angeles, California 90017
(213) 624-6700
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
NWQ Balance Portfolio &
NWQ Value Equity Portfolio
Institutional Service
Class Shares
P R O S P E C T U S
January 3, 1997
<PAGE>
LOGO
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
NWQ BALANCED PORTFOLIO
&
NWQ VALUE EQUITY PORTFOLIO
INSTITUTIONAL SERVICE CLASS SHARES
INVESTMENT ADVISER: NWQ INVESTMENT MANAGEMENT COMPANY
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company,
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios"), each of which has a different investment objective and poli-
cies. The Portfolios offered by this Prospectus presently offer two separate
classes of shares: Institutional Class Shares and Institutional Service Class
Shares ("Service Class Shares"). Shares of each class represent equal, pro
rata interests in their respective Portfolios and accrue dividends in the same
manner, except that Service Class Shares bear fees payable by that class (at a
rate of .40% per annum) to financial institutions for services they provide to
shareholders of such shares. The securities offered hereby are shares of the
Service Class Shares of two diversified Portfolios of the Fund managed by NWQ
Investment Management Company.
NWQ BALANCED PORTFOLIO. The objective of the NWQ Balanced Portfolio (the
"Balanced Portfolio") is to achieve consistent, above-average returns with
minimum risk to principal by investing primarily in a combination of invest-
ment grade fixed income securities and common stocks of companies with above-
average statistical value which are in fundamentally attractive industries and
which, in the Adviser's opinion, are undervalued at the time of purchase.
NWQ VALUE EQUITY PORTFOLIO. The objective of the NWQ Value Equity Portfolio
(the "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 indus-
tries and which, in the Adviser's opinion, are undervalued at the time of pur-
chase.
There can be no assurance that either of the Portfolios will achieve their
stated objective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 6
Investment Policies........................................................ 6
Other Investment Policies.................................................. 8
Investment Limitations..................................................... 11
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 15
Service and Distribution Plans............................................. 17
Valuation of Shares........................................................ 20
Performance Calculations................................................... 21
Dividends, Capital Gains Distributions and Taxes........................... 22
Investment Adviser......................................................... 23
Adviser's Historical Performance........................................... 24
Administrative Services.................................................... 27
Distributor................................................................ 28
Portfolio Transactions..................................................... 28
General Information........................................................ 29
UAM Funds--Service Class Shares............................................ 31
</TABLE>
<PAGE>
NWQ INSTITUTIONAL SERVICE CLASS
FUND EXPENSES
The following table illustrates the expenses and fees that shareholders of
the Portfolios' Service Class Shares would incur. Transaction fees may be
charged if a broker-dealer or other financial intermediary deals with the Fund
on your behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
BALANCED VALUE EQUITY
PORTFOLIO SERVICE PORTFOLIO SERVICE
CLASS SHARES CLASS SHARES
----------------- -----------------
<S> <C> <C>
Sales Load Imposed on Purchases........... NONE NONE
Sales Load Imposed on Reinvested Divi-
dends................................... NONE NONE
Deferred Sales Load....................... NONE NONE
Redemption Fees........................... NONE NONE
Exchange Fees............................. NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
BALANCED VALUE EQUITY
PORTFOLIO SERVICE PORTFOLIO SERVICE
CLASS SHARES CLASS SHARES
----------------- -----------------
<S> <C> <C>
Investment Advisory Fees.................. 0.70 %+ 0.70 %+
Administrative Fees....................... 0.84 % 3.14 %
12b-1 Fees (Including Shareholder
Servicing Fees)**....................... 0.40 % 0.40 %
Other Expenses............................ 0.61 % 1.99 %
Advisory Fees Waived and Expenses
Assumed................................. (1.15)% (4.83)%
Total Operating Expenses (After Fee
Waivers Expenses Assumed)............... 1.40 %+* 1.40 %+*
</TABLE>
- -----------
+ Until February 28, 1998, the Adviser has voluntarily agreed to waive all or
part of its advisory fee for each Portfolio and to assume operating ex-
penses otherwise payable by the Portfolios, if necessary, in order to keep
the total annual operating expenses for the Balanced and Value Equity Port-
folios Service Class Shares from exceeding 1.40% of average daily net as-
sets. It is estimated that without waiving fees and assuming expenses, the
total annual operating expenses for the Balanced and the Value Equity Port-
folios Service Class Shares for the fiscal year ended October 31, 1996
would have been 2.55% and 6.25%, respectively, of average daily net assets.
The Fund will not reimburse the Adviser for advisory fees waived or ex-
penses that the Adviser may bear on behalf of the Portfolios for a given
fiscal year.
1
<PAGE>
* The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, the annualized Total Operating Ex-
penses of the Balanced Portfolio's Service Class Shares would be 1.41%.
Value Equity Portfolio Service Class is not yet operational.
** The Service Class Shares may bear service fees of 0.25% and distribution
fees and expenses of up to 0.15%. Long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. (See "SERVICE
AND DISTRIBUTION PLANS.")
The table above shows various fees and expenses an investor would bear di-
rectly or indirectly. The expenses and fees illustrated above are based on the
operations of the Balanced and Value Equity Portfolios Institutional Class
Shares during the fiscal year ended October 31, 1996 except that such informa-
tion has been restated to reflect 12b-1 fees and current administrative fees.
The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Portfolios charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Portfolio Service Class Shares.... $14 $45 $77 $168
Value Equity Portfolio Service Class
Shares................................... $14 $45 * *
</TABLE>
- -----------
* As the Value Equity Portfolio Service Class is not yet operational the Fund
has not projected expenses beyond the three year period shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
NWQ Investment Management Company (the "Adviser"), an investment counseling
firm established in 1982, serves as investment adviser to the NWQ Portfolios.
The Adviser presently manages $6.3 billion in assets for institutions and high
net worth individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment for each Portfolio is $2,500. The minimum for
subsequent investments is $100. Certain exceptions to the initial minimum in-
vestment amounts may be made by the officers of the Fund. (See "PURCHASE OF
SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will also distribute any
realized net capital gains annually. Distributions will be reinvested in each
Portfolio's shares unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agency pro-
vided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors should consider the following: (1) The Balanced Portfolio may invest
in securities rated lower than Baa by Moody's Investors Services, Inc. or BBB
by Standard & Poor's Corporation. These securities carry a high degree of
credit risk, and are considered speculative by the major credit rating agen-
cies and are sometimes referred to as "junk bonds". (See "INVESTMENT POLICIES
OF THE NWQ BALANCED PORTFOLIO."); (2) The fixed income securities held by the
Balanced Portfolio will be affected by general changes in interest rates that
may result in an increase or decrease in the value of the obligations held by
the Portfolio. The value of the securities held by the Portfolio can be ex-
pected to vary inversely with the changes in interest rates; as interest rates
decline, market value tends to increase and vice versa; (3) Each Portfolio may
use various investment practices including investing in repurchase agreements,
when-issued, forward delivery and delayed settlement securities and lending of
securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
SERVICE CLASS SHARES
The following tables provide selected per share information for a share out-
standing throughout each period presented of the Portfolios' Service Class
Shares and is part of the Portfolios' Financial Statements, which are included
in the Portfolios' 1996 Annual Report to Shareholders. The Financial State-
ments are incorporated into the Fund's SAI. The Portfolios' Financial State-
ments have been audited by Price Waterhouse LLP. Their unqualified opinion on
the Financial Statements is also incorporated into the SAI. Please read the
following information in conjunction with the Portfolios' 1996 Annual Report
to Shareholders. The Value Equity Portfolio Service Class is not yet opera-
tional.
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
INSTITUTIONAL SERVICE
CLASS SHARES
---------------------
JANUARY 22, 1996**
TO
OCTOBER 31, 1996
---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 11.57
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................. 0.21
Net Realized and Unrealized Gain (Loss) on
Investments.......................................... 0.78
-------
Total from Investment Operations..................... 0.99
-------
DISTRIBUTIONS
Net Investment Income.................................. (0.19)
Net Realized Gain...................................... --
-------
Total Distributions.................................. (0.19)
-------
NET ASSET VALUE, END OF PERIOD........................... $ 12.37
=======
TOTAL RETURN+............................................ 8.60%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).................. $19,999
Ratio of Expenses to Average Net Assets................ 1.41%*
Ratio of Net Investment Income to Average Net Assets... 2.39%*
Portfolio Turnover Rate................................ 31%
Average Commission Rate#............................... $0.0717
Voluntary Waived Fees and Expenses Assumed by the
Advisor Per Share.................................... $0.09
Ratio of Expenses to Average Net Assets Including
Expense Offsets...................................... 1.40%*
</TABLE>
- -----------
* Annualized.
** Initial offering of Institutional Service Class shares.
+ Total return would have been lower had the Adviser not waived and assumed
certain expenses during the periods.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose their average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
INVESTMENT OBJECTIVES
The objective of the BALANCED PORTFOLIO is to achieve consistent, above-av-
erage returns with minimum risk to principal by investing primarily in a com-
bination of investment grade fixed income securities and common stocks of com-
panies with above-average statistical value in fundamentally attractive indus-
tries and which, in the Adviser's opinion, are undervalued at the time of pur-
chase.
The objective of the VALUE EQUITY PORTFOLIO is to achieve consistent, supe-
rior 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 the Adviser's opinion, are undervalued at
the time of purchase.
INVESTMENT POLICIES
THE BALANCED PORTFOLIO is designed to provide shareholders with a single in-
vestment portfolio which combines the Adviser's equity strategy, fixed income
strategy and active asset allocation decisions. The Adviser's asset allocation
discipline recognizes the advantage of varying the asset mix among asset clas-
ses and is neither limited to the return, nor subject to the risks, of a sin-
gle asset class. The allocation process focuses on expected returns of each
asset class relative to the other asset classes, monetary conditions, and the
economic outlook. The Adviser actively adjusts the mix of common stocks, bonds
and cash equivalents in a disciplined manner designed to maximize the Portfo-
lio's return and limit the volatility of that return.
The Portfolio intends to achieve its objective by investing in a diversified
portfolio of common stocks and investment grade fixed income securities. The
proportion of the Portfolio's assets invested in fixed income or common stocks
will vary as market conditions warrant. A typical asset mix for the Portfolio,
however, is expected to be 60% in common stocks, 30% in fixed income securi-
ties and 10% in cash and cash equivalents. However, the percentage of the
Portfolio's assets committed to different securities may range as follows: 30%
to 75% in common stocks, 25% to 50% in fixed income securities, and 0% to 45%
in cash and cash equivalents. The Portfolio will invest at least 25% of its
assets in fixed income senior securities.
The Adviser's selection process of common stocks for the Portfolio is de-
signed to identify securities which are undervalued and are within fundamen-
tally attractive industries. The Portfolio will invest in individual common
stocks, either listed on a national exchange or traded over-the-counter, of
companies with medium to large market capitalizations. However, up to 10% of
the total assets of the Portfolio may be invested in common stocks of compa-
nies with market capitalizations of less than $500 million. Additionally, the
Portfolio may invest up to 20%
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<PAGE>
of its total assets in American Depositary Receipts ("ADRs"), described in
more detail below. Common stocks are selected using approaches identical to
those implemented for the Value Equity Portfolio described below.
The Adviser uses an active fixed income strategy seeking to benefit during
periods of declining interest rates by increasing investment exposure and ex-
tending security maturities. During a rising rate environment, maturities are
shortened and exposure decreased to avoid capital loss. Value is added through
actively adjusting portfolio duration. Average duration may range from one to
ten years and maturities may range from one to thirty years.
The Portfolio will invest in fixed income securities of primarily investment
grade which include securities of or guaranteed by the U.S. Government and its
agencies or instrumentalities, corporate bonds, mortgage-backed securities,
variable rate debt securities, asset-backed securities and various short-term
instruments as described under "OTHER INVESTMENT POLICIES." Investment grade
securities are considered to be those rated either Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or BBB by Standard
& Poor's Corporation ("S&P"). The Portfolio may purchase any other publicly or
privately placed unrated security which in the Adviser's opinion, is of equiv-
alent quality to securities rated investment grade. Securities rated Baa by
Moody's or BBB by S&P may possess speculative characteristics and may be more
sensitive to changes in the economy and the financial condition of issuers
than higher rated bonds. Mortgage-backed securities in which the Portfolio may
invest will either carry a guarantee from an agency of the U.S. Government or
a private issuer for the timely payment of principal. The Portfolio may also
invest up to 10% of its total assets in securities rated less than BBB by S&P
or Baa by Moody's. Securities rated below Baa by Moody's or BBB by S&P are
commonly referred to as "junk bonds."
It is the Adviser's intention that the Portfolio's fixed income investments
will be limited to the ratings categories described above. However, the Ad-
viser reserves the right to retain securities which are downgraded by one or
both of the rating agencies if, in the Adviser's judgement, the retention of
the securities is warranted. The SAI for the Portfolios contains a description
of corporate bond ratings.
THE VALUE EQUITY PORTFOLIO seeks to achieve its objective by investing at
least 65% of its total assets in common stocks of companies with above-average
statistical value which are in fundamentally attractive industries and which
in the Adviser's opinion are undervalued at the time of purchase. The Portfo-
lio may also invest in other equity-related securities consisting of convert-
ible bonds, convertible preferred stocks, rights and warrants. The Adviser
will select from a universe of 1100 companies of medium to large capitaliza-
tion. Companies with market capitalization under $500 million will be limited
to 10% of the Portfolio's total assets. Statistical measures are applied to
screen for the companies with the best value characteristics such as below av-
erage price-to-earnings and price-to-book ratios,
7
<PAGE>
above-average dividend yield and strong financial stability. The process is
differentiated from other value-oriented investment managers in the following
ways: the use of normalized earnings to value cyclical companies, a focus on
quality of earnings, investment in relative value, and concentration in
industries/sectors having strong long-term fundamentals.
As part of the multi-disciplined approach to capturing value, the Adviser
strives to identify market sectors early in their cycle of fundamental im-
provement, investor recognition and market exploitation. Industry fundamentals
used in the decision making process are business trend analysis to analyze in-
dustry and company fundamentals for the impact of changing worldwide product
demand/supply, direction of inflation and interest rates, and
expansion/contraction of business cycles. Following this phase, approximately
200 companies that have above-average statistical value and are in a sector
identified as having positive fundamentals on a secular basis will be actively
followed by the Adviser. Company visits and interviews with management provide
the fundamental research to verify the value in these potential investments.
The Adviser utilizes in-house research capabilities in addition to Wall Street
and numerous independent firms for economic, industry and securities research.
The Portfolio will be concentrated in those industries with positive fundamen-
tals and likewise will minimize risk by avoiding industries with deteriorating
secular fundamentals.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, shares of foreign based
companies may be purchased if they pass the selection process outlined above.
The Portfolio may invest up to 20% of its assets in shares of foreign based
companies through sponsored ADRs which are U.S. domestic securities represent-
ing ownership rights in foreign companies. (See "Foreign Securities" in the
SAI for a description of the risks involved.)
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calen
8
<PAGE>
dar days will not exceed 15% of the total assets of a Portfolio. Each Portfo-
lio will not invest in any security issued by a commercial bank unless (i) the
bank has total assets of at least $1 billion, or the equivalent in other cur-
rencies, (ii) in the case of U.S. banks, it is a member of the Federal Deposit
Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price if such securities mature in less than one year.
The Administrator and the Adviser will mark to market daily the value of the
securities purchased. The use of repurchase agreements involves certain risks.
For example, a default by the seller of the agreement may cause a Portfolio to
experience a loss or delay in the liquidation of the collateral securing the
repurchase agreement. The Portfolio might also incur disposition costs in liq-
uidating the collateral. While the Fund's management acknowledges these risks,
it is expected that they can be controlled through stringent security selec-
tion criteria and careful monitoring procedures. The Fund has received permis-
sion from the SEC to pool daily uninvested cash balances of the Fund's Portfo-
lios in order to invest in repurchase agreements on a joint basis. By entering
into joint repurchase agreements, a Portfolio may incur lower transactions
costs and earn higher rates of interest on joint repurchase agreements. Each
Portfo
9
<PAGE>
lio's contribution would determine its return from a joint repurchase agree-
ment. (See "SHORT TERM INVESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, DELAYED SETTLEMENT AND FORWARD DELIVERY SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. Such transactions will be limited to
no more than 10% of the equity portion of each Portfolio's assets. "When-
issued" or "forward delivery" refers to securities whose terms and indenture
are available, and for which a market exists, but which are not available for
immediate delivery. When-issued and forward delivery transactions may be ex-
pected to occur a month or more before delivery is due. Delayed settlement is
a term used to describe settlement of a securities transaction in the second-
ary market which will occur sometime in the future. No payment or delivery is
made by the Portfolio until it receives payment or delivery from the other
party to any of the above transactions. The Portfolio will maintain a separate
account of cash or liquid securities at least equal to the value of purchase
commitments until payment is made. Such segregated securities will either ma-
ture or, if necessary, be sold on or before the settlement date. Typically, no
income accrues on securities purchased on a delayed delivery basis prior to
the time delivery is made, although a Portfolio may earn income on securities
it has deposited in a segregated account.
Each Portfolio engages in these types of purchases in order to buy securi-
ties that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
10
<PAGE>
PORTFOLIO TURNOVER
Portfolio turnover for each Portfolio will approximate 50%. In addition to
Portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES" for more information on taxation.) The Portfolios will not normally en-
gage in short-term trading, but each reserves the right to do so. The tables
set forth in "Financial Highlights" present the Portfolios' historical portfo-
lio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. The Portfolio will indirectly bear its proportionate share of any
management fees paid by an investment company in which it invests in addition
to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Fund's Directors
may change such policies without an affirmative vote of a majority of the out-
standing voting securities of a Portfolio, as defined in the 1940 Act.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of a single issuer
(other than obligations issued by or guaranteed as to principal and
interest by the U.S. government or any agency or instrumentality
thereof);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
11
<PAGE>
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position;
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 10%
of the Portfolio's gross assets valued at the lower of market or cost,
and (ii) the Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The Portfolios' investment objectives and investment limitations (a), (b),
(d), (e) and (f)(i), set forth above, are fundamental and may be changed only
with the approval of the holders of a majority of the outstanding shares of
each Portfolio. If a percentage limitation on investment or utilization of as-
sets as set forth above is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value or total cost
of a Portfolio's assets will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares may be purchased through UAM Fund Distributors, Inc. (the "Distribu-
tor") without a sales commission, at the net asset value per share next deter-
mined after an order is received by the Fund or the designated Service Agent.
(See "SERVICE AND DISTRIBUTION PLANS" and "VALUATION OF SHARES.") The required
minimum initial investment for each Portfolio is $2,500. Certain exceptions
may be determined by the officers of the Fund.
The Portfolios issue two classes of shares: Institutional Class and Service
Class. The two classes of shares each represent interests in the same portfo-
lio of investments, have the same rights and are identical in all respects,
except that the Service Class Shares offered by this Prospectus bear share-
holder servicing ex
12
<PAGE>
penses and distribution plan expenses, and have exclusive voting rights with
respect to the Rule 12b-1 Distribution Plan pursuant to which the distribution
fee may be paid. The net income attributable to Service Class Shares and the
dividends payable on Service Class Shares will be reduced by the amount of the
shareholder servicing and distribution fees; accordingly, the net asset value
of the Service Class Shares will be reduced by such amount to the extent the
Portfolio has undistributed net income.
Some Service Agents may also impose additional or different conditions or
other account fees on the purchase and redemption of Portfolio shares, which
are not subject to the Rule 12b-1 Service and Distribution Plans, and may in-
clude transaction fees and/or service fees paid by the Fund from the Fund as-
sets attributable to the Service Agent. It is possible that these fees would
not be imposed if shares of the Portfolio were purchased directly from the
Fund or the Distributor. Service Agents may provide shareholder services to
their customers that are not available to a shareholder dealing directly with
the Fund. Each Service Agent is responsible for transmitting to its customers
a schedule of any such fees and information regarding any additional or dif-
ferent purchase and redemption conditions. Shareholders who are customers of
Service Agents should consult their Service Agent for information regarding
fees and conditions. A salesperson and any other person entitled to receive
compensation for selling or servicing Portfolio shares may receive different
compensation with respect to one particular class of shares over another in
the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent, Chase Global Funds Services Company, prior to the close of its business
day to receive that day's share price. Proper payment for the order must be
received by the Sub-Transfer Agent no later than the time when the Portfolio
is priced on the following business day. Service Agents are responsible to
their customers and the Fund for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it, together with a check pay-
able to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
13
<PAGE>
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment need not be converted into Federal Funds (monies credited
to the Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will
accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #0210-00021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check to the UAM Funds Service Center (payable to "UAM Funds") or by wiring
monies to the Custodian Bank using the instructions outlined above. When mak-
ing additional investments, be sure that your account number, account name,
and the name of the Portfolio to be purchased are specified on the check or
wire. Prior to wiring additional investments, notify the Fund by calling the
number on the cover of this prospectus. Mail orders should include, when pos-
sible, the "Invest by Mail" stub which accompanies any Fund confirmation
statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when,
14
<PAGE>
in the judgment of management, such suspension or rejection is in the best in-
terests of the Fund. Purchases of a Portfolio's shares will be made in full
and fractional shares of the Portfolio calculated to three decimal places.
Certificates for fractional shares will not be issued. Certificates for whole
shares will not be issued except at the written request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "VALUATION OF SHARES" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued in exchange for securities will be issued at net asset value determined
as of the same time. All dividends, interest, subscription, or other rights
pertaining to such securities shall become the property of the Portfolio and
must be delivered to the Fund by the investor upon receipt from the issuer.
Securities acquired through an in-kind purchase will be acquired for invest-
ment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange, such securities are eligible for in-
vestment by the Portfolio (current market quotations must be read-
ily available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are not subject to any restrictions upon their sale by
the Portfolio under the Securities Act of 1933, or otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation may realize a gain or loss for
Federal Income Tax purposes upon the exchange, depending upon the cost of the
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of either Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value next determined after receipt of the re-
demption request. No charge is made for redemptions. Any redemption may be
more or less than the purchase price of your shares depending on the market
value of the investment securities held by the Portfolio.
15
<PAGE>
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instruction
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
16
<PAGE>
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after re-
ceipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
as determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities so received in pay-
ment of redemptions.
SERVICE AND DISTRIBUTION PLANS
Under the Service Plan for Service Class Shares, adopted pursuant to Rule
12b-1 under the 1940 Act, the Fund may enter into service agreements with
Service Agents (broker-dealers or other financial institutions) who receive
fees with respect to the Fund's Service Class Shares owned by shareholders for
whom the Service Agent is the dealer or holder of record, or for whom the
Service Agent performs Servicing, as defined below. These fees are paid out of
the assets allocable to Service Class Shares to the Distributor, to the Serv-
ice Agent directly or through the Distributor. The Fund reimburses the Dis-
tributor or the Service Agent for payments made at an annual rate of up to
0.25 of 1% of the average daily value of
17
<PAGE>
Service Class Shares owned by clients of the Service Agent during the period
payments for Servicing are being made to it. Such payments are borne exclu-
sively by the Service Class Shares. Each item for which a payment may be made
under the Service Plan constitutes personal service and/or shareholder account
maintenance and may constitute an expense of distributing Fund shares as the
SEC construes such term under Rule 12b-1. The fees payable for Servicing re-
flect actual expenses incurred up to the limit described herein.
Servicing may include assisting clients in changing dividend options, ac-
count designations and addresses; performing sub-accounting; establishing and
maintaining shareholder accounts and records; processing purchase and redemp-
tion transactions; investing client cash account balances automatically in
Service Class Shares; providing periodic statements showing a client's account
balance and integrating such statements with those of other transactions and
balances in the client's other accounts serviced by the Service Agent; arrang-
ing for bank wires; and such other services as the Fund may request, to the
extent the Service Agent is permitted by applicable statute, rule or regula-
tion.
The Glass-Steagall Act and other applicable laws prohibit federally chart-
ered or supervised banks from engaging in certain aspects of the business of
issuing, underwriting, selling and/or distributing securities. Accordingly,
banks are engaged to act as Service Agent only to perform administrative and
shareholder servicing functions, including transaction-related agency services
for their customers. If a bank is prohibited from acting as a service agent,
alternative means for continuing the servicing of its shareholders would be
sought and the shareholder clients of the bank will remain Fund shareholders.
The Distributor promotes the distribution of the Service Class Shares in ac-
cordance with the terms of a Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act. The Distribution Plan provides for the use of Fund assets
allocable to Service Class Shares to pay expenses of distributing such shares.
The Distribution Plan and Service Plan (the "Plans") were approved by the
Board of Directors, including a majority of the directors who are not "inter-
ested persons" of the Fund as defined in the 1940 Act (and each of whom has no
direct or indirect financial interest in the Plans or any agreement related
thereto, referred to herein as the "12b-1 Directors"). The Plans may be termi-
nated at any time by the vote of the Board or the 12b-1 Directors, or by the
vote of a majority of the outstanding Service Class Shares of the Portfolio
involved.
While the Plans continue in effect, the selection of the 12b-1 Directors is
committed to the discretion of such persons then in office. The Plans provide
generally that a Portfolio may incur distribution and service costs under the
Plans which may not exceed in the aggregate .75% per annum of that Portfolio's
net assets. The Board has currently limited aggregate payments under the Plans
to
18
<PAGE>
.50% per annum of a Portfolio's net assets. Under the Plans, as implemented
for the Portfolios' Service Class Shares, Distribution Plan expenses may be no
more than 0.15% and Service Plan expenses may be no more than 0.25%, although
the maximum limit may be paid following appropriate Board approval. The Dis-
tribution Plan will permit payments to the Distributor, broker-dealers, other
financial institutions, sales representatives or other third parties who ren-
der promotional and distribution services, for items such as advertising ex-
penses, selling expenses, commissions or travel reasonably intended to result
in sales of Service Class Shares and for the printing of prospectuses sent to
prospective purchasers of Service Class Shares of the Portfolios.
Although the Plans may be amended by the Board of Directors, any changes in
the Plans which would materially increase the amounts authorized to be paid
under the Plans must be approved by shareholders of the Class involved. The
total amounts paid under the foregoing arrangements may not exceed the maximum
limits specified above, and the amounts and purposes of expenditures under the
Plans must be reported to the 12b-1 Directors quarterly. The amounts allowable
under the Plans for each Class of Shares of the Portfolios are also limited
under certain rules of the National Association of Securities Dealers, Inc.
In addition to payments by the Fund under the Plans, the Distributor, United
Asset Management Corporation ("UAM"), the parent company of UAMFSI and of, the
Adviser, or any of their affiliates, may, at its own expense, compensate a
Service Agent or other person for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to the Fund, a Portfolio
or any Class of Shares of a Portfolio. The person making such payments may do
so out of its revenues, its profits or any other source available to it. Such
services arrangements, when in effect, are made generally available to all
qualified service providers. The Adviser may compensate its affiliated compa-
nies for referring investors to the Portfolios.
The Distributor, the Adviser and certain of their other affiliates also par-
ticipate in an arrangement with Smith Barney Inc. under which Smith Barney
provides certain defined contribution plan marketing and shareholder services
and receives from such entities an amount equal to up to 33.3% of the portion
of the investment advisory fees attributable to the invested assets of Smith
Barney's eligible customer accounts without regard to any expense limitation
in addition to amounts payable to all selling dealers. The Fund also compen-
sates Smith Barney for services it provides to certain defined contribution
plan shareholders that are not otherwise provided by the Administrator.
EXCHANGE PRIVILEGE
Service Class Shares of each Portfolio may be exchanged for Service Class
Shares of any other UAM Funds Portfolio. (For Portfolios currently offering
Serv
19
<PAGE>
ice Class Shares, please call the UAM Funds Service Center.) Exchange requests
should be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE." An ex-
change into another UAM Funds Portfolio is a sale of shares and may result in
a gain or loss for income tax purposes. The Fund may modify or terminate the
exchange privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets attributable to the class, less any liabilities
attributable to the class, by the number of shares outstanding attributable to
the class. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the
20
<PAGE>
fair market value of such securities. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost when the Board of
Directors determines that amortized cost reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Fund's Board of Directors.
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating total return. Both yield
and total return figures are based on historical earnings and are not intended
to indicate future performance.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Dividends paid by the Portfolio with respect to Institu-
tional Class and Service Class Shares, to the extent any dividends are paid,
will be calculated in the same manner at the same time on the same day and
will be in the same amount, except that service and distribution fees relating
to Service Class Shares will be borne exclusively by that class.
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report, contact the UAM Funds Service Center at the address
or phone number on the cover of this Prospectus.
21
<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolio will normally distribute such
gains annually. All dividends and capital gains distributions will be automat-
ically reinvested in additional shares of the Portfolio unless the Fund is no-
tified in writing that the shareholder elects to receive distributions in
cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
22
<PAGE>
INVESTMENT ADVISER
NWQ Investment Management Company was founded in 1982 and is located at 655
South Hope Street, 11th Floor, Los Angeles, California 90017. The Adviser is a
wholly-owned subsidiary of United Asset Management Corporation ("UAM") and
provides investment management services to institutional and high net worth
individuals. As of the date of this Prospectus, the Adviser had over $6.3 bil-
lion in assets under management.
Under Investment Advisory Agreements dated as of January 24, 1994, the Ad-
viser manages the investment and reinvestment of the assets of the Portfolios.
The Adviser must adhere to the stated investment objectives and policies of
the Portfolios, and is subject to the control and supervision of the Fund's
Board of Directors.
An investment policy committee is responsible for the day-to-day management
of each Portfolio's investments. The following investment professionals are
the members of this committee who collectively make the Portfolios' investment
decisions:
DAVID A. POLAK, CFA, is the founder and has been President and Chief
Investment Officer/Portfolio Manager of NWQ Investment Management Company from
1982 to the present. From 1979 to 1982, Mr. Polak was Chief Investment
Strategist/Portfolio Manager of Argus Investment Management Inc. and, from
1968 to 1979, he was a Portfolio Manager at Beneficial Standard Investment
Management. Mr. Polak is a graduate of Massachusetts Institute of Technology
(BS), Rensselaer Polytechnical Institute (MS) and the University of California
at Los Angeles (MBA).
EDWARD C. FRIEDEL, CFA, has been a Managing Director and Investment
Strategist/Portfolio Manager of NWQ Investment Management Company from 1983 to
the present. From 1971 to 1983, Mr. Friedel was a Portfolio Manager at
Beneficial Standard Investment Management. Mr. Friedel is a graduate of the
University of California at Berkeley (BS) and Stanford University (MBA).
JAMES H. GALBREATH, CFA, has been a Managing Director and Investment
Strategist/Portfolio Manager at NWQ Investment Management Company from 1987 to
the present. From 1983 to 1987, Mr. Galbreath was President of Galbreath Fi-
nancial and, from 1974 to 1983, he was a Partner and Portfolio Manager at Ste-
phenson & Company. Mr. Galbreath is a graduate of the University of Denver (BS
and BA).
PHYLLIS G. THOMAS, CFA, has been a Managing Director and Investment
Strategist/Portfolio Manager at NWQ Investment Management Company from 1990 to
the present. From 1987 to 1990, Ms. Thomas was a Portfolio Manager with The
Boston Company Institutional Investors, Inc. and, from 1980 to
23
<PAGE>
1987, she was a Portfolio Manager with Beneficial Standard Investment Manage-
ment. Ms. Thomas is a graduate of Northern Illinois University (BS) and the
University of California at Los Angeles (MBA).
As compensation for its services as Adviser, each Portfolio pays the Adviser
an annual fee in monthly installments, calculated by applying the following
annual percentage rates to each Portfolio's average daily net assets for the
month:
<TABLE>
<S> <C>
Balanced Portfolio.................................................... 0.70%
Value Equity Portfolio................................................ 0.70%
</TABLE>
The Adviser may waive advisory fees or assume operating expenses otherwise
payable by a Portfolio in order to reduce the Portfolio's expense ratio. Until
February 28, 1998, the Adviser has agreed to keep the total annual operating
expenses of the Portfolios' Service Class Shares from exceeding 1.40% of aver-
age daily net assets. The Fund will not reimburse the Adviser for any advisory
fees which are waived or Portfolio expenses which the Adviser may bear on be-
half of the Portfolios for a given fiscal year.
ADVISER'S HISTORICAL PERFORMANCE
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, poli-
cies and strategies as those of the Balanced Portfolio. The investment returns
of the Balanced Portfolio may differ from those of the separately managed ac-
counts because such separately managed accounts may have fees and expenses
that differ from those of the Balanced Portfolio. Further, the separately man-
aged accounts are not subject to investment limitations, diversification re-
quirements and other restrictions imposed by the Investment Company Act of
1940 and Internal Revenue Code; such conditions, if applicable, may have low-
ered the returns for separately managed accounts. The results presented are
not intended to predict or suggest the return to be experienced by the Portfo-
lio or the return an investor might achieve by investing in the Balanced Port-
folio.
24
<PAGE>
NWQ INVESTMENT MANAGEMENT COMPANY--BALANCED STRATEGY
(Percentage returns of Net of Management Fees)
<TABLE>
<CAPTION>
NWQ
INVESTMENT
MANAGEMENT 60/30/10
YEARS THROUGH: COMPANY INDEX
- -------------- ---------- --------
<S> <C> <C>
1982 33.61% 23.62%
1983 16.65% 16.72%
1984 7.29% 9.43%
1985 24.50% 26.14%
1986 25.17% 16.78%
1987 5.57% 5.80%
1988 11.76% 12.91%
1989 22.05% 24.01%
1990 0.89% 1.56%
1991 23.07% 23.68%
1992 3.74% 7.26%
1993 16.75% 9.70%
1994 (3.25)% 0.21%
1995 27.77% 28.46%
9 Months to 9/30/96 8.66% 8.36%
Annualized 14.72% 14.22%
Cumulative 658.00% 610.36%
Fourteen-Year Mean 15.40% 14.73%
Value of $1 invested during (1/1/82-9/30/96) $ 7.58 $ 7.10
</TABLE>
Notes:
1. The ANNUALIZED RETURN is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods
set forth by the Association for Investment Management Research, the Bank
Administration Institute, and the Investment Counsel Association of Ameri-
ca. Market Value of the account was the sum of the account's total assets,
including cash, cash equivalents, short term investments, and securities
valued at current market prices.
2. The CUMULATIVE RETURN means that $1 invested in the composite account on
January 1, 1982 had grown to $7.58 by September 30, 1996.
3. The FOURTEEN-YEAR MEAN is the arithmetic average of the annual returns for
the calendar years listed.
4. The 60/30/10 INDEX is a weighted index comprised of 60% S&P 500, 30% Leh-
man Bros. Gov. Corp., 10% 3 Mo. Treasury Bills and is an unmanaged index
which assumes reinvestment of dividends and is generally considered repre-
sentative of securities similar to those invested in by the Adviser for
the purpose of the composite performance numbers set forth above.
25
<PAGE>
5. The Adviser's average annual management fee over the period shown (1/1/82-
9/30/96) was .79% or 79 basis points. During the period, fees on the Ad-
viser's individual accounts ranged from .27% to 1.00% (27 basis points to
100 basis points). Net returns to investors vary depending on the manage-
ment fee.
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, poli-
cies and strategies as those of the Value Equity Portfolio. The investment re-
turns of the Value Equity Portfolio may differ from those of the separately
managed accounts because such separately managed accounts may have fees and
expenses that differ from those of the Value Equity Portfolio. Further, the
separately managed accounts are not subject to investment limitations, diver-
sification requirements and other restrictions imposed by the Investment Com-
pany Act of 1940 and Internal Revenue Code; such conditions, if applicable,
may have lowered the returns for separately managed accounts. The results pre-
sented are not intended to predict or suggest the return to be experienced by
the Portfolio or the return an investor might achieve by investing in the
Value Equity Portfolio.
NWQ INVESTMENT MANAGEMENT COMPANY -- VALUE EQUITY STRATEGY
(Percentage returns of Net of Management Fees)
<TABLE>
<CAPTION>
YEARS THROUGH: NWO INVESTMENT MANAGEMENT COMPANY S&P 500
- -------------- --------------------------------- -------
<S> <C> <C>
1982 45.24 % 21.54 %
1983 22.06 % 22.55 %
1984 7.05 % 6.27 %
1985 29.70 % 31.73 %
1986 26.59 % 18.66 %
1987 (0.24)% 5.25 %
1988 19.51 % 16.61 %
1989 33.33 % 31.69 %
1990 (2.21)% (3.10)%
1991 29.54 % 30.47 %
1992 1.31 % 7.62 %
1993 17.50 % 10.08 %
1994 (.79)% 1.32 %
1995 30.91 % 37.58 %
9 Months to 9/30/96 13.16 % 13.50 %
Annualized 17.64 % 16.47 %
Cumulative 997.70 % 847.60 %
Fourteen-Year Mean 18.54 % 17.02 %
Value of $1 invested during (1/1/82
- 9/30/96) $10.98 $ 9.48
</TABLE>
26
<PAGE>
- -----------
Notes:
1. The ANNUALIZED RETURN is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods
set forth by the Association for Investment Management Research, the Bank
Administration Institute, and the Investment Counsel Association of Ameri-
ca. Market Value of the account was the sum of the account's total assets,
including cash, cash equivalents, short term investments, and securities
valued at current market prices.
2. The CUMULATIVE RETURN means that $1 invested in the composite account on
January 1, 1982 had grown to $10.98 by September 30, 1996.
3. The FOURTEEN-YEAR MEAN is the arithmetic average of the annual returns for
the calendar years listed.
4. The S&P 500 is an unmanaged index which assumes reinvestment of dividends
and is generally considered representative of securities similar to those
invested in by the Adviser for the purpose of the composite performance
numbers set forth above.
5. The Adviser's average annual management fee over the period shown (1/1/82-
9/30/96) was 1.00% or 100 basis points. During the period, fees on the Ad-
viser's individual accounts were 100 basis points on all accounts. Net re-
turns to investors vary depending on the management fee.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of
aggregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Balanced Portfolio.................................................... 0.06%
Value Equity Portfolio................................................ 0.04%
</TABLE>
27
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent of the
Fund, agrees to use its best efforts as sole distributor of Fund shares. The
Distributor does not receive any fee or other compensation under the Agreement
with respect to the Shares offered in this Prospectus except as described un-
der "SERVICE AND DISTRIBUTION PLANS." The Agreement continues in effect as
long as it is approved at least annually by the Fund's Board of Directors.
Those approving the Agreement must include a majority of Directors who are not
parties to the Agreement or interested persons of any such party. The Agree-
ment provides that the Fund will bear costs of registration of its shares with
the SEC and various states as well as the printing of its prospectuses, its
SAIs and its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Portfolios. These Agreements direct the Adviser to use its best efforts to ob-
tain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of the research, statistical and
pricing services they provide to the Portfolios in addition to required Ad-
viser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients.
28
<PAGE>
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Board of Directors to issue three billion shares of common
stock, with a $.001 par value. The Directors have the power to designate one
or more series ("Portfolios") or classes of shares of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. At its discretion, the Board of Direc-
tors may create additional Portfolios and Classes of shares of the Fund.
The shares of each Portfolio are fully paid and nonassessable and have no
preference as to conversion, exchange, dividends, retirement or other features
and have no pre-emptive rights. They have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election
of Directors can elect 100% of the Directors. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held), then standing in his name on the books of the Fund. As of December 6,
1996, Nabank & Co., Tulsa, OK held of record 56% of the outstanding shares of
the NWQ Balanced Portfolio Institutional Class Shares for which ownership is
disclaimed or presumed disclaimed; Hartnat & Co., Boston, MA held of record
25.7% of the outstanding shares of the NWQ Balanced Portfolio Institutional
Service Class Shares for which ownership is disclaimed or presumed disclaimed;
and Charles Schwab & Co., Inc., San Francisco, CA held of record 51.2% of the
outstanding shares of the NWQ Value Equity Portfolio Institutional Class
Shares for which ownership is disclaimed or presumed disclaimed. The persons
or organizations owning 25% or more of the outstanding shares of a Portfolio
may be presumed to "control" (as that term is defined in the 1940 Act) such
Portfolio. As a result, those persons or organizations could have the ability
to vote a majority of the shares of the Portfolio on any matter requiring the
approval of shareholders of such Portfolio. Both Institutional Class and In-
stitutional Service Class Shares represent an interest in the same assets of a
29
<PAGE>
Portfolio. Service Class Shares bear certain expenses related to shareholder
servicing, may bear expenses related to the distribution of such shares and
have exclusive voting rights with respect to matters relating to such distri-
bution expenditures. Information about the Service Class Shares of the Portfo-
lios is available upon request by contacting the UAM Funds Service Center. An-
nual meetings will not be held except as required by the 1940 Act and other
applicable laws. The Fund has undertaken that its Directors will call a meet-
ing of shareholders if such a meeting is requested in writing by the holders
of not less than 10% of the outstanding shares of the Fund. The Fund will as-
sist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or phone number listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
30
<PAGE>
UAM FUNDS -- SERVICE CLASS SHARES
BHM&S Total Return Bond Portfolio
FPA Crescent Fund
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Sirach Growth Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced
Sirach Equity
Sterling Partners' Balanced
Sterling Partners' Equity
Sterling Partners' Short-Term Fixed Income
TJ Core Equity Portfolio
31
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
NWQ Investment Management Company
655 South Hope Street, 11th Floor
Los Angeles, California 90017
(213) 624-6700
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS
Rice, Hall, James Small Cap Portfolio
&
Rice, Hall, James Small/Mid Cap Portfolio
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
RICE, HALL, JAMES SMALL CAP PORTFOLIO
&
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: RICE, HALL, JAMES & ASSOCIATES
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. ("UAM Funds") is an open-end, management investment company,
known as a "mutual fund." The Fund consists of multiple series of shares
(known as "Portfolios"), each of which has different investment objectives and
policies. The Rice, Hall, James Portfolios currently offer one class of
shares. The securities offered in this Prospectus are Institutional Class
Shares of two diversified, no-load Portfolios of the Fund managed by Rice,
Hall, James & Associates.
RICE, HALL, JAMES SMALL CAP PORTFOLIO. The objective of the Rice, Hall,
James Small Cap Portfolio (the "Small Cap Portfolio") is to provide maximum
capital appreciation, consistent with reasonable risk to principal by invest-
ing primarily in small market capitalization companies.
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO. The objective of the Rice, Hall,
James Small/Mid Cap Portfolio (the "Small/Mid Cap Portfolio") is to provide
maximum capital appreciation, consistent with reasonable risk to principal by
investing primarily in small/mid market capitalization (small/mid cap) compa-
nies.
There can be no assurance that the Portfolios will meet their stated objec-
tive.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. Such Statement is dated January 3, 1997 and
has been incorporated by reference into this Prospectus. For a free copy of
the SAI, contact the UAM Funds Service Center at the address or telephone num-
ber above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 6
Investment Policies........................................................ 6
Other Investment Policies.................................................. 8
Investment Limitations..................................................... 12
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 16
Shareholder Services....................................................... 18
Valuation of Shares........................................................ 18
Performance Calculations................................................... 19
Dividends, Capital Gains Distributions and Taxes........................... 19
Investment Adviser......................................................... 20
Administrative Services.................................................... 23
Distributor................................................................ 23
Portfolio Transactions..................................................... 24
General Information........................................................ 24
UAM Funds -- Institutional Class Shares.................................... 27
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolios' Institutional Class Shares would incur. The Fund does not charge
shareholder transaction expenses. However, transaction fees may be charged if
a broker-dealer or other financial intermediary deals with the Fund on your
behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
RICE, HALL, JAMES RICE, HALL, JAMES
SMALL CAP SMALL/MID CAP
PORTFOLIO PORTFOLIO
----------------- -----------------
<S> <C> <C>
Sales Load Imposed on Purchases........ NONE NONE
Sales Load Imposed on Reinvested
Dividends............................ NONE NONE
Deferred Sales Load.................... NONE NONE
Redemption Fees........................ NONE NONE
Exchange Fees.......................... NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
RICE, HALL, JAMES RICE, HALL, JAMES
SMALL CAP SMALL/MID CAP
PORTFOLIO PORTFOLIO
----------------- -----------------
<S> <C> <C>
Investment Advisory Fees................. 0.75 % 0.80 %
Administrative Fees...................... 0.35 % 0.20 %
12b-1 Fees............................... NONE NONE
Distribution Costs....................... NONE NONE
Other Expenses........................... 0.28 % 0.25 %
Advisory Fees Waived..................... 0.00 % 0.00 %
Total Operating Expenses*................ 1.38 % 1.25 %**
</TABLE>
- -----------
* The fees and expenses set forth above are based on the Small Cap Portfo-
lio's operations during the fiscal year ended October 31, 1996, except
they have been restated to reflect current administrative fees. (See "AD-
MINISTRATIVE SERVICES" herein and in the SAI.) The annualized Total Oper-
ating Expenses excludes the effect of expense offsets. If expense offsets
were included, the annualized Total Operating Expenses for the Small Cap
Portfolio would not significantly differ. The Small/Mid Cap Portfolio be-
gan operations on November 1, 1996.
** The fees and expenses with respect to the Small/Mid Cap Portfolio are
based on estimates. For purposes of calculating the fees set forth above,
the table assumes that the Small/Mid Cap Portfolio's average daily assets
will be $25 million.
1
<PAGE>
The tables above show various expenses and fees an investor would bear di-
rectly or indirectly.
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume as the Adviser's own expense operating expenses otherwise pay-
able by the Portfolios to reduce the Portfolios' expense ratios. As of the
date of this Prospectus, the Adviser has agreed to keep the Small Cap and the
Small/Mid Cap Portfolios Institutional Class Shares from exceeding 1.40% and
1.25%, of average daily net assets, respectively. The Fund will not reimburse
the Adviser for any advisory fees waived or expenses that the Adviser may bear
on behalf of the Portfolios for a given fiscal year.
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. The Portfolios
charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Rice, Hall, James Small Cap Portfolio.......... $14 $44 $76 $167
Rice, Hall, James Small/Mid Cap Portfolio...... $13 $40 * *
</TABLE>
- -----------
* As the Small/Mid Cap Portfolio began operations on November 1, 1996, the
Fund has not projected expenses beyond the three-year period shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Rice, Hall, James & Associates (the "Adviser"), a registered investment ad-
viser founded in 1974, serves as investment adviser to the Portfolios. The Ad-
viser presently manages over $1 billion in assets, primarily on behalf of in-
stitutional and individual investors. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment is $2,500. The minimum for subsequent invest-
ments is $100. Certain exceptions to the initial or minimum investment amounts
may be made by the officers of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will be reinvested in the Port-
folio's shares automatically unless an investor elects to receive cash distri-
butions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agency serv-
ices provided to the Fund and its Portfolios by third-party service providers.
(See "ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of a Portfolio's shares will fluctuate in response to changes in
market and economic conditions as well as the financial conditions and pros-
pects of the issuers in which a Portfolio invests. Prospective investors
should consider the following: (1) The small and mid-sized capitalization cor-
porations in which the Portfolios will invest are more vulnerable to financial
and other risks than larger corporations and the securities of such small and
mid-sized capitalization corporations may involve a higher degree of risk and
price volatility than investments in the general equity markets; (2) Both
Portfolios may invest a portion of their assets in derivatives including
futures contracts and options. (See "OTHER INVESTMENT POLICIES."); (3) Both
Portfolios may invest in securities of foreign issuers, which may involve
greater risks than investments in domestic securities, such as foreign cur-
rency risks. (See "OTHER INVESTMENT POLICIES."); (4) In general, a Portfolio
will not trade for short-term profits, but when circumstances warrant, invest-
ments may be sold without regard to the length of time held. High rates of
portfolio turnover may result in additional cost and the realization of capi-
tal gains. (See "OTHER INVESTMENT POLICIES."); (5) In addition, both Portfo-
lios may use various investment practices that involve special consideration,
including investing in repurchase agreements, when-issued, forward delivery
and delayed settlement securities and lending of securities. (See "OTHER IN-
VESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides selected per share information for a share out-
standing throughout the respective periods presented for the Small Cap Portfo-
lio's Institutional Class Shares. This table is part of the Portfolio's Finan-
cial Statements, which are included in the Portfolio's October 31, 1996 Annual
Report to Shareholders. The Annual Report has been incorporated into the Port-
folio's SAI. The Portfolio's October 31, 1996 Financial Statements have been
audited by Price Waterhouse LLP. Their unqualified opinion on the Financial
Statements is also incorporated into the Portfolio's SAI. The following infor-
mation should be read in conjunction with the Portfolio's October 31, 1996 An-
nual Report to Shareholders. Since the Small/Mid Cap Portfolio commenced oper-
ations on November 1, 1996, no financial highlights are presented for that
Portfolio.
RICE, HALL, JAMES SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 1, 1994** TO OCTOBER 31, OCTOBER 31,
OCTOBER 31, 1994 1995 1996
----------------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............... $10.00 $11.14 $15.87
------ ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.01 (0.07) (0.10)
Net realized and unrealized gain
on investments.................. 1.13 4.81 2.73
------ ------- -------
Total from investment
operations.................... 1.14 4.74 2.63
------ ------- -------
DISTRIBUTIONS
Net investment income............. -- (0.01) --
In excess of net investment
income.......................... -- (0.00)# --
Net realized gain................. -- -- (2.77)
------ ------- -------
Total distributions............. -- (0.01) (2.77)
------ ------- -------
NET ASSET VALUE, END OF PERIOD...... $11.14 $15.87 $15.73
====== ======= =======
TOTAL RETURN........................ 11.40%+ 42.59%+ 19.43%
====== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(thousands)....................... $8,287 $18,910 $33,488
Ratio of expenses to average net
assets............................ 1.40%* 1.40% 1.37%
Ratio of net investment income
(loss) to average net assets...... 0.30%* (0.63)% (0.78)%
Portfolio turnover rate............. 5% 180% 181%
Average commission rate##........... N/A N/A $0.0509
Voluntary waived fees and expenses
assumed by the adviser per share.. $ 0.05 $ 0.01 N/A
Ratio of expenses to average net
assets including expense offsets.. N/A 1.40% 1.37%
</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.
# Value is less than 0.01 per share.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
INVESTMENT OBJECTIVES
The objective of the Small Cap Portfolio is to provide maximum capital ap-
preciation, consistent with reasonable risk to principal by investing primar-
ily in small market capitalization companies. The Adviser intends to pursue
this objective through investment primarily in common stocks of companies
whose market capitalizations range between $40 million and $500 million.
The objective of the Small/Mid Cap Portfolio is to provide maximum capital
appreciation, consistent with reasonable risk to principal by investing pri-
marily in small/mid market capitalization companies. The Adviser intends to
pursue this objective through investment primarily in common stocks of compa-
nies whose market capitalizations range between $300 million and $2.5 billion.
There can be no assurance that the Portfolios will achieve their stated
objective.
INVESTMENT POLICIES
THE SMALL CAP PORTFOLIO will invest, under normal circumstances, at least
65% of its total assets in equity securities of companies with market capital-
izations of $40 million to $500 million, at the time of initial purchase. The
equity securities in which the Portfolio will invest will consist of common
stocks and securities convertible into common stocks, including convertible
preferred stocks and convertible bonds. The Adviser will strive to accomplish
its investment objective with broad diversification. The Adviser believes that
the Portfolio will provide a level of diversification and investment opportu-
nity that may be difficult for individual investors to accomplish on their
own.
The Adviser will use a selection process that emphasizes smaller, emerging
companies which have the potential to become market leaders in their indus-
tries. The Adviser will focus on securities of companies with:
. strong management
. leading products or services
. distribution to a large marketplace or growing niche market
. anticipated above-average revenue and earnings growth rates
. potential for improvement in profit margins
. strong cash flow and/or improving financial position
The list of potential investments is further filtered by the use of tradi-
tional fundamental security analysis and valuation methods including, but not
limited to, analysis of relative returns on capital and equity, reward to risk
ratios and earnings per share growth rates relative to price earnings ratios.
The Adviser believes that many companies with smaller capitalizations have
greater potential than their larger
6
<PAGE>
counterparts to deliver above-average revenue and earnings growth rates that
have not yet been recognized by investors.
The Adviser expects that a majority of investments in the Small Cap Portfo-
lio will be in U.S.-based companies, however, from time to time shares of for-
eign based companies may be purchased if they meet the Small Cap Portfolio's
investment criteria. Under normal circumstances, investments in foreign based
companies will comprise no more than 15% of portfolio assets.
It is anticipated that cash reserves will represent a relatively small per-
centage of portfolio assets (less than 20% under most circumstances). In unu-
sual circumstances, or for temporary defensive purposes when market or eco-
nomic conditions may warrant, the Small Cap Portfolio may invest all or a por-
tion of its assets in short-term investments, cash and cash equivalents. When
the Small Cap Portfolio is in a defensive position, it may not be pursuing its
investment objective.
THE SMALL/MID CAP PORTFOLIO will invest, under normal circumstances, at
least 65% of its total assets in equity securities of companies with market
capitalizations of $300 million to $2.5 billion, at the time of initial pur-
chase. The equity securities in which the Small/Mid Cap Portfolio will invest
will consist of common stock and securities convertible into common stocks,
including convertible preferred stocks and convertible bonds.
The small/mid cap area of the market, defined by the Adviser as companies
with market capitalizations less than $2.5 billion but greater than $300 mil-
lion, has more than three times the number of securities than the market com-
prised of companies with market capitalizations greater than $2.5 billion. The
Adviser believes that the small/mid cap market has less analyst coverage which
means there is greater pricing inefficiency for such securities than for more
closely followed, usually larger capitalization companies. The Adviser's in-
vestment selections for the Small/Mid Cap Portfolio will tend to be from rela-
tively underfollowed securities.
The Adviser practices a fundamentally driven bottom up research approach.
This approach focuses on identifying stocks of growth companies that are sell-
ing at a discount to the companies' projected earnings growth rates. Specifi-
cally, the Adviser requires that equity securities in which the Small/Mid Cap
Portfolio invests have price/earnings ratios that are lower than the 3 to 5
year projected earnings growth rate. In addition, the stocks must possess cat-
alysts, which are defined by the Adviser as fundamental events that ultimately
lead to increases in revenue growth rates, expanding profit margins and/or in-
creases in earnings growth rates that are generally not anticipated by the
market. Such events can include new product introductions or applications,
discovery of niche markets, new management, corporate or industry restruc-
tures, regulatory change and end market expansion. Most importantly, the Ad-
viser must be convinced that such change will lead to greater investor recog-
nition and a subsequent rise in the stock prices within a 12
7
<PAGE>
to 24 month period. The key is discovering undervalued companies where funda-
mental changes are occurring that are temporarily going unnoticed by invest-
ors.
The Adviser expects that a majority of investments in the Small/Mid Cap
Portfolio will be in U.S.-based companies, however, from time to time, shares
of foreign based companies may be purchased if they meet the Small/Mid Cap
Portfolio's investment criteria. Under normal circumstances, investments in
foreign based companies will comprise no more than 15% of portfolio assets.
It is anticipated that cash reserves will represent a relatively small per-
centage of portfolio assets (no more than 20% under most circumstances). In
unusual circumstances, or for temporary defensive purposes when market or eco-
nomic conditions may warrant, the Small/Mid Cap Portfolio may invest all or a
portion of its assets in short-term investments, cash and cash equivalents.
When the Small/Mid Cap Portfolio is in a defensive position, it may not be
pursuing its investment objective.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, each Portfolio may invest a por-
tion of its assets in domestic and foreign money market instruments including
certificates of deposit, bankers' acceptances, time deposits, U.S. Government
obligations, U.S. Government agency securities, short-term corporate debt se-
curities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corpora-
tion or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated,
determined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 15% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of for
8
<PAGE>
eign issuers, and any other short-term money market instruments including
variable rate demand notes and tax-exempt money instruments. By entering into
these investments on a joint basis, it is expected that a Portfolio may earn a
higher rate of return on investments relative to what it could earn individu-
ally.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price if such securities mature in less than one year.
The Administrator and the Adviser will mark to market daily the value of the
securities purchased. The use of repurchase agreements involves certain risks.
For example, a default by the seller of the agreement may cause a Portfolio to
experience a loss or delay in the liquidation of the collateral securing the
repurchase agreement. The Portfolio might also incur disposition costs in liq-
uidating the collateral. While the Fund's management acknowledges these risks,
it is expected that they can be controlled through stringent security selec-
tion criteria and careful monitoring procedures. The Fund has received permis-
sion from the SEC to pool daily uninvested cash balances of the Fund's Portfo-
lios in order to invest in repurchase agreements on a joint basis. By entering
into joint repurchase agreements, a Portfolio may incur lower transaction
costs and earn higher rates of interest on joint repurchase agreements. Each
Portfolio's contribution would determine its return from a joint repurchase
agreement. (See "SHORT TERM INVESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
9
<PAGE>
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It
is possible that the market price of the securities at the time of delivery
may be higher or lower than the purchase price. Each Portfolio will maintain a
separate account of cash or liquid securities at least equal to the value of
purchase commitments until payment is made. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery is
made although the Portfolio may earn income on securities it has deposited in
a segregated account.
Each Portfolio may engage in these types of purchases in order to buy secu-
rities that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for the Small/ Mid Cap Portfolio and the Small Cap Port-
folio are not anticipated to exceed 250% and 150% respectively. In addition to
Portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES" for more information on taxation). The Portfolios will not normally en-
gage in short-term trading, but each reserves the right to do so. The table
set forth in "Financial Highlights" presents the Small Cap Portfolio's histor-
ical portfolio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company.
10
<PAGE>
The Portfolio will indirectly bear its proportionate share of any management
fees paid by an investment company in which it invests in addition to the ad-
visory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon a Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN INVESTMENTS
Investing in foreign companies, may involve additional risks and considera-
tions which are not typically associated with investing in U.S. companies.
Since securities of foreign companies are normally denominated in foreign cur-
rencies, each Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, comparable information may not be readily avail-
able about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S. compa-
nies. In addition, in certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those coun-
tries.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, each
Portfolio may invest in futures and options and interest rate futures con-
tracts. Because transaction costs associated with futures and options may be
lower than the costs of investing in the securities directly, it is expected
that use of index futures and options to facilitate cash flows may reduce the
Portfolio's overall transactions costs. Each Portfolio may enter into futures
contracts provided that not more than 5% of its total assets are at the time
of acquisition required as margin deposit to secure obligations under such
contracts. Each Portfolio will engage in futures and options transactions for
hedging purposes only.
Futures and options can be volatile and involve various degrees and types of
risk. If each Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts
11
<PAGE>
could result in a loss. A Portfolio could also suffer losses if it is unable
to liquidate its position due to an illiquid secondary market. In the opinion
of the Directors of the Fund, the risk that a Portfolio will be unable to
close out a futures position or options contract will be minimized only by en-
tering into futures contracts or options transactions traded on national ex-
changes and for which there appears to be a liquid secondary market.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. A Portfolio will invest no more than 10%
of its net assets in illiquid securities. The prices realized from the sales
of these securities could be less than those originally paid by the Portfolio
or less than what would be considered fair value of such securities.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Fund's Directors
may change such policies without an affirmative vote of a "majority of the
outstanding voting securities of the Portfolio," as defined in the 1940 Act.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the portfolio adopts a temporary position;
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other
12
<PAGE>
financial institutions so long as the loans are made in compliance
with the 1940 Act, as amended, or the Rules and Regulations or inter-
pretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 33
1/3% of the Portfolio's gross assets valued at the lower of market or
cost, and (ii) a Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 33 1/3% of its total assets at fair market value.
The Portfolios' investment objectives and investment limitations (a), (b),
(d), (e), and (f(i)), set forth above, are fundamental and may be changed only
with the approval of the holders of a majority of the outstanding shares of
each Portfolio of the Fund. If a percentage limitation on investment or utili-
zation of assets as set forth above is adhered to at the time an investment is
made, a later change in percentage resulting from changes in the value or to-
tal cost of the Portfolio's assets will not be considered a violation of the
restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "VALUATION OF SHARES.") The minimum initial
investment required is $2,500. Certain exceptions may be made by the officers
of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled to receive compensation for selling or servicing Portfolio shares may
receive different compensation with respect to one particular class of shares
over another in the Fund.
13
<PAGE>
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent, Chase Global Funds Services Company, prior to the close of its business
day to receive that day's share price. Proper payment for the order must be
received by the Sub-Transfer Agent no later than the time when the Portfolio
is priced on the following business day. Service Agents are responsible to
their customers and the Fund for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it together with a check made
payable to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for purchases of shares received by mail will be credited to an ac-
count at the next share price calculated for the Portfolio after receipt. Pay-
ment does not need to be converted into Federal Funds (monies credited to the
Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will accept
it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank wir-
ing the funds. An account number will then be provided to you. Next,
. Instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name _________
Your Account Number _________
Your Account Name ___________
Wire Control Number _________
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which both
the NYSE and the Custodian Bank are open for business.
14
<PAGE>
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
the Custodian Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be purchased are identified on the check or wire. Prior to wiring
additional investments, notify the UAM Funds Service Center by calling the
number on the cover of this Prospectus. Mail orders should include, when pos-
sible, the "Invest by Mail" stub which accompanies any Fund confirmation
statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional shares will not be issued. Certif-
icates for whole shares will not be issued except at the written request of
the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolios may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolio, as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "VALUATION OF SHARES" at the time
of the next determination of net asset value after acceptance. Shares issued
by a Portfolio in exchange for securities will be issued at net asset value
determined as of the same time. All dividends, interest, subscription, or
other rights pertaining to such securities shall become the property of the
Portfolio and must be delivered to the Fund by the investor upon receipt from
the issuer. Securities acquired through in-kind purchase will be acquired for
investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are liquid securities and not subject to any restric-
tions upon
15
<PAGE>
their sale by the Portfolio under the Securities Act of 1933, or
otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value next determined after receipt of the re-
demption request. No charge is made for redemptions. Any redemption may be
more or less than the purchase price of the shares depending on the market
value of the investment securities held by the Portfolios.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
16
<PAGE>
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or the Sub-Transfer Agent do not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after the
receipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
determined by the SEC.
17
<PAGE>
If the Board of Directors determines that it would be detrimental to the
best interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by a Portfolio in lieu of cash
in conformity with applicable rules of the SEC. Investors may incur brokerage
charges on the sale of portfolio securities received in payment of redemp-
tions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE". An ex-
change into another UAM Funds Portfolio is a sale of shares and may result in
a gain or loss for income tax purposes. The Fund may modify or terminate the
exchange privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither
18
<PAGE>
exceeding the current asked prices nor less than the current bid prices. Quo-
tations of foreign securities in a foreign currency are converted to U.S. dol-
lar equivalents. The converted value is based upon the bid price of the for-
eign currency against U.S. dollars quoted by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost when the Board of
Directors determines that amortized cost reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating total return. Total return
figures are based on historical earnings and are not intended to indicate fu-
ture performance.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report contact the UAM Funds Service Center at the address
or telephone number on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolios will normally distribute them
annually.
19
<PAGE>
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of each Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
Rice, Hall, James & Associates was founded in 1974 and is located at 600
West Broadway, Suite 1000, San Diego, CA 92101. The Adviser is a wholly-owned
subsidiary of United Asset Management Corporation ("UAM") and pro-
20
<PAGE>
vides investment management services to individual and institutional invest-
ors. As of the date of this Prospectus, the Adviser had over $1 billion in as-
sets under management.
Under Investment Advisory Agreements (the "Agreements") with the Fund, dated
as of January 24, 1994 for the Small Cap Portfolio and September 16, 1996 for
the Small/Mid Cap Portfolio, the Adviser, subject to the control and supervi-
sion of the Fund's Board of Directors and in conformance with the stated in-
vestment objective and policies of each Portfolio, manages the investment and
reinvestment of the assets of the Portfolios. In this regard, it is the re-
sponsibility of the Adviser to make investment decisions for each Portfolio
and to place purchase and sale orders for each Portfolio's investments.
The investment professionals responsible for the day-to-day management of
the Portfolios are as follows:
SAMUEL R. TROZZO is Chairman of the Adviser with over thirty-six years' in-
vestment experience. Prior to founding Rice, Hall, James & Associates in 1974,
Mr. Trozzo was Vice President and Senior Investment Officer of Southern Cali-
fornia First National Bank. He is a former member of the State of California
Board of Administration/Investment Committee Public Employees Retirement Sys-
tem. He is a graduate of Kent State University.
THOMAS W. MCDOWELL, JR. is President and Chief Executive Officer of the Ad-
viser with over fifteen years' investment experience. Mr. McDowell joined
Rice, Hall, James in 1984. Prior to that time, he was Investment Officer, Se-
curity Analyst and Portfolio Manager at California First Bank. He earned his
B.A. degree from the University of California, Los Angeles and his M.B.A. from
San Diego State University.
DAVID P. TESSMER is Partner and Co-Director of Research of the Adviser with
thirty years' investment experience. Prior to joining Rice, Hall, James in
1986, Mr. Tessmer was Vice President and Senior Portfolio Manager at The Pa-
cific Century Group, San Diego. He earned his B.S. degree in Investment Man-
agement at Northwestern University and his M.B.A. in Finance at Columbia Grad-
uate School of Business.
TIMOTHY A. TODARO is Partner and Co-Director of Research of the Adviser with
sixteen years' investment experience. Mr. Todaro joined Rice, Hall, James in
1983. Prior to that time, he was Senior Investment Analyst at Comerica Bank,
Detroit, Michigan. Mr. Todaro earned his B.A. in Economics at the University
of California, San Diego and his M.B.A. degree in Finance/International Busi-
ness at the University of Wisconsin, Madison. He is a Chartered Financial Ana-
lyst.
GARY S. RICE is Partner of the Adviser with thirteen years' investment expe-
rience. Mr. Rice was an Account Administrator with the Trust Division at Fed-
erated
21
<PAGE>
Investors, Inc., Pittsburgh, Pennsylvania prior to joining Rice, Hall, James
in 1983. He earned his B.A. degree in Economics/Business Administration at
Vanderbilt University.
MICHELLE P. CONNELL is Partner of the Adviser with twelve years' investment
experience. Prior to joining Rice, Hall, James in 1995, she was Senior Invest-
ment Analyst with Linsco/Private Ledger. Previously, she was the director of
Finance and Operations at the San Diego Natural History Museum. Ms. Connell
has a B.A. degree in accounting from Seattle University and her M.B.A. from
San Diego State University. She is a level III Chartered Financial Analyst
candidate.
As compensation for the services rendered by the Adviser under the Agree-
ments, the Portfolios pay the Adviser annual fees, in monthly installments,
calculated by applying the following annual percentage rates to the Portfo-
lios' average daily net assets for the month:
<TABLE>
<S> <C>
Rice, Hall, James Small Cap Portfolio.................................. 0.75%
Rice, Hall, James Small/Mid Cap Portfolio.............................. 0.80%
</TABLE>
Although the advisory fee rates payable by the Portfolios are higher than
the rates payable by most mutual funds, the Fund believes they are comparable
to the rates paid by many other funds with similar investment objectives and
policies and are appropriate for these Portfolios in light of their investment
objectives.
The Adviser has agreed to waive all or part of its advisory fee and to as-
sume as the Adviser's own expense operating expenses otherwise payable by the
Small Cap Portfolio to keep its total annual operating expenses from exceeding
1.40% of its average daily net assets. The Adviser has voluntarily agreed to
waive all or part of its advisory fee and to assume as the Adviser's own ex-
pense operating expenses otherwise payable by the Small/Mid Cap Portfolio, if
necessary, in order to keep its total annual operating expenses from exceeding
1.25% of its average daily net assets. The Fund will not reimburse the Adviser
for advisory fees waived or expenses that the Adviser may bear on behalf of
the Portfolios for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares. Payments
made for any of these purposes may be made from its revenues, its profits or
any other source available to it. When such service arrangements are in ef-
fect, they are made generally available to all qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder
22
<PAGE>
services of its Consulting Group and receives .15 of 1% of the daily net asset
value of Institutional Class Shares held by Smith Barney's eligible customer
accounts in addition to amounts payable to all selling dealers.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of UAM, is re-
sponsible for performing and overseeing administrative, fund accounting, divi-
dend disbursing and transfer agent services provided to the Fund and its Port-
folios. UAMFSI's principal office is located at 211 Congress Street, Boston,
MA 02110. UAMFSI has subcontracted some of these services to Chase Global
Funds Services Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, by
a Mutual Funds Service Agreement dated April 15, 1996. CGFSC is located at 73
Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The following Portfolio specific fees are calculated from the
aggregate net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Rice, Hall, James Small Cap Portfolio.................................. 0.04%
Rice, Hall, James Small/Mid Cap Portfolio.............................. 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11% of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
The Distributor, a wholly-owned subsidiary of UAM with its principal office
located at 211 Congress Street, Boston, Massachusetts 02110, distributes the
shares of the Fund. Under the Distribution Agreement (the "Agreement"), the
Distributor, as agent of the Fund, agrees to use its best efforts as sole dis-
tributor of the Fund's shares. The Distributor does not receive any fee or
other compensation
23
<PAGE>
under the Agreement with respect to the shares offered in this Prospectus. The
Agreement continues in effect so long as such continuance is approved at least
annually by the Fund's Board of Directors. Those approving the Agreement must
include a majority of Directors who are neither parties to the Agreement nor
interested persons of any such party. The Agreement provides that the Fund
will bear the costs of the registration of its shares with the SEC and various
states and the printing of its prospectuses, SAIs and reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each Portfolio. The Agreements direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of research, statistical and pric-
ing services these brokers provide to the Portfolios in addition to required
broker services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients. Although not a typical practice, the Adviser may place portfo-
lio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series or classes of shares of common stock and to classify or reclassify any
unissued shares without further action by shareholders.
24
<PAGE>
At its discretion, the Board of Directors may create additional Portfolios
and classes of shares. The shares of each Portfolio are fully paid and nonas-
sessable, and have no preference as to conversion, exchange, dividends, re-
tirement or other features and no pre-emptive rights. They have noncumulative
voting rights, which means that holders of more than 50% of shares voting for
the election of Directors can elect 100% of the Directors. A shareholder is
entitled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his name on the books of the Fund.
As of December 6, 1996, Juanita Whisenand, Trustee for Whisenand Family
Trust, La Jolla, CA, held of record 26.8% of the outstanding share of Rice,
Hall, James Small/Mid Cap Portfolio for which beneficial ownership is dis-
claimed or presumed disclaimed. The persons or organizations owning 25% or
more of the outstanding shares of a Portfolio may be presumed to "control" (as
that term is defined in the 1940 Act) such Portfolio. As a result, those per-
sons or organizations could have the ability to vote a majority of the shares
of the Portfolio on any matter requiring the approval of shareholders of such
Portfolio.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters to the extent required by
the undertaking.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund and
audits its financial statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
25
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
26
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
27
<PAGE>
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
28
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Rice, Hall, James & Associates
600 West Broadway, Suite 1000
San Diego, CA 92101
(619) 239-9005
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
SAMI Preferred Stock Income Portfolio
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
SAMI
PREFERRED STOCK
INCOME PORTFOLIO
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
SAMI PREFERRED STOCK INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: SPECTRUM ASSET MANAGEMENT, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios"), each of which has different investment objectives and invest-
ment policies. The SAMI Preferred Stock Income Portfolio currently offers only
one class of shares. The securities offered in this Prospectus are Institu-
tional Class Shares of one diversified, no-load Portfolio of the Fund managed
by Spectrum Asset Management, Inc.
SAMI PREFERRED STOCK INCOME PORTFOLIO. The objective of the Portfolio is to
provide a high level of dividend income consistent with capital preservation.
To achieve its objective, the Portfolio will invest primarily in a diversified
portfolio of utility preferred securities combined with a constant cross-hedge
using U.S. Government securities futures. The Portfolio also expects to invest
significantly in bank preferred securities. In addition, the Portfolio's In-
vestment Adviser intends to manage the Portfolio to maximize income qualifying
for the dividends received deduction under the Internal Revenue Code of 1986.
There can be no assurance that the Portfolio will meet its stated objective.
Keep this Prospectus for future reference. It contains information you
should know before you invest. A "Statement of Additional Information" (SAI)
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI,
contact the UAM Funds Service Center at the address or telephone number above.
THIS SECURITY HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objective....................................................... 5
Investment Policies........................................................ 6
Other Investment Policies.................................................. 9
Investment Limitations..................................................... 13
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 16
Shareholder Services....................................................... 18
Valuation of Shares........................................................ 19
Performance Calculations................................................... 19
Dividends, Capital Gains Distributions and Taxes........................... 20
Investment Adviser......................................................... 21
Administrative Services.................................................... 25
Distributor................................................................ 26
Portfolio Transactions..................................................... 26
General Information........................................................ 27
UAM Funds -- Institutional Class Shares.................................... 29
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolio would incur. However, transaction fees may be charged if a broker-
dealer or other financial intermediary deals with the Fund on your behalf.
(See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SAMI PREFERRED
STOCK INCOME PORTFOLIO
----------------------
<S> <C>
Sales Load Imposed on Purchases....................... NONE
Sales Load Imposed on Reinvested Dividends............ NONE
Deferred Sales Load................................... NONE
Redemption Fees....................................... NONE
Exchange Fees......................................... NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SAMI PREFERRED
STOCK INCOME PORTFOLIO
----------------------
<S> <C>
Investment Advisory Fees............................ 0.70%
Administrative Fees................................. 0.28%
12b-1 Fees.......................................... NONE
Distribution Costs.................................. NONE
Other Expenses...................................... 0.22%
Advisory Fees Waived and Expenses Assumed........... (0.21%)
Total Operating Expenses (after fee waivers and
expenses assumed.................................. 0.99%*
</TABLE>
- -----------
* The annualized Total Operating Expenses excludes the effect of expense off-
sets. If expense offsets were included, the annualized Total Operating Ex-
penses would not be affected.
The table above shows the various fees and expenses that an investor would
bear directly or indirectly. The expenses and fees listed above are based on
the Portfolio's operations during the fiscal year ended October 31, 1996, ex-
cept that Adminstrative Fees have been restated to reflect current fees. See
"ADMINISTRATIVE SERVICES" herein and in the SAI.
The Adviser has voluntarily agreed to waive its advisory fees and to assume
expenses otherwise payable by the Portfolio, in order to reduce the Portfo-
lio's expense ratio. As of the date of this Prospectus, the Adviser has agreed
to keep the Portfolio's total annual operating expenses, after the effect of
expense offset arrangements, from exceeding 0.99% of its average daily net as-
sets. The Fund will
1
<PAGE>
not reimburse the Adviser for any advisory fees that are waived or Portfolio
expenses that the Adviser may bear on behalf of the Portfolio for a given fis-
cal year.
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the ta-
ble above, the Portfolio charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
SAMI Preferred Stock Income Portfolio........... $10 $32 $55 $122
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Spectrum Asset Management, Inc. (the "Adviser"), is an investment counseling
firm founded in 1987. The Adviser presently manages over $750 million in as-
sets for institutions, pension plans and endowments. (See "INVESTMENT ADVIS-
ER.")
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor"), to investors at net asset value without a sales commission.
Share purchases may be made by sending investments directly to the Fund. The
minimum initial investment is $2,500. The minimum for subsequent investments
is $100. The minimum initial investment for IRA accounts is $500. The minimum
initial investment for spousal IRA accounts is $250. Certain exceptions to the
initial or minimum investment amounts may be made by the officers of the Fund.
(See "PURCHASE OF SHARES.").
DIVIDENDS AND DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income in monthly dividends. Any realized net capital gains will also be
distributed with the last dividend distribution for the fiscal year. Distribu-
tions will be reinvested in each Portfolio's shares unless an investor elects
to receive cash distributions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS
AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares may be redeemed without cost at any time, at the Portfolio's net as-
set value next determined after receipt of the redemption request. The redemp-
tion price may be more or less than the purchase price. (See "REDEMPTION OF
SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The Portfolio's Adviser intends to hedge a major portion of the Portfolio's
preferred and fixed income securities investments through the use of deriva-
tives including futures contracts, options on futures contracts and options on
U.S. Government securities to substantially reduce the price volatility of the
Portfolio generally due to interest rate changes.
The Adviser has successfully operated an investment program similar to the
Portfolio's for its individual institutional clients since its inception in
1987. A portfolio of preferred stocks hedged with U.S. Government securities
futures and options is a "cross" hedge and not a "perfect" hedge, and, there-
fore, an absolute correlation does not exist between the price volatility of
the portfolio of preferred securities and the hedging instruments. Preferred
securities prices may change more or less rapidly than bond or note futures
prices causing a distortion in the price relationship. The Adviser will con-
tinuously analyze a variety of factors including average investment rates,
premium and discount prices of the preferred stocks, the underlying credits of
the issuer, as well as market volatility and basis risk. The use of futures
and options might result in a poorer overall performance for the Portfolio
than if it had not engaged in such transactions.
Prospective investors should consider two other factors that could affect
the rate of return of the Portfolio. By concentrating its investments in the
utilities industry, the Portfolio is exposed to changes in and possible ad-
verse economic and industry conditions over time, including e.g., changes in
government regulations, resource depletion, changing technologies, and credit
market constraints.
Prospective investors should consider the following factors: (1) The Portfo-
lio may invest in repurchase agreements which entail a risk of loss should the
seller default on its transaction. (See "REPURCHASE AGREEMENTS."); (2) The
Portfolio may purchase securities on a when-issued basis. Securities purchased
on a when-issued basis may decline or appreciate in market value prior to
their actual delivery to the Portfolio. (See "WHEN-ISSUED, FORWARD DELIVERY
AND DELAYED SETTLEMENT SECURITIES."); (3) The Portfolio may lend its invest-
ment securities which entails a risk of loss should the borrower fail finan-
cially. (See " LENDING OF SECURITIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides selected per share information for a share of
the SAMI Preferred Stock Income Portfolio outstanding throughout the periods
presented. It is part of the Portfolio's Financial Statements which are in-
cluded in the Portfolio's 1996 Annual Report to Shareholders. The Financial
Statements are incorporated into the Portfolio's SAI. The Portfolio's Finan-
cial Statements have been audited by Price Waterhouse LLP. Their unqualified
opinion on the Financial Statements is also incorporated into the Portfolio's
SAI. Please read the following information in conjunction with the Portfolio's
1996 Annual Report to Shareholders.
<TABLE>
<CAPTION>
JUNE 23**, 1992 YEARS ENDED OCTOBER 31,
TO OCTOBER 31, ----------------------------
1992 1993 1994 1995 1996
--------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.09 $ 9.98 $ 9.29 $ 9.21
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income................ 0.14 0.60 0.60 0.67 0.58
Net Realized and
Unrealized Gain
(Loss)................ 0.03 (0.07) (0.71) (0.08) 0.14
------- ------- ------- ------- -------
Total from Investment
Operations.......... 0.17 0.53 (0.11) 0.59 0.72
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment
Income................ (0.08) (0.61) (0.58) (0.67) (0.59)
In Excess of Net
Realized Gain......... (0.03) -- -- --
------- ------- ------- ------- -------
Total Distributions.. (0.08) (0.64) (0.58) (0.67) (0.59)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.09 $ 9.98 $ 9.29 $ 9.21 $ 9.34
======= ======= ======= ======= =======
TOTAL RETURN............ 1.70 %+ 5.47 %+ (1.15)% 6.67 % 8.17%+
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands).... $23,904 $49,671 $91,221 $33,789 $27,528
Ratio of Expenses to
Average Net Assets.... 0.97 %* 0.82 % 0.89 % 0.98 % 0.99%
Ratio of Net
Investment Income to
Average Net Assets.... 6.36 %* 6.10 % 6.45 % 7.03 % 6.26%
Portfolio Turnover
Rate.................. 16 % 144 % 65 % 44 % 77%
Average Commission Rate
#...................... N/A N/A N/A N/A $0.0302
Voluntary Waived Fees
and Expenses Assumed
buy the Adviser Per
Share.................. $ 0.02 $ 0.01 N/A N/A $ 0.02
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A 0.98% 0.99%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain expenses not been waived
and expenses assumed during the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
INVESTMENT OBJECTIVE
The objective of the Portfolio is to provide a high level of current divi-
dend income consistent with capital preservation. The Portfolio will invest
primarily in a professionally managed, diversified portfolio of investment
grade, utility preferred securities which will be hedged with U.S. Government
securities futures to minimize capital fluctuations of the Portfolio caused by
interest rate movements. The Portfolio's Adviser also expects to invest a sig-
nificant portion of the Portfolio's assets in bank preferred securities. The
Portfolio's objective is fundamental and may be changed only upon approval by
vote of the holders of the majority of the Portfolio's shares. There can be no
assurance that the Portfolio will achieve its objective.
INVESTMENT POLICIES
Spectrum Asset Management, Inc., the Adviser, seeks to achieve the Portfo-
lio's objective by investing primarily in investment grade, utility preferred
securities of varying maturities. The Adviser also expects to invest a signif-
icant portion of the Portfolio's assets in bank preferred securities. Invest-
ment grade preferred stocks are generally considered to be those having a rat-
ing of at least "Baa" or higher by Moody's Investors Service, Inc. ("Moody's")
or "BBB-" by Standard & Poor's Corporation ("S&P"). Although bonds rated Baa
or BBB- may possess speculative characteristics and may be more sensitive to
changes in the economy and the financial condition of issuers than higher
rated bonds. As a matter of operating policy, the Adviser will invest at least
60% of the Portfolio's assets in securities rated A or better by at least one
rating agency. In the event of a downgrade of the rating to below investment
grade of a stock held in the Portfolio, the Adviser will attempt to liquidate
the particular issue within a 90 day period. The Portfolio will not invest in
securities of companies that have a bond rating below investment grade, con-
vertible preferred securities, or any type of common stock.
When selecting specific preferred stock issues, the Adviser considers not
only current yield but all variables that would affect the value of a security
(i.e., sinking fund provisions, call features, redemption characteristics and
credit quality). The Adviser also carefully analyzes the underlying fundamen-
tals of the issuer, with particular emphasis (for utility securities) on in-
terest and dividend coverage, the utility customer mix, regulatory climate,
energy sources, quality of management, non-utility diversification, if any,
and construction expenditures relative to internal cash generation. While the
investment philosophy of the Adviser is primarily one of buy and hold, the Ad-
viser will seek to optimize total returns by trading the Portfolio when it be-
lieves market, economic or other conditions make it advantageous to do so, for
example, by taking advantage of market or pricing inefficiencies of certain
securities to improve dividend income without eroding capital. At the time
this prospectus was prepared, the Adviser attempted to structure the Portfolio
to take maximum advantage of potential spread tightening due to the increasing
6
<PAGE>
scarcity value of dividend received deduction ("DRD") qualifying preferred
stock. As new preferred types of securities have been developed, the supply of
traditional DRD preferred securities has decreased. In addition, the Adviser
is focusing on issues either trading at a discount with strong call protection
or with attractive yields to call. Changes in the DRD and preferred securities
markets may require modification of the Portfolio's investment policies from
time to time. Investors will receive advance notice of significant policy
changes.
The Adviser will invest at least 65% of the Portfolio's total assets in
utility preferred stocks. As a result, the Portfolio is legally deemed to be
"concentrating" its investments in utility securities, meaning that normally,
under applicable law, at least 25% of the Portfolio's total assets must be in-
vested in utility securities. The Adviser also invests a significant portion
of the Portfolio's assets in bank preferred securities. However, investments
in bank securities will be limited to less than 25% of the Portfolio's total
assets. The utilities industry includes companies engaged in the manufacture,
production, generation, transmission and sale of gas and electric energy. It
also includes issuers engaged in the communications field, including entities
such as telephone, telegraph, satellite, microwave and other companies provid-
ing communication facilities for the public benefit. The bank industry in-
cludes companies that provide financial services to consumers and industry.
Examples of companies in the banking field include commercial banks, savings
and loan associations, and companies that span across these segments. Under
applicable regulations, the Portfolio may not invest more than 5% of its total
assets in the equity securities of any company that derives more than 15% of
its revenues from brokerage or investment management activities.
Preferred securities. The Adviser may invest the Portfolio's assets in all
types of preferred securities including fixed-dividend, adjustable-rate pre-
ferred stocks, perpetual preferred stock and private placement fixed-dividend
sinking fund preferred stock. Adjustable rate preferred stock is preferred
stock that has a dividend rate which is adjusted periodically, typically every
three months, to reflect changes in the general level of interest rates. The
dividend rate on an adjustable rate preferred stock is determined by applying
an adjustment formula, established at the time the stock is issued, which gen-
erally involves a fixed relationship to rates on specific classes of debt se-
curities issued by the U.S. Treasury, with limits on the minimum and maximum
dividend rates that may be paid. Sinking fund preferred stock provides for the
issuer to redeem the outstanding preferred stock according to a predetermined
schedule. Perpetual preferred securities have no sinking fund or maturity fea-
tures, but include a call feature. In order to maintain liquidity of the Port-
folio, the Adviser, at its discretion, may from time to time invest a portion
of the Portfolio's assets in U.S. Treasury bills or similar short-term instru-
ments. (See "SHORT-TERM INVESTMENTS.") Under normal conditions, short-term in-
vestments may comprise up to 35% of the Portfolio's total assets. For tempo-
rary defensive purposes, when economic, market or other conditions so warrant,
the Ad-
7
<PAGE>
viser may invest up to all of the Portfolio's total assets in short-term in-
vestments. In such a situation, income dividends paid by the Portfolio quali-
fying for the dividends received deduction would be greatly reduced.
Preferred stock has a preference over common stock in liquidation (and gen-
erally dividends as well) but is subordinated to the liabilities of the issuer
in all respects. As a general rule, the market value of preferred stock with a
fixed dividend rate and no conversion element varies inversely with interest
rates and perceived credit risk. Because preferred stock is junior to debt se-
curities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield character-
istics.
Cross-hedging strategy. The Adviser does not make interest rate projections
and seeks to preserve capital by implementing and maintaining a constant
cross-hedge. The Portfolio's preferred and fixed income securities investments
are subject to market fluctuation based largely, but not exclusively on the
securities' sensitivity to changes in interest rates. By maintaining a hedge
consisting of U.S. Government futures contracts, options on such futures con-
tracts, and options, the Adviser seeks to reduce interest rate related risk.
Futures contracts provide for the sale by one party and purchase by another
party of a specified amount of a security or financial instrument, at a speci-
fied future time and price. An option is a legal contract that gives the
holder the right to buy or sell a specified amount of the underlying security
or futures contract at a fixed or determinable price upon the exercise of the
option. A call option conveys the right to buy and a put option conveys the
right to sell a specified quantity of the underlying security or futures con-
tract.
The Adviser implements the cross-hedge strategy by monitoring the correla-
tion between the preferred and fixed income securities and the U.S. Government
futures and options markets. Depending upon the Adviser's analysis, futures
and options can be used in a variety of ways. A typical use is to establish a
short position in Government futures contracts or options to offset the prin-
cipal fluctuations of the preferred stock portfolio caused by interest rate
movements. This strategy enables the Adviser to invest across the yield curve,
realizing higher dividend yields, while managing interest rate volatility. The
formula used by the Adviser to analyze and guide its hedging investments is
derived by evaluating the history of price movements in both the preferred
stock, fixed income and U.S. Government securities, futures and options mar-
kets. The Adviser uses sophisticated quantitative analytical techniques, in-
cluding regression analyses and price volatility analyses, to create the nec-
essary statistical data to monitor and adjust the hedging investments. Natu-
rally, historical price movements may bear no relationship to future price
movements.
The Portfolio's preferred and fixed income securities portfolio and its
futures and options positions are intended to produce offsetting capital gains
and losses as
8
<PAGE>
interest rates change. As the goal is to achieve a netting effect of capital
gains and losses, the Portfolio's rate of return should reflect primarily the
dividend and interest income it receives. The hedging positions that the Port-
folio expects to hold normally appreciate in value when interest rates rise.
If any gain on these instruments were realized and used by the Portfolio to
acquire additional preferred stocks, an increase in the Portfolio's dividend
income would result. Conversely, should interest rates decline, these hedging
positions would be expected to decline in value and, if necessary, the sale of
some of the Portfolio's holdings of preferred stocks to finance hedge losses
would cause a decrease in the Portfolio's dividend income. Thus, the success-
ful use of hedging transactions, combined with the fact that dividend rates on
fixed rate preferred stocks do not change in response to changes in interest
rates, should make the Portfolio's income from the Portfolio's fixed rate pre-
ferred stocks increase in rising interest rate environments while being rela-
tively resistant to the impact of significant declines in interest rates. The
Portfolio's use of hedging instruments and the availability of gains for in-
vestment in additional shares of preferred stock may be limited by the re-
strictions and distribution requirements imposed on the Portfolio in connec-
tion with its qualification as a regulated investment company under the Code.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.") The Adviser does not
believe that these restrictions and requirements will materially adversely af-
fect the management of the Portfolio or the ability of the Portfolio to
achieve its investment objective.
The Portfolio may enter into futures and options contracts provided that not
more than 5% of the Portfolio's assets are at the time of acquisition required
as margin deposits or premiums to secure obligations under such contracts. The
primary risks associated with the use of futures and options are (1) imperfect
correlation between the change in market value of the securities held by a
Portfolio and the prices of futures and options relating to the stocks or
bonds purchased or sold by the Portfolio; and (2) possible lack of a liquid
secondary market for a futures contract or option and the resulting inability
to close a futures position which could have an adverse impact on the Portfo-
lio's ability to hedge. In the opinion of the Directors, the risk that the
Portfolio will be unable to close out a futures position or options contract
will be minimized by only entering into futures contracts or options transac-
tions traded on national exchanges and for which there appears to be a liquid
secondary market. For additional information regarding futures and options
contracts, see the SAI.
The development of hedging techniques and the management of individual port-
folios for institutions have given the Adviser substantial experience in car-
rying out this investment strategy.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets
9
<PAGE>
in domestic and foreign money market instruments including certificates of de-
posit, bankers' acceptances, time deposits, U.S. Government obligations, U.S.
Government agency securities, short-term corporate debt securities, and com-
mercial paper rated A-1 or A-2 by Standard & Poor's Corporation or Prime-1 or
Prime-2 by Moody's Investors Service, Inc. or if unrated, determined by the
Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price if such securities mature in less than one year.
The Administrator and the Adviser will mark to market daily the value of the
securities purchased. The use of repurchase agreements involves certain risks.
For example, a default by the seller of the agreement may cause a Portfolio to
experience a loss or delay in the liquida
10
<PAGE>
tion of the collateral securing the repurchase agreement. The Portfolio might
also incur disposition costs in liquidating the collateral. While the Fund's
management acknowledges these risks, it is expected that they can be con-
trolled through stringent security selection criteria and careful monitoring
procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into joint repurchase agree-
ments, a Portfolio may incur lower transactions costs and earn higher rates of
interest on joint repurchase agreements. Each Portfolio's contribution would
determine its return from a joint repurchase agreement. (See "SHORT TERM IN-
VESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe the set-
tlement of a securities transaction in the secondary market, which will occur
sometime in the future. No payment or delivery is made by the Portfolio until
it receives payment or delivery from the other party to any of the above
transactions. The Portfolio will maintain a separate account of cash or liquid
securities at least equal to the value of purchase commitments until payment
is made. Such segregated securities will either mature or, if necessary, be
sold on or before the settlement date. Typically, no income accrues on securi-
ties purchased on a delayed delivery basis prior to the time delivery is made,
although the Portfolio may earn income on securities it has
11
<PAGE>
deposited in a segregated account. The Portfolio may engage in when-issued
transactions to obtain what is considered to be an advantageous price and
yield at the time of the transaction; however, the Portfolio does not receive
income on such investments until actual issuance of the securities.
The Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices-not to increase
its investment leverage.
INVESTMENT COMPANIES
The Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has been granted permission by the SEC to allow each of its Portfo-
lios, for cash management purposes, to invest the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory and any other fees earned as a result of the Portfolio's investment in
the DSI Money Market Portfolio. The investing Portfolio will bear expenses of
the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
PORTFOLIO TURNOVER
Higher rates of portfolio turnover may result in the realization of capital
gains. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES" for more infor-
mation on taxation). The Portfolio will normally not engage in short-term
trading, but reserves the right to do so. The table set forth in "Financial
Highlights" presents the Portfolio's historical portfolio turnover ratios.
INVESTMENT LIMITATIONS
The Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
12
<PAGE>
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors or parent companies)
a continuous operating history of less than 3 years;
(d) make loans except (i) by purchasing bonds, debentures or similar obli-
gations which are publicly distributed, (including repurchase agree-
ments provided, however, that repurchase agreements maturing in more
than seven days, together with securities which are not readily mar-
ketable, will not exceed 10% of a Portfolio's total assets), and (ii)
by lending its portfolio securities to banks, brokers, dealers and
other financial institutions so long as such loans are not inconsis-
tent with the 1940 Act or the rules and regulations or interpretations
of the SEC thereunder;
(e) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% of the
Portfolio's gross assets valued at the lower of market or cost, and
purchase additional securities when the Portfolio's borrowings exceed
5% of its total gross assets; and
(f) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
Except as specified above and as described under "INVESTMENT POLICIES" and
"OTHER INVESTMENT POLICIES," the Portfolio's investment policies are not funda-
mental and the Fund's Directors may change such policies without an affirmative
vote of a "majority of the outstanding voting securities of the Portfolio," as
defined in the 1940 Act.
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Funds Distributor, Inc. (the
"Distributor"), without a sales commission, at the net asset value per share
next determined after an order is received by the Fund and payment is received
by the Custodian. (See "VALUATION OF SHARES.") The minimum initial investment
required is $2,500. The minimum initial investment for IRA accounts is $500.
Minimum initial investment for spousal IRA accounts is $250. Certain exceptions
may be determined by the officers of the Fund.
Shares of the Portfolio may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase or
redemption of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any
13
<PAGE>
such fees and information regarding any additional or different purchase or
redemption conditions. Shareholders who are customers of Service Agents should
consult their service agent for information regarding these fees and condi-
tions. Amounts paid to Service Agents may include transaction fees and/or
service fees paid by the Fund from the Fund assets attributable to the Service
Agent, and which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled to receive compensation for selling or servicing Portfolio shares may
receive different compensation with respect to one particular class of shares
over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior to the close of its business day to receive that day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it, together with a check
payable to UAM Funds, to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (monies
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account
name, address, telephone number, social security or taxpayer iden-
tification number, the Portfolio selected, the amount being wired
and the
14
<PAGE>
name of the bank wiring the funds. An account number will then be
provided to you. Next
. Instruct your bank to wire the specified amount to the Fund's Cus-
todian;
The Chase Manhattan Bank
ABA #02100-0021
UAM Funds
DDA Acct. #9102772952
Ref: SAMI Preferred Stock Income Portfolio
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on
the form. Federal Funds purchases will be accepted only on a day on
which both the NYSE and the Custodian Bank are open for business.
. For wire purchases arranged through Spectrum Asset Management,
Inc., properly completed Applications may be submitted through
Spectrum. Federal Funds purchases will be accepted only on a day on
which the New York Stock Exchange and the Custodian Bank are open
for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares may be purchased at net asset value by mailing a
check to the UAM Funds Service Center (payable to UAM Funds) at the above ad-
dress or by wiring monies to the Custodian Bank using the instructions out-
lined above. When making additional investments, be sure that your account
number, account name, and the Portfolio to be purchased are specified on the
check or wire.
Prior to wiring additional investments, notify the UAM Funds Service Center
by calling the number on the cover of this Prospectus. Mail orders should in-
clude, when possible, the "Invest by Mail" stub which accompanies any Fund
confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional
15
<PAGE>
shares will not be issued. Certificates for whole shares will not be issued
except at the written request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining to such securities shall become the property of the Portfolio and must
be delivered to the Fund by the investor upon receipt from the issuer. Securi-
ties acquired through an in-kind purchase will be acquired for investment and
not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are liquid securities and not subject to any restric-
tions upon their sale by the Portfolio under the Securities Act of
1933, or otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed by mail or telephone, without cost
at any time, at the net asset value of the Portfolio next determined after re-
ceipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of your shares depending
on the market value of the investment securities held by the Portfolio.
16
<PAGE>
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or the Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
17
<PAGE>
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
The purpose of signature guarantees is to verify the identity of the party
who has authorized a redemption. Signature guarantees will be accepted from
any eligible guarantor institution which participates in a signature guarantee
program. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities associa-
tions, clearing agencies and savings associations. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital
of at least $100,000. Credit unions must be authorized to issue signature
guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven business days af-
ter the receipt of the request, or earlier if required under applicable law.
The Fund may suspend the right of redemption or postpone the date at times
when both the NYSE and Custodian Bank are closed, or under any emergency cir-
cumstances as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the SEC. Investors may
incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you
18
<PAGE>
are interested. Exchanges can only be made with Portfolios that are qualified
for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE". An ex-
change into another UAM Funds Portfolio is a sale of shares and may result in
a gain or loss for income tax purposes. The Fund may modify or terminate the
exchange privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds, other fixed income securities and fixed dividends are valued accord-
ing to the broadest and most representative market, which will ordinarily be
the over-the-counter market. Bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities.
Securities purchased with remaining maturities of 60 days or less are valued
at amortized cost, using methods approved by the Board of Directors.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods approved by the Fund's Directors.
19
<PAGE>
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A
cumulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report, contact the UAM Funds Service Center at the address
or phone number on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in monthly dividends. If any
net capital gains are realized, each Portfolio will normally distribute them
annually. All dividends and capital gains distributions will be automatically
reinvested in additional shares of the Portfolio unless the Fund is notified
in writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
The Portfolio intends to qualify each year as a "regulated investment compa-
ny" under subchapter M of the Internal Revenue Code of 1986, as amended, for
federal income tax purposes and to meet all other requirements that are neces-
sary for it (but not its shareholders) to be exempt from federal taxes on in-
come and
20
<PAGE>
gains paid to shareholders in the form of dividends. To do this, the Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by the Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce the Port-
folio's dividends but are included in the taxable income reported on your tax
statement if the Portfolio qualifies for this tax treatment and elects to pass
it through to you. Consult a tax adviser for more information regarding deduc-
tions and credits for foreign taxes.
INVESTMENT ADVISER
Spectrum Asset Management, Inc. (the "Adviser") is a Connecticut corporation
formed in 1987 and is located at Four High Ridge Park, Stamford, CT 06905. The
Adviser is a wholly-owned subsidiary of United Asset Management Corporation
and provides investment management services to corporations, pension plans,
and endowments. As of the date of this Prospectus, the Adviser had in excess
of $750 million in assets under management. Since its inception, the Adviser
has concentrated its advisory services in the management of diversified port-
folios of fixed-dividend, preferred stocks for its clients. Most portfolios
have been hedged with U.S. Government securities futures and options to mini-
mize principal fluctuations of the portfolios caused by interest rate changes.
The Adviser is registered as a broker-dealer and investment adviser with the
Commission and is a member firm of the National Association of Securities Deal-
21
<PAGE>
ers, Inc. The Adviser is also registered with the Commodity Futures Trading
Commission and the National Futures Association and operates as a commodity
trading adviser and introducing broker.
Under an Investment Advisory Agreement dated as of May 18, 1992, the Adviser
manages the investment and reinvestment of the assets of the Portfolio. The
Adviser must adhere to the stated investment objectives and policies of the
Portfolios, and is subject to the control and supervision of the Fund's Board
of Directors.
As compensation for the services rendered by the Adviser under the Agree-
ment, the Portfolio pays the Adviser an annual fee, in monthly installments,
calculated by applying the following annual percentage rate to the Portfolio's
average daily net assets for the month: 0.70%.
The Adviser may assume expenses otherwise payable by the Portfolio, to re-
duce the Portfolio's expense ratio. As of the date of this Prospectus, the Ad-
viser has voluntarily agreed to keep the Portfolio's total annual operating
expenses from exceeding 0.99% of its average daily net assets. The Fund will
not reimburse the Adviser for any advisory fees that are waived or Portfolio
expenses that the Adviser may bear on behalf of the Portfolio for a given fis-
cal year.
In addition, the Adviser may compensate its affiliated companies for refer-
ring investors to the Portfolio. The Distributor, UAM, the Adviser, or any of
their affiliates, may, at its own expense, compensate a Service Agent or other
person for marketing, shareholder servicing, record-keeping and/or other serv-
ices performed with respect to the Fund, a Portfolio or any Class of Shares of
a Portfolio. Payments made for any of these purposes may be made from its rev-
enues, its profits or any other source available to it. When such service ar-
rangements are in effect, they are made generally available to all qualified
service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
All members of the Adviser's Professional Staff must have at minimum a bach-
elor's degree from a duly accredited institution of higher education and must
receive passing grades on the following exams:
1. General Securities Representative (Series 7);
2. Commodity Futures Associated Person-NFA (Series 3); and 3. Uniform Se-
curities Agent Exam (Blue Sky Law, Series 63).
22
<PAGE>
Below is a list of the professional staff of the Adviser.
SCOTT T. FLEMING -- Chairman of the Board of Directors, Chief Financial Of-
ficer, and one of the principals of Spectrum Asset Management, Inc. Mr.
Fleming was a Director and Principal of DBL Preferred Management, Inc., a
wholly-owned subsidiary of Drexel Burnham Lambert, Inc. Prior to joining DBL,
Mr. Fleming was a financial analyst with EG&G, Inc., where he was responsible
for all outside money managers as well as managing a significant Adjustable
Rate Preferred Stock portfolio. He is currently licensed as a
Financial/Operations Principal (Series 27), a General Securities Principal
(Series 24), Securities Registered Representative (Series 7), Blue Sky Law
(Series 63), and registered with the NFA as an Associated Person (Series 3)
with Spectrum Asset Management, Inc., CTA. M.B.A. Finance, Babson College,
B.S. Accounting, Bentley College.
MARK A. LIEB -- Director, President, Chief Executive Officer, and one of the
principals of Spectrum Asset Management, Inc. Director of the parent company,
United Asset Management Corporation. Mr. Lieb was a Founder, Director and
Partner of DBL Preferred Management, Inc., a wholly owned corporate cash man-
agement subsidiary of Drexel Burnham Lambert, Inc. He was instrumental in the
formation, continual development and execution of all aspects of the subsidi-
ary including portfolio management. Mr. Lieb's prior employment included the
development of the preferred stock trading desk at Mosley Hallgarten & Esta-
brook. He is a licensed Securities Representative (Series 7), Blue Sky Law
(Series 63), General Securities Principal (Series 24), and registered with the
NFA as an Associated Person (Series 3) with Spectrum Asset Management, Inc.,
CTA. M.B.A. Finance, University of Hartford; B.A. Economics, Central Connecti-
cut State College.
BERNARD M. SUSSMAN -- Senior Vice President of Spectrum Asset Management,
Inc. Prior to joining Spectrum, Mr. Sussman was with Goldman Sachs & Co. for
over 17 years. Mr. Sussman was a General Partner from 1990 to 1994, and man-
aged their Preferred Stock Department. He was responsible for all sales and
trading of fixed and adjustable rate preferred stocks, auction preferreds, and
all other preferred products. Mr. Sussman coordinated Goldman Sachs & Co.'s
effort through preferred specialists, including the general sales force. Addi-
tionally, Mr. Sussman interacted with the corporate finance department in de-
veloping and marketing new issues. Mr. Sussman continues to be a Limited Part-
ner of Goldman Sachs & Co. He is a licensed Securities Representative (Series
7), Blue Sky Law (Series 63), General Securities Principal (Series 24), Gen-
eral Securities Sales Supervisor, Branch Office Manager (Series 8), and regis-
tered with the NFA as an Associated Person (Series 3) with Spectrum Asset Man-
agement, Inc., CTA. M.B.A. Finance and B.S. Industrial Relations, Cornell Uni-
versity.
L. PHILIP JACOBY, IV -- Vice President -- Portfolio Management of Spectrum
Asset Management, Inc. Prior to joining Spectrum, Mr. Jacoby was a Senior In-
vestment Officer at USL Capital Corporation (a subsidiary of Ford Motor Corpo
23
<PAGE>
ration) and was a co-manager of a $600 million preferred stock portfolio and
Vice President, Institutional Sales at E.F. Hutton, Inc. He is currently li-
censed as a General Securities Representative (Series 7), Blue Sky Law (Series
63), a General Securities Principal (Series 24), a Municipal Securities Prin-
cipal (Series 53) and registered with the NFA as an Associated Person (Series
3) with Spectrum Asset Management, Inc., CTA. B.S, B.A., Finance, Boston Uni-
versity.
PATRICK G. HURLEY -- Hedge Manager. Mr. Hurley came to Spectrum Asset Man-
agement, Inc. from James Money Management, Inc. where he served as a Govern-
ment Securities Trader and Computer Specialist. Prior to joining James,
Mr. Hurley was with Oppenheimer & Co., Inc. where he held positions as an As-
sistant Trader Fixed -- Income and Programmer/Analyst. In both positions at
Oppenheimer, he was an integral part of the fixed income arbitrage group which
concentrated on the hedged trading of U.S. Treasury Bond and Note Futures. He
is currently a licensed General Securities Representative (Series 7), Blue Sky
Law (Series 63), and registered with the NFA as an Associated Person (Series
3) with Spectrum Asset Management, Inc., CTA. B.S. Electrical Engineering
(Computer Concentration), University of Notre Dame.
JEAN M. ORLANDO -- Assistant Vice President -- Controller. Ms. Orlando came
to Spectrum Asset Management, Inc. from DBL Preferred Management, Inc. where
she was operations manager. Prior to joining DBL Preferred Management, Ms. Or-
lando was employed by Drexel Burnham Lambert, Inc. where she acted as supervi-
sor of a private commodity trading operation. She is currently licensed as a
Securities Registered Representative (Series 7), Blue Sky Law (Series 63), and
registered with the NFA as an Associated Person (Series 3) with Spectrum Asset
Management, Inc., CTA. B.B.A. Public Accounting with honors, Baruch College.
MELISSA D. COPE -- Technical Analyst -- Special Projects. Ms. Cope came to
Spectrum Asset Management, Inc. from Mount Holyoke College where she spent two
years of her undergraduate career as a Computer Consultant. Prior to that,
Ms. Cope was a Database Consultant at Scanline Office Interiors in Honolulu,
Hawaii. Other prior work experience includes administrative and programming
positions at Hawaiian Telephone and Hawaiian Electric. She is currently li-
censed as a Securities Registered Representative (Series 7) and Blue Sky Law
(Series 63) with Spectrum Asset Management, Inc., CTA. A.B. Psychology with
honors, Mount Holyoke College.
LESLIE SWEEM -- Account Executive. Prior to her association with Spectrum
Asset Management, Inc., Ms. Sweem was a top Preferred Stock Specialist with
Salomon Brothers Inc. in New York. Prior to joining Salomon Brothers Inc., she
was an Assistant Vice President at Republic Bank Dallas where she was a For-
tune 1000 lending officer. She is currently licensed as a Securities Regis-
tered Representative (Series 7), Blue Sky Law (Series 63) and registered with
the NFA as an
24
<PAGE>
Associated Person (Series 3) with Spectrum Asset Management, Inc., CTA. B.S.
Business Administration, Kansas University.
TAMARA S. CROUSE -- Compliance Manager and Office Manager. Ms. Crouse came
to Spectrum Asset Management, Inc. from Saugatuck Associates, a venture capi-
tal firm, where she served as an Assistant (August 1992 to January 1994).
Prior to Saugatuck Associates, Ms. Crouse was employed by Service Corporation
International where she served as a Marketing Assistant and Financial Analyst
(August 1989 to August 1992). She is currently licensed as a Securities Repre-
sentative (Series 7), Blue Sky Law (Series 63) and registered with the NFA as
an Associated Person (Series 3) with Spectrum Asset Management, Inc., CTA.
M.B.A. Finance, University of Bridgeport; B.S. Geology (Concentration in Chem-
istry), State College of New York at Oneonta.
NANCY KRUG DRAY -- Part-Time Compliance Officer and Assistant to Portfolio
Manager. Ms. Dray came to Spectrum Asset Management, Inc. in July 1987. From
July 1987 through May 1989, Ms. Dray was Assistant Vice President --Trading
for Spectrum Asset Management, Inc. She is currently licensed as a Securities
Representative (Series 7), Blue Sky Law (Series 63), Municipal Securities
Principal (Series 53), and registered with the NFA as an Associated Person
(Series 3) with Spectrum Asset Management, Inc., CTA. B.S., Plattsburgh State
University.
Scott Fleming, Mark Lieb, Bernard Sussman, L. Phillip Jacoby, IV and Patrick
Hurley are primarily responsible for the day-to-day investment management of
the Portfolio. Scott Fleming and Mark Lieb have been primarily responsible
since its commencement of operations. Bernard Sussman, L. Phillip Jacoby, IV
and Patrick Hurley have been responsible since April 1995, January 1995 and
May 1994, respectively.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio-specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio-specific fee for the Portfolio is 0.06% of aggre-
gate net assets.
25
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined assets;
0.11 of 1% of the next $800 million of combined assets;
0.07 of 1% of combined assets in excess of $1 billion but less than $3
billion;
0.05 of 1% of combined assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
can increase by up to $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Distribution Agreement (the "Agreement"), the Distributor, as agent for the
Fund, agrees to use its best efforts as sole distributor of Fund shares. The
Distributor does not receive any fee or other compensation under the Agreement
with respect to the SAMI Preferred Stock Income Portfolio. The Agreement con-
tinues in effect so long as such continuance is approved at least annually by
the Fund's Board of Directors. Those approving the Agreement must include a
majority of Directors who are neither parties to such Agreement nor interested
persons of any such party. The Agreement provides that the Fund will bear the
costs of the registration of its shares with the SEC and various states and
the printing of its prospectuses, its SAI's and its reports to stockholders.
Shares of the Portfolio are also sold through the Adviser's brokerage division
pursuant to a selling-dealer agreement with the Distributor.
PORTFOLIO TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Portfolio and directs the Adviser to use its best efforts to obtain the best
available price and most favorable execution for all transactions of the Port-
folio. The Adviser may use its own brokerage facilities under procedures de-
signed to ensure that the charges for the transactions do not exceed usual and
customary levels. Such transactions and the procedures are supervised by the
Fund's Board of Directors.
If consistent with the interests of the Portfolio, the Adviser may select
brokers on the basis of the research, statistical and pricing services they
provide to the Portfolio in addition to required Adviser services. Such bro-
kers may be paid a higher commission than that which another qualified broker
would have charged for effecting the same transaction, provided that such com-
missions are paid in
26
<PAGE>
compliance with the Securities Exchange Act of 1934, as amended, and that the
Adviser determines in good faith that such commission is reasonable in terms
either of the transaction or the overall responsibility of the Adviser to the
Portfolio and the Adviser's other clients.
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who recommend the Portfolio or who act as agents in
the purchase of shares of the Portfolio for their clients.
If a purchase or sale of securities consistent with the investment policies
of the Portfolio and one or more of these other clients served by the Adviser
is considered at or about the same time, transactions in such securities will
be allocated among the Portfolio and clients in a manner deemed fair and rea-
sonable by the Adviser. Although there is no specified formula for allocating
such transactions, allocations are subject to periodic review by the Direc-
tors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series or classes of shares of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios, without further action by
shareholders. The Board of Directors may create additional Portfolios and
classes of shares of the Fund at its discretion.
The shares of each Portfolio and Class are fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no pre-emptive rights. They have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors. A shareholder is
entitled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his name on the books of the Fund.
As of December 6, 1996, Kansas City Power & Light Company, Kansas City, MO
held of record 28.8% of the outstanding shares of the Portfolio. The persons
or organizations owning 25% or more of the outstanding shares of a Portfolio
may be presumed to "control" (as that term is defined in the 1940 Act) such
Portfolio. As a result, those persons or organizations could have the ability
to vote a majority of the shares of the Portfolio on any matter requiring the
approval of shareholders of such Portfolio.
27
<PAGE>
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
28
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
29
<PAGE>
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
30
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Asset Management, Inc.
Four High Ridge Park
Stamford, CT 06905
(203) 322-0189
Distributor
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02710
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
The Sirach Portfolios
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
THE SIRACH PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: SIRACH CAPITAL MANAGEMENT, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios"), each of which has different investment objectives and policies.
The Sirach Fixed Income and Short-Term Reserves Portfolios currently offer
only one class of shares: Institutional Class Shares. The Sirach Growth, Spe-
cial Equity, Strategic Balanced and Equity Portfolios currently offer two sep-
arate classes of shares: Institutional Class Shares and Institutional Service
Class Shares ("Service Class Shares"). Shares of each class represent equal,
pro rata interests in a Portfolio and accrue dividends in the same manner ex-
cept that Service Class Shares bear fees payable by the class (at the rate of
.25% per annum) to financial institutions for services they provide to the
owners of such shares. The securities offered in this Prospectus are Institu-
tional Class Shares of six diversified, no-load Portfolios of the Fund managed
by Sirach Capital Management, Inc.
SIRACH GROWTH PORTFOLIO. The objective of the Sirach Growth Portfolio (the
"Growth Portfolio") is to provide long-term capital growth consistent with
reasonable risk to principal by investing primarily in common stocks of compa-
nies that offer long-term growth potential.
SIRACH SPECIAL EQUITY PORTFOLIO. The objective of the Sirach Special Equity
Portfolio (the "Special Equity Portfolio") is to provide maximum long-term
growth of capital consistent with reasonable risk to principal, by investing
in small to medium capitalized companies with particularly attractive finan-
cial characteristics.
SIRACH STRATEGIC BALANCED PORTFOLIO. The objective of the Sirach Strategic
Balanced Portfolio (the "Strategic Balanced Portfolio") is to provide long-
term growth of capital consistent with reasonable risk to principal by invest-
ing in a diversified portfolio of common stocks and fixed income securities.
SIRACH FIXED INCOME PORTFOLIO. The objective of the Sirach Fixed Income
Portfolio (the "Fixed Income Portfolio") is to provide above-average total re-
turn with reasonable risk to principal by investing primarily in investment
grade fixed income securities.
SIRACH SHORT-TERM RESERVES PORTFOLIO. The objective of the Sirach Short-Term
Reserves Portfolio (the "Short-Term Reserves Portfolio") is to provide compet-
itive rates of return consistent with the maintenance of principal and liquid-
ity by investing primarily in investment grade fixed income securities with an
average weighted maturity of three years or less.
SIRACH EQUITY PORTFOLIO. The objective of the Sirach Equity Portfolio (the
"Equity Portfolio") is to provide long-term capital growth consistent with
reasonable risk to principal by investing, under normal circumstances, at
least 90% of its total assets in common stocks of companies that offer long-
term growth potential.
There can be no assurance that the Portfolios will achieve their stated ob-
jective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" (SAI)
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 9
Investment Policies........................................................ 10
Other Investment Policies.................................................. 14
Investment Limitations..................................................... 18
Purchase of Shares......................................................... 19
Redemption of Shares....................................................... 22
Shareholder Services....................................................... 24
Valuation of Shares........................................................ 25
Performance Calculations................................................... 26
Dividends, Capital Gains Distributions and Taxes........................... 26
Investment Adviser......................................................... 27
Adviser's Historical Performance........................................... 29
Administrative Services.................................................... 31
Distributor................................................................ 32
Portfolio Transactions..................................................... 32
General Information........................................................ 33
UAM Funds -- Institutional Class Shares.................................... 35
</TABLE>
<PAGE>
SIRACH INSTITUTIONAL CLASS
FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolios' Institutional Class Shares would incur. Transaction fees may be
charged if a broker-dealer or other financial intermediary deals with the Fund
on your behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SPECIAL STRATEGIC FIXED SHORT-TERM
GROWTH EQUITY BALANCED INCOME RESERVES EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on
Purchases.............. NONE NONE NONE NONE NONE NONE
Sales Load Imposed on
Reinvested Dividends... NONE NONE NONE NONE NONE NONE
Deferred Sales Load..... NONE NONE NONE NONE NONE NONE
Redemption Fees......... NONE NONE NONE NONE NONE NONE
Exchange Fees........... NONE NONE NONE NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SPECIAL STRATEGIC FIXED SHORT-TERM
GROWTH EQUITY BALANCED INCOME RESERVES EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES CLASS SHARES
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... 0.65% 0.70% 0.65% 0.65% 0.40% 0.65%
Administrative Fees..... 0.14% 0.14% 0.18% 0.54% 0.48% 0.17%
12b-1 Fees.............. NONE NONE NONE NONE NONE NONE
Other Expenses.......... 0.09% 0.04% 0.12% 0.30% 0.34% 0.17%
Advisory Fees Waived.... N/A N/A N/A (0.74)% (0.72)% (0.09)%
---- ---- ---- ----- ----- -----
Total Operating Expenses
(After Fee Waiver)..... 0.88%* 0.88%* 0.95%* 0.75%+* 0.50%+* 0.90%+*
</TABLE>
- -----------
+ Absent the Adviser's fee waiver, annualized Total Operating Expenses of the
Fixed Income Portfolio, Short-Term Reserves Portfolio and Equity Portfolio
Institutional Class Shares for the fiscal year ended October 31, 1996 would
have been 1.49%, 1.22% and 0.99%, respectively.
* The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, annualized Total Operating Expenses
of the Growth, Strategic Balanced, Fixed Income, and Short-Term Reserves
Portfolios Institutional Class Shares would be 0.89%, 0.96%, 0.76%, and
0.50%, respectively, and annualized Total Operating Expenses of the Special
Equity Portfolio Institutional Class Shares would not be affected.
1
<PAGE>
The above table shows various fees and expenses an investor would bear di-
rectly or indirectly.
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolios to reduce expense
ratios. As of the date of this Prospectus, the Adviser has agreed to keep the
Fixed Income, Short-Term Reserves and Equity Portfolios Institutional Class
Shares from exceeding 0.75%, 0.50% and 0.90% respectively, of average daily
net assets. The Fund will not reimburse the Adviser for any advisory fees that
are waived or Portfolio expenses that the Adviser may bear on behalf of a
Portfolio for a given fiscal year.
With the exception of the Equity Portfolio, the expenses and fees for the
Portfolios set forth above are based on operations during the fiscal year
ended October 31, 1996, except that Administrative Fees have been restated to
reflect current fees. See "ADMINISTRATIVE SERVICES" herein and in the SAI. The
expenses and fees set forth above for the Equity Portfolio are based on esti-
mates. For purposes of calculating the fees set forth above, the table assumes
that the Equity Portfolio's average daily assets will be $50 million. It is
estimated that without waiving fees and assuming expense the Total Operating
Expenses is estimated to be 0.99% of the average net assets.
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. The Portfolios
charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Portfolio Institutional Class Shares... $ 9 $28 $49 $119
Special Equity Portfolio Institutional Class
Shares...................................... $ 9 $28 $49 $109
Strategic Balanced Portfolio Institutional
Class Shares................................ $10 $29 $51 $114
Fixed Income Portfolio Institutional Class
Shares...................................... $ 8 $24 $42 $ 94
Short Term Reserves Portfolio Institutional
Class Shares................................ $ 5 $16 $28 $ 63
Equity Portfolio Institutional Class Shares... $ 9 $29 $50 $111
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Sirach Capital Management, Inc. (the "Adviser"), an investment counseling
firm founded in 1970, serves as investment adviser to the Portfolios. The Ad-
viser presently manages approximately $7 billion in assets for institutional
clients and high net worth individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment is $2,500. The minimum for subsequent invest-
ments is $100. The minimum initial investment for IRA accounts is $500. Mini-
mum initial investment for spousal IRA accounts is $250. Certain exceptions to
the initial or minimum investment amounts may be made by the officers of the
Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will be reinvested in Portfolio
shares automatically unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of UAM Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of each Portfolio's shares will fluctuate in response to changes
in market and economic conditions, as well as the financial conditions and
prospects of the issuers in which a Portfolio invests. Prospective investors
should consider the following. (1) The Fixed Income and Strategic Balanced
Portfolios may invest a portion of their assets in derivatives including
futures contracts and options. (See "FUTURES CONTRACTS AND OPTIONS."); (2) The
Special Equity Portfolio invests primarily in small and medium capitalization
companies, some of which may be foreign based. (See "INVESTMENT POLICIES" and
"FOREIGN INVESTMENTS."); (3) In general, the Portfolios will not trade for
short-term profits, but when circumstances warrant, investments may be sold
without regard to the length of time held. High rates of portfolio turnover
may result in additional transaction costs and the realization of capital
gains. (See "PORTFOLIO TURNOVER."); (4) In addition, each Portfolio may use
various investment practices, including investing in repurchase agreements,
when issued, forward delivery and delayed settlement securities and lending of
securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS SHARES
The following tables provide selected per share information for a share out-
standing throughout each of the respective periods presented for the Special
Equity, Growth, Strategic Balanced, Fixed Income Short-Term Reserves and Equity
Portfolios' Institutional Class Shares. These tables are part of the Portfo-
lios' Financial Statements, which are included in the Portfolios' 1996 Annual
Report to Shareholders. The Annual Report is incorporated into the Portfolios'
SAI. The Portfolios' Financial Statements have been audited by Price Waterhouse
LLP. Their unqualified opinion on the Financial Statements is also incorporated
into the SAI. Please read the following information in conjunction with the
Portfolios' 1996 Annual Report to Shareholders.
SPECIAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
OCTOBER 2,**
1989 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, -------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996
------------ ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $9.67 $8.58 $13.90 $15.03 $19.10 $16.10 $ 18.80
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)................ 0.02 0.15 0.07 0.05 (0.01) 0.04 0.11 (0.06)
Net Realized &
Unrealized Gain (Loss)
on Investments........ (0.35) (1.08) 5.33 1.13 4.68 (0.90) 3.65 3.51
Total From Investment
Operations............ (0.33) (0.93) 5.40 1.18 4.67 (0.86) 3.76 3.45
DISTRIBUTIONS:
Net Investment Income.. -- (0.16) (0.08) (0.05) (0.01) (0.02) (0.11) (0.03)
Net Realized Gain on
Investments........... -- -- -- -- (0.59) (2.12) (0.95) (4.24)
Total Distributions.... -- (0.16) (0.08) (0.05) (0.60) (2.14) (1.06) (4.27)
NET ASSET VALUE, END OF
PERIOD................. $9.67 $8.58 $13.90 $15.03 $19.10 $16.10 $18.80 $17.98
TOTAL RETURN............ (3.30)% (9.78)% 63.13 % 8.50 % 31.81 % (4.68)% 25.31 % 23.62 %
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands).... $25,679 $73,098 $255,118 $358,714 $528,078 $513,468 $498,026 $441,326
Ratio of Expenses to
Average Net Assets.... 1.90 %* 0.98 % 0.92 % 0.90 % 0.89 % 0.88 % 0.85 % 0.87 %
Ratio of Net Investment
Income (Loss) to
Average Net Assets.... 2.64 %* 1.71 % 0.61 % 0.38 % (0.03)% 0.27 % 0.64 % (0.29)%
Portfolio Turnover
Rate.................. 7 % 108 % 85 % 122 % 102 % 107 % 137 % 129 %
Average Commission
Rate#................. N/A N/A N/A N/A N/A N/A N/A $0.0590
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... N/A N/A N/A N/A N/A N/A 0.85 % 0.87 %
</TABLE>
- -----------
* Annualized
** Commencement of Operations
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged, during the period.
5
<PAGE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO STRATEGIC BALANCED PORTFOLIO
------------------------------------- ------------------------------------
DECEMBER 1, DECEMBER 1,
1993** TO YEAR ENDED YEAR ENDED 1993** TO YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1995 1996 1994 1995 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 9.66 $ 11.35 $ 10.00 $ 9.35 $ 10.75
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.10 0.15 0.12 0.27 0.36 0.36
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.36) 1.70 2.65 (0.69) 1.39 1.24
Total From Investment
Operations........... (0.26) 1.85 2.77 (0.42) 1.75 1.60
DISTRIBUTIONS
Net Investment Income.. (0.08) (0.16) (0.11) (0.23) (0.35) (0.36)
Net Asset Value, End of
Period................ $ 9.66 $ 11.35 $ 14.01 $ 9.35 $ 10.75 $ 11.99
TOTAL RETURN............ (2.58)% 19.33 % 24.52% (4.19)% 19.10 % 15.13%
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands).... $80,944 $114,787 $128,982 $99,564 $95,834 $83,430
Ratio of Expenses to
Average Net Assets.... 0.92 %* 0.86 % 0.87% 0.90 %* 0.87 % 0.93%
Ratio of Net Investment
Income to Average Net
Assets................ 1.13 %* 1.48 % 0.97% 3.05 %* 3.49 % 3.04%
Portfolio Turnover
Rate.................. 141 % 119 % 151% 158 % 158 % 172%
Average Commission
Rate#................. N/A N/A $ 0.0600 N/A N/A $0.0600
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... N/A .84% .86% N/A .86% .92%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
# Beginning with a fiscal year 1996, a Portfolio is required to disclose the
average commission rate per share is paid for portfolio trades on which
commissions were charged during the period.
6
<PAGE>
<TABLE>
<CAPTION>
FIXED INCOME PORTFOLIO SHORT TERM RESERVES PORTFOLIO
------------------------------------ ------------------------------------
DECEMBER 1, DECEMBER 1,
1993** TO YEAR ENDED YEAR ENDED 1993** TO YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1995 1996 1994 1995 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $9.16 $9.88 $10.00 $10.03 $10.02
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.48 0.58 0.55 0.34 0.59 0.51
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.91) 0.73 (0.15) (0.02) (0.02) (0.01)
Total From Investment
Operations........... (0.43) 1.31 0.40 0.32 0.57 0.50
DISTRIBUTIONS
Net Investment
Income............... (0.41) (0.59) (0.54) (0.29) (0.58) (0.51)
NET ASSET VALUE, END OF
PERIOD................. $9.16 $9.88 $9.74 $10.03 $10.02 $10.01
TOTAL RETURN+........... (4.33)% 14.75 % 4.21 % 3.24 % 5.83 % 5.12 %
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)... $12,178 $15,439 $18,803 $21,371 $18,489 $15,641
Ratio of Expenses to
Average Net Assets... 0.75 %* 0.76 % 0.76 % 0.50 %* 0.52 % 0.50 %
Ratio of Net
Investment Income to
Average Net Assets... 5.37 %* 6.13 % 5.84 % 3.53 %* 5.34 % 4.96 %
Portfolio Turnover
Rate................. 230 % 165 % 260 % 13 % 38 % 0 %
Voluntary Waived Fees
and Expenses Assumed by
the Adviser Per Share.. $0.08 $0.06 $0.07 $0.04 $0.04 $0.07
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A 0.75 % 0.75 % N/A 0.50 % 0.50 %
</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.
7
<PAGE>
SIRACH EQUITY PORTFOLIO
<TABLE>
<CAPTION>
JULY 1,
1996** TO
OCTOBER 31,
1996
-----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............................................ 0.01
Net Realized and Unrealized Gain................................. 0.97
Total From Investment Operations................................ 0.98
DISTRIBUTIONS
Net Investment Income............................................ (0.01)
Net Asset Value, End of Period.................................... $10.97
Total Return+..................................................... 9.80%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)............................. $6,410
Ratio of Expenses to Average Net Assets........................... 1.03%*
Ratio of Net Investment Income to Average Net Assets.............. 0.39%*
Portfolio Turnover Rate........................................... 34%
Average Commission Rate........................................... $0.0600
Voluntary Waived Fees and Expenses Assumed by the Adviser Per
Share........................................................... $0.14
Ratio of Expenses to Average Net Assets Including Expense
Offsets......................................................... 0.90%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total Return would have been lower had certain fees not been waived and ex-
penses assumed by the Adviser during the period indicated.
8
<PAGE>
INVESTMENT OBJECTIVES
GROWTH PORTFOLIO. The objective of the Growth Portfolio is to provide long-
term capital growth consistent with reasonable risk to principal by investing
in common stocks of companies that offer long-term growth potential.
SPECIAL EQUITY PORTFOLIO. The objective of the Special Equity Portfolio is
to provide maximum long-term growth of capital consistent with reasonable risk
to principal, by investing in small to medium capitalized growth companies
that have particularly strong financial characteristics as measured by the Ad-
viser's "ranking system."
STRATEGIC BALANCED PORTFOLIO. The objective of the Strategic Balanced Port-
folio is to provide long-term capital growth consistent with reasonable risk
to principal by investing in a diversified portfolio of common stocks of es-
tablished companies and investment grade fixed income securities. The propor-
tion of the Portfolio's assets invested in fixed income or common stocks will
vary as market conditions warrant. A typical asset mix for the Portfolio, how-
ever, is expected to be 50% common stocks and 50% fixed income securities.
Cash equivalent investments will be maintained when deemed appropriate by the
Adviser.
FIXED INCOME PORTFOLIO. The objective of the Fixed Income Portfolio is to
provide above-average total return consistent with reasonable risk to princi-
pal by investing primarily in investment grade fixed income securities of va-
rying maturities of the U.S. Government and its agencies, corporate bonds,
collateralized mortgage obligations ("CMOs"), mortgage-backed securities, and
various short term instruments such as commercial paper, Treasury bills and
certificates of deposit. Income return is expected to be a predominant portion
of the Portfolio's total return. Any capital return on the Portfolio is depen-
dent upon interest rate movements. The capital return from the Portfolio will
vary according to, among other factors, interest rate changes and the average
maturity (duration) of the Portfolio.
SHORT-TERM RESERVES PORTFOLIO. The objective of the Short-Term Reserves
Portfolio is to provide competitive rates of return consistent with the main-
tenance of principal and liquidity by investing primarily in investment grade
fixed income securities with an average weighted maturity of 3 years or less.
EQUITY PORTFOLIO. The objective of the Equity Portfolio is to provide long-
term capital growth consistent with reasonable risk to principal by investing,
under normal circumstances, at least 90% of its total assets in commons stocks
of companies that offer long-term growth potential. As described below, growth
potential is measured by the Adviser's "ranking" system.
There can be no assurance that the Portfolios will achieve their stated ob-
jective.
9
<PAGE>
INVESTMENT POLICIES
GROWTH PORTFOLIO. The Growth Portfolio seeks to achieve its objective by in-
vesting in common stocks of companies that are small, medium and large growth
companies deemed by the Adviser to offer long-term growth potential. The secu-
rities selected will be from a universe of approximately 4,000 companies
listed on the New York and American Stock Exchanges and on the National Asso-
ciation of Securities Dealers Automated Quotation system ("NASDAQ"). The Port-
folio may also invest in convertible bonds or convertible preferred stocks.
The Adviser's security selection process for the Portfolio will focus on
those companies that rank high on the Adviser's proprietary ranking system.
The ranking system consists of five buying tests that are ranked according to
decile. The Adviser believes that companies that possess a higher "ranking
score" are likely to provide superior rates of return over an extended period
of time relative to the stock market in general. The components of the ranking
system include past earnings per share growth rates, earnings acceleration,
prospective earnings "surprise" probabilities, relative price strength, and
cash reinvestment rates. The Adviser screens a universe of approximately 4,000
companies to identify potentially attractive securities. The list of potential
investments is narrowed further by the use of traditional fundamental security
analysis. The Adviser focuses particular attention on those companies whose
recent earnings have exceeded consensus expectations.
As perceived risks in the marketplace increase, cash reserves can be used
for defensive purposes. Under normal circumstances, it is anticipated that
cash reserves will represent less than 20% of the Portfolio's assets. For tem-
porary defensive purposes, the Portfolio may reduce its holdings of equity se-
curities and increase its holdings in short-term investments (see "SHORT-TERM
INVESTMENTS.")
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased, if they pass the selection
process outlined above. The Portfolio may invest up to 20% of its assets in
shares of foreign based companies. In addition, if shares of a foreign company
are purchased, they must be traded in the United States as sponsored American
Depository Receipts ("ADRs") which are U.S. domestic securities representing
ownership rights in foreign companies. (See "FOREIGN INVESTMENTS.")
SPECIAL EQUITY PORTFOLIO. The Portfolio seeks to achieve its objective by
investing primarily in the common stocks of companies with market capitaliza-
tions of $100 million to $2 billion dollars. Securities selected for the Port-
folio will be chosen from the New York Stock Exchange and American Stock Ex-
change or from the over the counter markets operated by the National Associa-
tion of Securities Dealers.
10
<PAGE>
The security selection process for the Portfolio focuses on those companies
within the market capitalization specified above and that rank above average
on the Adviser's proprietary "ranking system." The "ranking system" consists
of five buying tests that are ranked according to decile. The Adviser believes
that companies with smaller capitalizations that possess a higher "ranking
score" are likely to provide superior rates of return over an extended period
of time relative to the stock market in general. The components of the ranking
system include past earnings per share growth rates, earnings acceleration,
prospective earnings "surprise" probabilities, relative price strength, and
cash reinvestment rates. The Adviser screens a universe of several thousand
smaller to medium capitalized companies to identify potentially attractive se-
curities. The list of potential investments is narrowed further by the use of
traditional fundamental security analysis. In addition, the Adviser focuses
particular attention on those companies whose earnings momentum are accelerat-
ing and/or whose recent earnings have exceeded the Adviser's expectations.
It is anticipated that under normal circumstances cash reserves will repre-
sent less than 20% of the Portfolio's assets. For temporary defensive purpos-
es, however, the Portfolio may reduce its holdings of equity securities and
increase, up to 100%, its holdings in short-term investments.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased if they pass the selection
process outlined above. In addition, if shares of a foreign company are pur-
chased, they must be traded in the United States as American Depository Re-
ceipts ("ADRs"), which are U.S. domestic securities representing ownership
rights in foreign companies. Under normal circumstances, ADRs will not com-
prise more than 20% of the Portfolio's assets. (See "FOREIGN INVESTMENTS.")
STRATEGIC BALANCED PORTFOLIO. The Strategic Balanced Portfolio is designed
to provide a single vehicle with which to participate in the Adviser's equity
and fixed income strategies, combined with the Adviser's asset allocation de-
cisions. The Portfolio seeks to achieve its objective by investing in a combi-
nation of stocks, bonds and short-term cash equivalents. A typical asset mix
of the Portfolio is expected to be 50% equities and 50% fixed income securi-
ties. Depending upon market conditions, the mix may vary, and cash equivalent
investments will be maintained when deemed appropriate by the Adviser. Under
normal conditions, the range of exposure to fixed income securities is ex-
pected to be 25% to 50% of the Portfolio, and the range of exposure to equity
securities is expected to be 35% to 70%. However, at least 25% of the Portfo-
lio's total assets will always be invested in fixed income senior securities
including debt securities and preferred stock.
Equity and fixed income securities are selected using approaches identical
to those for the Growth Portfolio and the Fixed Income Portfolio as set forth
below.
11
<PAGE>
FIXED INCOME PORTFOLIO. The Fixed Income Portfolio seeks to achieve its ob-
jective by investing in a diversified mix of investment grade fixed income se-
curities of varying maturities including securities of the U.S. Government and
its agencies, corporate bonds, mortgage-backed securities, asset-backed secu-
rities, and various short term instruments such as commercial paper, Treasury
bills and certificates of deposit. The Portfolio may also invest in "stripped"
securities.
Investment grade bonds are generally considered to be those bonds having one
of the four highest grades assigned by Moody's Investors Services, Inc.
("Moody's") (Aaa, Aa, A or Baa ) or Standard and Poor's Corporation ("S&P")
(AAA, AA, A or BBB). Securities rated Baa by Moody's or BBB by S&P may have
speculative characteristics and could be more sensitive to changes in the
economy and the financial condition of issuers than higher rated bonds. Mort-
gage-backed securities in which the Portfolio may invest will either carry a
guarantee from an agency of the U.S. Government or a private issuer of the
timely payment of principal and interest or are sufficiently seasoned to be
considered by the Adviser to be of investment grade quality.
It is the Adviser's intention that the Portfolio's investments will be lim-
ited to the investment grades described above. However, the Adviser reserves
the right to retain securities which are downgraded by one or both of the rat-
ing agencies if, in its judgment, retention is warranted.## The Adviser may
also invest in preferred stocks and convertible securities. In the case of
convertible securities, the conversion privilege may be exercised, but common
stocks received will be sold.
Regardless of the rating category, credit quality of bonds in such ratings
categories can change unexpectedly, and even recently-issued credit ratings
may not fully reflect the actual risks posed by a particular security. It is
the Portfolio's policy not to rely primarily on ratings issued by established
credit rating agencies, but to utilize such ratings in conjunction with the
Adviser's own independent and on-going review of credit quality.
The Adviser attempts to be risk averse believing that preserving principal
in periods of rising interest rates should lead to above-average returns over
the long run. The structure of the Portfolio will be largely determined by the
Adviser's assessment of current economic conditions and trends, the Federal
Reserve Board's management of monetary policy, fiscal policy, inflation expec-
tations, government and private credit demands and global conditions. Once
these factors have been carefully analyzed, the average maturity/duration of
the Portfolio will be adjusted to reflect the Adviser's outlook. Under normal
market conditions, the weighted average maturity ranges between eight and
twelve years and the weighted average duration will range between four and six
years. Over a complete market cycle, the average maturity and duration will,
on average, equal the general market.
12
<PAGE>
Additionally, the Adviser attempts to emphasize relative values within se-
lected maturity ranges. Interest rate spreads between different quality rang-
es, by types of issues and within coupon areas are monitored, and the Portfo-
lio will be structured to take advantage of relative values within these
areas. Marketability of individual issues and diversification within the Port-
folio will be emphasized. The Portfolio will hold, under normal circumstances,
no more than 10% of its assets in any non-governmental issue.
While the Adviser anticipates that the majority of the Portfolio will be in-
vested in U.S. dollar-denominated securities, up to 20% of the Portfolio's as-
sets may consist of obligations of foreign governments, agencies, or corpora-
tions denominated either in U.S. dollars or foreign currencies. Credit quality
standards applied to foreign obligations are the same as those applied to
U.S.-based securities.
The Portfolio may enter into futures contracts and options on such contracts
for hedging purposes. (See "FUTURES CONTRACTS AND OPTIONS" for a more complete
discussion of this policy and a description of special considerations and
risks associated with investing in futures and options).
SHORT-TERM RESERVES PORTFOLIO. The Portfolio seeks to achieve its objective
by investing exclusively in the following short-term investment grade fixed
income securities with an average weighted maturity of 3 years or less:
(1) Short-term corporate debt securities rated BBB or better by S&P or Baa
or better by Moody's;
(2) U.S. Treasury and U.S. Government agency obligations;
(3) Bank obligations, including certificates of deposit and banker's ac-
ceptances;
(4) Commercial paper rated Prime-1 by Moody's or A-1 by S&P; and
(5) Repurchase agreements collateralized by these securities.
EQUITY PORTFOLIO. The Portfolio seeks to achieve its objective by investing
primarily in common stocks of companies that are small, medium and large capi-
talization growth companies deemed by the Adviser to offer long-term poten-
tial.
The security selection process for the Portfolio will focus on companies
that rank high on the Adviser's proprietary ranking system. The ranking system
consists of five buying tests that are ranked according to decile. The Adviser
believes that companies that possess a higher "ranking score" are likely to
provide superior rates of return over an extended period of time relative to
the stock market in general. The components of the ranking system include past
earnings per share growth rates, earnings acceleration, prospective earnings
"surprise" probabilities, relative price strength and cash reinvestment rates.
The Adviser screens a universe of approximately 4,000 companies to identify
potentially attractive securities. The
13
<PAGE>
list of potential investments is narrowed further by the use of traditional
fundamental security analysis. The Adviser focuses particular attention on
those companies whose recent earnings have exceeded consensus expectations.
In seeking to fulfill its investment objective, the Portfolio, under normal
circumstances, will invest at least 90% of its assets in equity securities,
consisting primarily of common stock; however, the Portfolio may also invest
in convertible bonds or convertible preferred stocks. The Portfolio may invest
a portion of its assets in shares of foreign based companies. If shares of a
foreign company are purchased, they must be traded in the United States as
sponsored American Depository Receipts ("ADRs"). (See "FOREIGN INVESTMENTS.")
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
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The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price if such securities mature in less than one year.
The Administrator and the Adviser will mark to market daily the value of the
securities purchased.
The use of repurchase agreements involves certain risks. For example, a de-
fault by the seller of the agreement may cause a Portfolio to experience a
loss or delay in the liquidation of the collateral securing the repurchase
agreement. The Portfolio might also incur disposition costs in liquidating the
collateral. While the Fund's management acknowledges these risks, it is ex-
pected that they can be controlled through stringent security selection crite-
ria and careful monitoring procedures.
The Fund has received permission from the SEC to pool daily uninvested cash
balances of the Fund's Portfolios in order to invest in repurchase agreements
on a joint basis. By entering into joint repurchase agreements, a Portfolio
may incur lower transactions costs and earn higher rates of interest on joint
repurchase agreements. Each Portfolio's contribution would determine its re-
turn from a joint repurchase agreement. (See "SHORT TERM INVESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
15
<PAGE>
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It
is possible that the market price of the securities at the time of delivery
may be higher or lower than the purchase price. Each Portfolio will maintain a
separate account of cash or liquid securities at least equal to the value of
purchase commitments until payment is made. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery is
made although the Portfolio may earn income on securities it has deposited in
a segregated account.
Each Portfolio engages in these types of purchases in order to buy securi-
ties that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for the Equity Portfolio is not anticipated to exceed
125%. In addition to Portfolio trading costs, higher rates of portfolio turn-
over may result in the realization of capital gains. (See "DIVIDENDS, CAPITAL
GAINS DISTRIBUTIONS AND TAXES" for more information on taxation.) The Portfo-
lios will not normally engage in short-term trading, but each reserves the
right to do so. Except for the Equity Portfolio, the tables set forth in "Fi-
nancial Highlights" present the Portfolios' historical portfolio turnover ra-
tios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
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<PAGE>
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN INVESTMENTS
Investing in foreign companies may involve additional risks and considera-
tions which are not typically associated with investing in U.S. companies.
Since stocks of foreign companies are normally denominated in foreign curren-
cies, the Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, comparable information may not be readily avail-
able about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S. compa-
nies. In addition, in certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those coun-
tries.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, the
Fixed Income Portfolio may invest in bond futures and options and interest
rate futures contracts. Because transaction costs associated with futures and
options may be lower than the costs of investing in bonds directly, it is ex-
pected that use of index futures and options to facilitate cash flows may re-
duce the Portfolio's overall transaction costs. The Portfolio may enter into
futures contracts provided that not more than 5% of its total assets are at
the time of acquisition required as margin deposit to secure obligations under
such contracts. The Portfolio will engage in futures and options transactions
for hedging purposes only.
Futures and options can be volatile and involve various degrees and types of
risk. If the Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts could result in a loss. The Portfolio could also suffer
losses if it is unable to liquidate its position due to an illiquid secondary
market. In the opinion of the Directors of the Fund, the risk that the Portfo-
lio will be unable to close out a futures
17
<PAGE>
position or options contract will be minimized by only entering into futures
contracts or options transactions traded on national exchanges and for which
there appears to be a liquid secondary market.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. Each of the Portfolio may also invest up
to 15% of its net assets (except the Special Equity Portfolio which may invest
up to 10% of its net assets) in illiquid securities. Prices realized from
sales of these securities could be more or less than those originally paid by
the Portfolio or less than what may be considered the fair value of such secu-
rities.
STRIPPED SECURITIES
The Fixed Income Portfolio may invest in "stripped" securities. Stripped se-
curities are usually structured with two or more classes that receive differ-
ent proportions of the interest and principal distributions on a pool of U.S.
Government, mortgage or asset-based securities. In some cases, one class will
receive all of the interest distributions (the interest-only class or "IO"
class), while the other class will receive all of the principal distributions
(the principal only or "PO" class). The Portfolio does not intend to invest in
IOs. Stripped securities commonly have greater volatility than other types of
fixed income securities. Stripped securities may be considered derivative se-
curities.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a "majority of the out-
standing voting securities" of a Portfolio, as defined in the 1940 Act.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. government or any of its agencies or instrumentali-
ties);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
18
<PAGE>
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the portfolio adopts a temporary defensive position;
(e) make loans except (i) by purchasing bonds, debentures or similar obli-
gations which are publicly distributed, (including repurchase agree-
ments provided, however, that repurchase agreements maturing in more
than seven days, together with securities which are not readily mar-
ketable, will not exceed 10% of the Portfolio's total assets), and
(ii) by lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not incon-
sistent with the 1940 Act or the Rules and Regulations or interpreta-
tions of the Commission thereunder;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 33
1/3% (10% for the Special Equity Portfolio) of the Portfolio's gross
assets valued at the lower of market or cost, and (ii) a Portfolio may
not purchase additional securities when borrowings exceed 5% of total
assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment objectives of the Portfolios are fundamental and with respect
to each Portfolio may be changed only with the approval of the holders of a
majority of the outstanding shares of such Portfolio. Except for limitations
(a), (b), (d), (e) and (f)(i), the Growth, Strategic Balanced, Fixed Income,
Short-Term Reserves and Equity Portfolios' investment limitations and policies
described in this Prospectus and in the SAI are not fundamental and may be
changed by the Fund's Board of Directors upon reasonable notice to investors.
The investment limitations of the Special Equity Portfolio described here and
in the SAI are fundamental policies and may be changed only with the approval
of the holders of a majority of the outstanding shares of the Portfolio. If a
percentage limitation on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in per-
centage resulting from changes in the value or total cost of the Portfolios'
assets will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the
19
<PAGE>
Custodian. (See "VALUATION OF SHARES.") The minimum initial investment re-
quired is $2,500. The minimum initial investment for 401(k) plans is $500. The
minimum initial investment for IRA accounts is $500. The minimum initial in-
vestment for spousal IRA accounts is $250. Certain exceptions may be made by
the officers of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled to receive compensation for selling or servicing Portfolio shares may
receive different compensation with respect to one particular class of shares
over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent, Chase Global Funds Shares Company, prior to the close of its business
day to receive that day's share price. Proper payment for the order must be
received by the Sub-Transfer Agent no later than the time when the Portfolio
is priced on the following business day. Service Agents are responsible to
their customers and the Fund for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it together with a check made
payable to UAM Funds, to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
20
<PAGE>
Payment for purchases of shares received by mail will be credited to an ac-
count at the next share price calculated for the Portfolio after receipt. (See
"OTHER PURCHASE INFORMATION.") Payment does not need to be converted into Fed-
eral Funds (monies credited to the Fund's Custodian Bank by a Federal Reserve
Bank) before the Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. Instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #02100-0021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
the Custodian Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be purchased is identified on the check or wire.
Prior to wiring additional investments, please notify the UAM Funds Service
Center by calling the number on the cover of this Prospectus. Mail orders
should include, when possible, the "Invest by Mail" stub which accompanies any
Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open.
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<PAGE>
The Fund reserves the right, in its sole discretion, to suspend the offering
of shares of each Portfolio or to reject purchase orders when, in the judgment
of management, such suspension or rejection is in the best interests of the
Fund.
Purchases of a Portfolio's shares will be made in full and fractional shares
of the Portfolio calculated to three decimal places. Certificates for frac-
tional shares will not be issued. Certificates for whole shares will not be
issued except at the written request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining to such securities shall become the property of the Portfolio and must
be delivered to the Fund by the investor upon receipt from the issuer. Securi-
ties acquired through an in-kind purchase will be acquired for investment and
not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be included in
the Portfolio (current market quotations must be readily available for
such securities);
. the investor represents and agrees that all securities offered to be ex-
changed are liquid securities and not subject to any restrictions upon
their sale by the Portfolio under the Securities Act of 1933, or other-
wise; and
. the value of any such securities (except U.S. Government securities) be-
ing exchanged together with other securities of the same issuer owned by
the Portfolio will not exceed 5% of the net assets of the Portfolio im-
mediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may
22
<PAGE>
be more or less than the purchase price of the shares depending on the market
value of investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or the Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
23
<PAGE>
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after the
receipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by a Portfolio in lieu of cash
in conformity with applicable rules of the SEC. Investors may incur brokerage
charges on the sale of portfolio securities received in payment of redemp-
tions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by calling the Fund or by writing to the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you
24
<PAGE>
are interested. Exchanges can only be made with Portfolios that are qualified
for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE."
An exchange into another UAM Funds Portfolio is a sale of shares and may re-
sult in a gain or loss for income tax purposes. The Fund may modify or termi-
nate the exchange privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets attributable to the class, less any liabilities attrib-
utable to the class, by the number of shares outstanding attributable to the
class. The net asset value per share of each Portfolio is determined as of the
close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market.
Bonds and other fixed income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the
fair market value of such securities. Securities purchased with remaining ma-
turities of 60 days or less are valued at amortized cost when the Board of Di-
rectors determines that amortized cost reflects fair value.
25
<PAGE>
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in a Portfolio over a
given period of time, expressed as an annual percentage rate. Yields are cal-
culated according to a standard that is required for all bond funds. As this
differs from other accounting methods, the quoted yield may not equal the in-
come actually paid to shareholders.
Total return is the change in value of an investment in a Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance is calculated separately for Institutional Class and Service
Class Shares. Dividends paid by a Portfolio with respect to Institutional
Class and Service Class Shares, to the extent any dividends are paid, will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that service fees, distribution charges and any incre-
mental transfer agency costs relating to Service Class Shares will be borne
exclusively by that class.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to Shareholders for the most recent fiscal
year contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report, contact the Fund at the address on the cover of this
Prospectus or call the UAM Funds Service Center.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, each Portfolio will normally distribute them
annually.
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<PAGE>
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of the Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
Sirach Capital Management, Inc. is a Washington corporation whose predeces-
sor was formed in 1970 and is located at 3323 One Union Square, Seattle, Wash-
ington 98101. The Adviser is a wholly-owned subsidiary of United Asset Manage-
ment Corporation ("UAM") and provides investment management serv-
27
<PAGE>
ices to corporations, pension and profit-sharing plans, 401(k) and thrift
plans, trusts, estates and other institutions and individuals. As of the date
of this Prospectus, the Adviser had approximately $7 billion in assets under
management. For further information on Sirach Capital Management, Inc.'s in-
vestment services, please call (206) 624-3800.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day management of the Portfolios and a description of their
business experience during the past five years are as follows:
GROWTH PORTFOLIO -- George B. Kauffman and Harvey G. Bateman;
SPECIAL EQUITY PORTFOLIO -- Harvey G. Bateman and Stefan W. Cobb.
STRATEGIC BALANCED PORTFOLIO -- George B. Kauffman, Stephen J. Romano, and
Robert L. Stephenson, Jr.;
FIXED INCOME PORTFOLIO -- Stephen J. Romano and Harvey G. Bateman;
SHORT-TERM RESERVES PORTFOLIO -- Stephen J. Romano and Harvey G. Bateman;
and
EQUITY PORTFOLIO -- Harvey G. Bateman and George B. Kauffman
HARVEY G. BATEMAN, CFA, CIC -- Principal. Mr. Bateman joined the Adviser in
1988. He has managed equity funds for the Adviser since 1989. Mr. Bateman as-
sumed responsibility for managing the Special Equity Portfolio in 1989, the
Fixed Income and Short-Term Reserves Portfolios in 1994, the Growth Portfolio
in 1995 and the Equity Portfolio in 1996.
GEORGE B. KAUFMAN, CFA, CIC -- Principal. Mr. Kauffman joined the Adviser in
1981. He has managed balanced and growth funds for the Adviser since 1981. Mr.
Kauffman assumed responsibility for managing the Strategic Balanced, Growth
Portfolios in 1993 and the Equity Portfolio in 1996.
ROBERT L. STEPHENSON, JR., CFA, CIC -- Principal. Mr. Stephenson joined the
Adviser in 1987. He has managed balanced and growth funds for the Adviser
since 1987. Mr. Stephenson assumed responsibility for managing the Strategic
Balanced Portfolio in 1993.
STEPHEN J. ROMANO, CFA, CIC -- Principal. Mr. Romano joined the Adviser in
1991. Prior to that, he was a Senior Investment Officer at Seattle-First Na-
tional Bank where he managed equity and fixed income portfolios for private
banking clients. Mr. Romano has managed fixed income funds for the Adviser
since 1991. He assumed responsibility for managing the Fixed Income and Short-
Term Reserves Portfolios in 1993.
STEFAN W. COBB -- Principal. Mr. Cobb joined the Adviser in 1994. Prior to
that, he was a Vice President at the investment banking firm of Robertson,
Stephens & Company where he was engaged in institutional sales. Mr. Cobb as-
sumed the responsibility for managing the Special Equity Portfolio in 1994.
28
<PAGE>
Under Investment Advisory Agreements dated as of September 27, 1989 and Oc-
tober 29, 1993, the Adviser manages the investment and reinvestment of the as-
sets of the Portfolios. The Adviser must adhere to the stated investment ob-
jectives and policies of the Portfolios, and is subject to the control and su-
pervision of the Fund's Board of Directors.
As compensation for its services as an Adviser, each Portfolio pays the
Adviser an annual fee, in monthly installments, calculated by applying the
following annual percentage rates to each Portfolio's average daily net assets
for the month:
<TABLE>
<S> <C>
Growth Portfolio....................................................... 0.65%
Special Equity Portfolio............................................... 0.70%
Strategic Balanced Portfolio........................................... 0.65%
Fixed Income Portfolio................................................. 0.65%
Short-Term Reserves Portfolio.......................................... 0.40%
Equity Portfolio....................................................... 0.65%
</TABLE>
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolios to reduce expense
ratios. As of the date of this Prospectus, the Adviser has agreed to keep the
Fixed Income, the Short-Term Reserves and the Equity Portfolios Institutional
Class Shares from exceeding 0.75%, 0.50% and 0.90% respectively, of average
daily net assets. The Fund will not reimburse the Adviser for any advisory
fees that are waived or Portfolio expenses that the Adviser may bear on behalf
of a Portfolio for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, record-keeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares. Payments
made for any of these purposes may be made from its revenues, its profits or
any other source available to it. When such service arrangements are in ef-
fect, they are made generally available to all qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's el-
igible customer accounts in addition to amounts payable to all selling deal-
ers.
ADVISER'S HISTORICAL PERFORMANCE
Set forth below are certain performance data provided by the Adviser relat-
ing to the composite of equity accounts of clients of the Adviser. These ac-
counts have the same investment objective as the Equity Portfolio, and were
managed using
29
<PAGE>
substantially similar, though not in all cases identical, investment strate-
gies and techniques as those contemplated for use by the Adviser in managing
the Equity Portfolio. (See "INVESTMENT OBJECTIVES AND POLICIES.") The results
presented are not intended to predict or suggest the returns to be experienced
by the Equity Portfolio or the return an individual investor might achieve by
investing in the Equity Portfolio. Results may differ because of, among other
things, difference in brokerage commissions, account expenses, including in-
vestment advisory fees, the size of positions taken in relation to account
size, diversification of securities, timing of purchases and sales, availabil-
ity of cash for new investments and private character of the accounts compared
with the Equity portfolio and its shareholders. Investors should be aware that
the use of methods of determining performance different from that used below
could result in different performance data. Investors should not rely on the
following performance data. The performance data shown is that of the Advis-
er's private accounts and is not indicative of the Equity Portfolio's future
performance.
TOTAL ANNUALIZED RETURN FOR VARIOUS PERIODS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INSTITUTIONAL S&P
EQUITY ACCOUNTS 500 INDEX
--------------- ---------
<S> <C> <C>
One-year period.................................... % %
Five-year period................................... % %
Ten-year period.................................... % %
Fourteen-year period*.............................. % %
</TABLE>
- -----------
* Inception of performance record
1. Equity performance results reflect a blending of 95% of the actual re-
turn from the equity only portion of Sirach Capital Management's Eq-
uity Composite with 5% of the return of the Salomon Brothers 3 Month
Treasury Bill rate. Results are based on the actual performance of an
asset weighted composite of fully discretionary, non-restricted,
unleveraged accounts. The composite totaled $1.519 billion as of
12/31/95.
2. The S&P 500 is an unmanaged index composite of 400 industrial, 40 fi-
nancial, 40 utilities and 20 transportation stocks, which assumes re-
investment of dividends and is generally considered representative of
U.S. large capitalization stocks.
30
<PAGE>
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
trative, fund accounting, dividend disbursing and transfer agent services pro-
vided to the Fund and its Portfolios. UAMFSI's principal office is located at
211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of these
services to Chase Global Funds Services Company ("CGFSC"), an affiliate of The
Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April 15, 1996.
CGFSC is located at 73 Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio-specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The following Portfolio-specific fees are calculated from the
aggregate net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Growth Portfolio....................................................... 0.04%
Special Equity Portfolio............................................... 0.04%
Strategic Balanced Portfolio........................................... 0.06%
Fixed Income Portfolio................................................. 0.04%
Short-Term Reserves Portfolio.......................................... 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative assets
and are subject to a graduated minimum fee schedule per Portfolio, which starts
at $2,000 per month and increases to $70,000 annually after two years. If a
separate class of shares is added to a Portfolio, its minimum annual fee in-
creases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, MA 02110, distributes shares of the Fund. Under the Distribution Agree-
ment (the "Agreement"), the Distributor, as agent of the Fund, agrees to use
its best efforts as sole distributor of Fund shares. The Distributor does not
receive any fee or other compensation under the Agreement with respect to the
Institutional
31
<PAGE>
Class Shares offered in this Prospectus. The Agreement continues in effect as
long as it is approved at least annually by the Fund's Board of Directors.
Those approving the Agreement must include a majority of Directors who are nei-
ther parties to the Agreement nor interested persons of any such party. The
Agreement provides that the Fund will bear costs of registration of its shares
with the SEC and various states as well as the printing of its prospectuses,
its SAIs and its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for each
Portfolio. The Agreements direct the Adviser to use its best efforts to obtain
the best available price and most favorable execution for all transactions of
the Portfolios. If consistent with the interests of the Portfolios, the Adviser
may select brokers on the basis of research, statistical and pricing services
these brokers provide to the Portfolios in addition to required Adviser servic-
es. Such brokers may be paid a higher commission than that which another quali-
fied broker would have charged for effecting the same transaction, provided
that such commissions are paid in compliance with the Securities Exchange Act
of 1934, as amended, and that the Adviser determines in good faith that the
commission is reasonable in terms either of the transaction or the overall re-
sponsibility of the Adviser to the Portfolios and the Adviser's other clients.
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is con-
sidering a purchase at or about the same time, transactions in such securities
will be allocated among the Portfolio and clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified formula for allocat-
ing such transactions, allocations are subject to periodic review by the Fund's
Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc.". On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund was
changed to "UAM Funds, Inc."
The Fund's Articles of Incorporation, as amended, permit the Directors to is-
sue three billion shares of common stock, with an $.001 par value. The Direc-
tors have the power to designate one or more series or classes of shares of
common
32
<PAGE>
stock and to classify or reclassify any unissued shares without further action
by shareholders. At its discretion, the Board of Directors may create addi-
tional Portfolios and classes of shares.
The shares of each Portfolio are fully paid and nonassessable, and have no
preference as to conversion, exchange, dividends, retirement or other features
and no pre-emptive rights. They have noncumulative voting rights, which means
that holders of more than 50% of shares voting for the election of Directors
can elect 100% of the Directors. A shareholder is entitled to one vote for each
full share held (and a fractional vote for each fractional share held), then
standing in his name on the books of the Fund.
As of December 6, 1996, the South Alaska Carpenters Defined Contribution Pen-
sion Plan, Anchorage, AK held of record 43% of the outstanding shares of the
Short-Term Reserves Portfolio Institutional Class Shares; Ciri Foundation, An-
chorage, AK held of record 25.8% of the outstanding shares of the Fixed Income
Portfolio; and U.S. Bank of Washington, NA, Trustee, Lane Powell Spears
Lubersky, Seattle, WA held of record 67% of the outstanding shares of the Eq-
uity Portfolio for which beneficial ownership is disclaimed or presumed dis-
claimed. Persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to "control" (as that term is defined in the
1940 Act) that Portfolio. As a result, these persons or organizations could
have the ability to vote a majority on any matter requiring approval by share-
holders of the Portfolio.
Both Institutional Class and Institutional Service Class Shares represent an
interest in the same assets of a Portfolio. Service Class Shares bear certain
expenses related to shareholder servicing, and may bear expenses related to
distribution. Service Class shares have exclusive voting rights for matters re-
lating to such distribution expenditures. Information about the Service Class
Shares of the Portfolios is available upon request by contacting the UAM Funds
Service Center.
Annual meetings will not be held except as required by the 1940 Act and other
applicable laws. The Fund has undertaken that its Directors will call a meeting
of shareholders if such a meeting is requested in writing by the holders of not
less than 10% of the outstanding shares of the Fund. The Fund will assist
shareholder communications in such matters to the extent required by the under-
taking.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountant for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
33
<PAGE>
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAW-
FULLY BE MADE.
34
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
35
<PAGE>
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
36
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Investment Adviser
Sirach Capital Management, Inc.
3323 One Union Square
Seattle, WA 98101
(206) 624-3800
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
The Sirach Portfolios
Institutional Service
Class Shares
P R O S P E C T U S
January 3, 1997
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MASSACHUSETTS 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
THE SIRACH PORTFOLIOS
INSTITUTIONAL SERVICE CLASS SHARES
INVESTMENT ADVISER: SIRACH CAPITAL MANAGEMENT, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company,
known as a "mutual fund." The Fund consists of multiple series of shares
(known as "Portfolios"), each of which has different investment objectives and
policies. The Sirach Strategic Balanced, Growth, Special Equity and Equity
Portfolios currently offer two separate classes of shares: Institutional Class
Shares and Institutional Service Class Shares ("Service Class Shares"). Shares
of each class represent equal, pro rata interests in a Portfolio and accrue
dividends in the same manner except that Service Class Shares bear fees pay-
able by the class (at the rate of .25% per annum) to financial institutions
for services they provide to the owners of such shares. (See "SERVICE AND DIS-
TRIBUTION PLANS.") The securities offered in this Prospectus are shares of the
Service Class of four diversified Portfolios of the Fund managed by Sirach
Capital Management, Inc.
SIRACH STRATEGIC BALANCED PORTFOLIO. The objective of the Sirach Strategic
Balanced Portfolio (the "Balanced Portfolio") is to provide long-term growth
of capital consistent with reasonable risk to principal by investing in a di-
versified portfolio of common stocks and fixed income securities.
SIRACH GROWTH PORTFOLIO. The objective of the Sirach Growth Portfolio (the
"Growth Portfolio") is to provide long-term capital growth consistent with
reasonable risk to principal by investing primarily in common stocks of compa-
nies that offer long-term growth potential.
SIRACH SPECIAL EQUITY PORTFOLIO. The objective of the Sirach Special Equity
Portfolio (the "Special Equity Portfolio") is to provide maximum long-term
growth of capital consistent with reasonable risk to principal, by investing
in small to medium capitalized companies with particularly attractive finan-
cial characteristics.
SIRACH EQUITY PORTFOLIO. The objective of the Sirach Equity Portfolio (the
"Equity Portfolio") is to provide long-term capital growth consistent with
reasonable risk to principal by investing, under normal circumstances, at
least 90% of its total assets in common stocks of companies that offer long-
term growth potential.
There can be no assurance that the Portfolios will achieve their stated ob-
jective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" (SAI)
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 7
Investment Policies........................................................ 7
Other Investment Policies.................................................. 11
Investment Limitations..................................................... 15
Purchase of Shares......................................................... 16
Redemption of Shares....................................................... 19
Service and Distribution Plans............................................. 21
Shareholder Services....................................................... 23
Valuation of Shares........................................................ 24
Performance Calculations................................................... 25
Dividends, Capital Gains Distributions and Taxes........................... 26
Investment Adviser......................................................... 27
Adviser's Historical Performance........................................... 29
Administrative Services.................................................... 30
Distributor................................................................ 31
Portfolio Transactions..................................................... 31
General Information........................................................ 32
UAM Funds -- Service Class Shares.......................................... 34
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolios' Service Class Shares would incur. However, transaction fees may be
charged if a broker-dealer or other financial intermediary deals with the Fund
on your behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
STRATEGIC SPECIAL
BALANCED GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SERVICE CLASS SERVICECLASS SERVICE CLASS SERVICE CLASS
SHARES SHARES SHARES SHARES
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Sales Load Imposed on
Purchases............. NONE NONE NONE NONE
Sales Load Imposed on
Reinvested Dividends.. NONE NONE NONE NONE
Deferred Sales Load..... NONE NONE NONE NONE
Redemption Fees......... NONE NONE NONE NONE
Exchange Fees........... NONE NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
STRATEGIC SPECIAL
BALANCED GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS
SHARES SHARES SHARES SHARES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment Advisory
Fees.................. 0.65% 0.65% 0.70% 0.65%**
Administrative Fees..... 0.18% 0.14% 0.14% 0.17%
12b-1 Fees (Including
Shareholder Servicing
Fees)+................ 0.25% 0.25% 0.25% 0.25%
Other Expenses.......... 0.12% 0.09%* 0.04% 0.17%**
Advisory Fees Waived.... N/A N/A N/A (0.09%)
---- ---- ---- -----
Total Operating
Expenses.............. 1.20%* 1.13%* 1.13%* 1.15%**
</TABLE>
- -----------
* The annualized Total Operating Expenses includes the effect of expense
offsets. If expense offsets were excluded, annualized Total Operating Ex-
penses of the Growth and Special Equity Portfolios Service Class Shares
would be 1.14% and 1.13% respectively. The Strategic Balanced and Equity
Portfolios are not yet operational.
1
<PAGE>
** The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume as the Adviser's own expense operating expenses otherwise
payable by the Equity Portfolio, if necessary, in order to reduce expense
ratios. As of the date of this Prospectus, the Adviser has agreed to keep
the Equity Portfolio Institutional Class Shares from exceeding 1.15% of
its average net assets. The Fund will not reimburse the Adviser for any
advisory fees that are waived or Portfolio expenses that the Adviser may
bear on behalf of the Equity Portfolio for a given fiscal year. (See
"SERVICE AND DISTRIBUTION PLANS.")
+ The Service Class Shares may bear service fees of 0.25%. Long-term share-
holders may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc. (See "SERVICE AND DISTRIBUTIONS PLANS.")
The table above shows various fees and expenses an investor would bear di-
rectly or indirectly. The fees and expenses listed above are based on the
Growth and Special Equity's Portfolios' operations during the period from
March 22, 1996 (initial offering) to October 31, 1996, except that Administra-
tive Fees have been restated to reflect current fees. See "ADMINISTRATIVE
SERVICES" herein and in the SAI. The expenses and fees set forth above for the
Strategic Balanced and Equity Portfolios are based on estimates. For purposes
of calculating the fees set forth above, the table assumes that the Equity
Portfolio's average daily assets will be $50 million. It is estimated that
without waiving fees and assuming expense the Total Operating Expenses would
be 1.24% of the average net assets.
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the ta-
ble above, the Portfolios charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Strategic Balanced Portfolio Service Class
Shares.................................. $12 $38 * *
Growth Portfolio Service Class Shares..... $12 $36 $62 $137
Special Equity Portfolio Service Class
Shares.................................. $12 $36 $62 $137
Equity Portfolio Service Class Shares..... $12 $37 * *
</TABLE>
- -----------
* As the Strategic Balanced and Equity Portfolios' Service Class are not yet
operational, the Fund has not projected expenses beyond the three year pe-
riod shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Sirach Capital Management, Inc. (the "Adviser"), an investment counseling
firm founded in 1970, serves as investment adviser to six of the Fund's Port-
folios. The Adviser presently manages approximately $7 billion in assets for
institutional clients and high net worth individuals. (See "INVESTMENT ADVIS-
ER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment is $2,500. The minimum for subsequent invest-
ments is $100. The minimum initial investment for IRA accounts is $500. The
minimum initial investment for spousal IRA accounts is $250. Certain excep-
tions to the initial or minimum investment amounts may be made by the officers
of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. In addition, each Portfolio will distrib-
ute to each class any unrealized net capital gains annually. Distributions
will be reinvested in Portfolio shares automatically unless an investor elects
to receive cash distributions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS
AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at their
respective net asset value next determined after receipt of the redemption re-
quest. The redemption price may be more or less than the purchase price. (See
"REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of UAM Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of each Portfolio's shares will fluctuate in response to changes
in market and economic conditions as well as the financial conditions and
prospects of the issuers in which a Portfolio invests. Prospective investors
should consider the following factors. (1) The Strategic Balanced Portfolio
may invest a portion of its assets in derivatives including futures contracts
and options. (See "FUTURES CONTRACTS AND OPTIONS."); (2) The Special Equity
Portfolio invests primarily in small and medium capitalization companies, some
of which may be foreign based. (See "INVESTMENT POLICIES" AND "FOREIGN INVEST-
MENTS."); (3) In general, the Portfolios will not trade for short-term prof-
its, but when circumstances warrant, investments may be sold without regard to
the length of time held. High rates of portfolio turnover may result in addi-
tional transaction costs and the realization of capital gains. (See "PORTFOLIO
TURNOVER."); (4) In addition, each Portfolio may use various investment prac-
tices that involve special considerations, including investing in repurchase
agreements, when-issued, forward delivery and delayed settlement securities
and lending of securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides selected per share information for a share out-
standing throughout the respective periods presented for the Portfolios' Serv-
ice Class Shares. This table is part of the Portfolio's Financial Statements,
which are included in the Portfolios' October 31, 1996 Annual Report to Share-
holders. The Annual Report has been incorporated by reference into the Portfo-
lio's SAI. The Portfolio's October 31, 1996 Financial Statements have been au-
dited by Price Waterhouse LLP. Their unqualified opinion on the Financial
Statements is also incorporated by reference into the Portfolio's SAI. The
following information should be read in conjunction with the Portfolio's Octo-
ber 31, 1996 Annual Report to Shareholders.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
INSTITUTIONAL
SERVICE CLASS
-----------------
MARCH 22, 1996***
TO
OCTOBER 31, 1996
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................... $ 12.80
-------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................................... 0.07
Net Realized and Unrealized Gain (Loss).................... 1.19
-------
Total from Investment Operations......................... 1.26
-------
DISTRIBUTIONS
Net Investment Income...................................... (0.06)
-------
NET ASSET VALUE, END OF PERIOD............................... $ 14.00
=======
TOTAL RETURN................................................. 9.87%
=======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)...................... $14,437
Ratio of Expenses to Average Net Assets.................... 1.12%*
Ratio of Net Investment Income to Average Net Assets....... 0.72%*
Portfolio Turnover Rate.................................... 151%
Average Commission Rate#................................... $0.0600
-------
Ratio of Expenses to Average Net Assets Including Expense
Offsets.................................................. 1.11%*
-------
</TABLE>
- -----------
* Annualized.
** Commencement of Operations.
*** Initial offering of Institutional Service Class Shares.
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged during the period.
5
<PAGE>
<TABLE>
<CAPTION>
SPECIAL EQUITY
INSTITUTIONAL
SERVICE CLASS
----------------
MARCH 22, 1996**
TO
OCTOBER 31, 1996
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $ 16.54
-------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)................................ (0.01)
Net Realized and Unrealized Gain (Loss)..................... 1.44
-------
Total from Investment Operations.......................... 1.43
-------
DISTRIBUTIONS
Net Investment Income....................................... --
Net Realized Gain........................................... --
-------
Total Distributions....................................... --
NET ASSET VALUE, END OF PERIOD................................ $ 17.97
=======
TOTAL RETURN.................................................. 8.65%
=======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)....................... $ 1,007
Ratio of Expenses to Average Net Assets..................... 1.12%*
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... (0.64)%*
Portfolio Turnover Rate..................................... 129%
Average Commission Rate#.................................... $0.0590
-------
Ratio of Expenses to Average Net Assets Including Expense
Offsets................................................... 1.12%*
-------
</TABLE>
- -----------
* Annualized.
** Initial offering of Institutional Service Class Shares.
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged during the period.
6
<PAGE>
INVESTMENT OBJECTIVES
STRATEGIC BALANCED PORTFOLIO. The objective of the Strategic Balanced Port-
folio is to provide long-term capital growth consistent with reasonable risk
to principal by investing in a diversified portfolio of common stocks of es-
tablished companies and investment grade fixed income securities. The propor-
tion of the Portfolio's assets invested in fixed income or common stocks will
vary as market conditions warrant. A typical asset mix for the Portfolio, how-
ever, is expected to be 50% common stocks and 50% fixed income securities.
Cash equivalent investments will be maintained when deemed appropriate by the
Adviser.
GROWTH PORTFOLIO. The objective of the Growth Portfolio is to provide long-
term capital growth consistent with reasonable risk to principal by investing
in common stocks of companies that offer long-term growth potential.
SPECIAL EQUITY PORTFOLIO. The objective of the Special Equity Portfolio is
to provide maximum long-term growth of capital consistent with reasonable risk
to principal, by investing in small to medium capitalized growth companies
that have particularly strong financial characteristics as measured by the Ad-
viser's "ranking system."
EQUITY PORTFOLIO. The objective of the Equity Portfolio is to provide long-
term capital growth consistent with reasonable risk to principal by investing,
under normal circumstances at least 90% of its total assets in common stocks
of companies that offer long-term growth potential. As described below, growth
potential is measured by the Adviser's "ranking" system.
There can be no assurance that the Portfolios will achieve their stated
objective.
INVESTMENT POLICIES
STRATEGIC BALANCED PORTFOLIO. The Strategic Balanced Portfolio is designed
to provide a single vehicle with which to participate in the Adviser's equity
and fixed income strategies, combined with the Adviser's asset allocation de-
cisions. The Portfolio seeks to achieve its objective by investing in a combi-
nation of stocks, bonds and short-term cash equivalents. A typical asset mix
of the Portfolio is expected to be 50% equities and 50% fixed income securi-
ties. However, depending upon market conditions, the mix may vary, and cash
equivalent investments will be maintained when deemed appropriate by the Ad-
viser. Under normal conditions, the range of exposure to fixed income securi-
ties is expected to be 25% to 50% of the Portfolio, and the range of exposure
to equity securities is expected to be 35% to 70%. However, at least 25% of
the Portfolio's total assets will always be invested in fixed income senior
securities including debt securities and preferred stock.
7
<PAGE>
The fixed income portion of the Portfolio will consist of a diversified mix
of investment grade fixed income securities of varying maturities including
securities of the U.S. Government and its agencies, corporate bonds, mortgage-
backed securities, asset-backed securities, and various short term instruments
such as commercial paper, Treasury bills and certificates of deposit. The
Portfolio may also invest in stripped securities.
Investment grade bonds are generally considered to be those bonds having one
of the four highest grades assigned by Moody's Investors Services, Inc.
("Moody's") (Aaa, Aa, A or Baa) or Standard and Poor's Corporation ("S&P")
(AAA, AA, A or BBB). Securities rated Baa by Moody's or BBB by S&P may have
speculative characteristics and could be more sensitive to changes in the
economy and the financial condition of issuers than higher rated bonds. Mort-
gage-backed securities in which the Portfolio may invest will either carry a
guarantee from an agency of the U.S. Government or a private issuer of the
timely payment of principal and interest or are sufficiently seasoned to be
considered by the Adviser to be of investment grade quality.
It is the Adviser's intention that the Portfolio's investments will be lim-
ited to the investment grades described above. However, the Adviser reserves
the right to retain securities which are downgraded by one or both of the rat-
ing agencies if, in the Adviser's judgment, the retention is warranted. In ad-
dition, the adviser may invest in preferred stock and convertible securities.
In the case of convertible securities, the conversion privilege may be exer-
cised, but the common stocks received will be sold.
Regardless of the rating category, credit quality of bonds in such ratings
categories can change suddenly and unexpectedly, and even recently-issued
credit ratings may not fully reflect the actual risks posed by a particular
security. For these reasons, it is the Portfolio's policy not to rely primar-
ily on ratings issued by established credit rating agencies, but to utilize
such ratings in conjunction with the Adviser's own independent and on-going
review of credit quality.
The Adviser attempts to be risk averse believing that preserving principal
in periods of rising interest rates should lead to above-average returns over
the long run. The fixed income portion of the Portfolio will be largely deter-
mined by the Adviser's assessment of current economic conditions and trends,
the Federal Reserve Board's management of monetary policy, fiscal policy, in-
flation expectations, government and private credit demands and global condi-
tions. Once these factors have been carefully analyzed, the average
maturity/duration of the Portfolio will be adjusted to reflect the Adviser's
outlook. Under normal market conditions, the weighted average maturity and du-
ration will range between eight and twelve years and four and six years, re-
spectively. Over a complete market cycle, the average maturity and duration
will, on average, equal the general market.
8
<PAGE>
Additionally, the Adviser attempts to emphasize relative values within se-
lected maturity ranges. Interest rate spreads between different quality rang-
es, by types of issues and within coupon areas are monitored, and the Portfo-
lio will be structured to take advantage of relative values within these
areas. Marketability of individual issues and diversification within the Port-
folio will be emphasized.
Active security rotation will generate the majority of the excess returns in
the Portfolio. The Portfolio will hold, under most circumstances, no more than
10% of its assets in any non-governmental issue.
While the Adviser anticipates that the majority of the assets in the Portfo-
lio will be U.S. dollar-denominated securities, up to 20% of the Portfolio's
assets may consist of obligations of foreign governments, agencies, or corpo-
rations denominated either in U.S. dollars or foreign currencies. The credit
quality standards applied to foreign obligations are the same as those applied
to the selection of U.S.-based securities.
Equity securities are selected using approaches identical to those for the
Growth Portfolio as set forth below.
GROWTH PORTFOLIO. The Growth Portfolio seeks to achieve its objective by in-
vesting in common stocks of companies that are small, medium and large growth
companies deemed by the Adviser to offer long-term growth potential. The secu-
rities selected will be from a universe of approximately 4,000 companies
listed on the New York and American Stock Exchanges and on the National Asso-
ciation of Securities Dealers Automated Quotation system ("NASDAQ"). The Port-
folio may also invest in convertible bonds or convertible preferred stocks.
The Adviser's security selection process for the Portfolio will focus on
those companies that rank high on the Adviser's proprietary ranking system.
The ranking system consists of five buying tests that are ranked according to
decile. The Adviser believes that companies that possess a higher "ranking
score" are likely to provide superior rates of return over an extended period
of time relative to the stock market in general. The components of the ranking
system include past earnings per share growth rates, earnings acceleration,
prospective earnings "surprise" probabilities, relative price strength, and
cash reinvestment rates. The Adviser screens a universe of approximately 4,000
companies to identify potentially attractive securities. The list of potential
investments is narrowed further by the use of traditional fundamental security
analysis. The Adviser focuses particular attention on those companies whose
recent earnings have exceeded consensus expectations.
As perceived risks in the marketplace increase, cash reserves can be used
for defensive purposes. Under normal circumstances, it is anticipated that
cash reserves will represent less than 20% of the Portfolio's assets. For tem-
porary defensive purposes, the Portfolio may reduce its holdings of equity se-
curities and increase its holdings in short-term investments. (See "SHORT-TERM
INVESTMENTS.")
9
<PAGE>
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased, if they pass the selection
process outlined above. The Portfolio may invest up to 20% of its assets in
shares of foreign based companies. In addition, if shares of a foreign company
are purchased, they must be traded in the United States as sponsored American
Depositary Receipts ("ADRs") which are U.S. domestic securities representing
ownership rights in foreign companies. (See "FOREIGN INVESTMENTS.")
SPECIAL EQUITY PORTFOLIO. The Portfolio seeks to achieve its objective by
investing primarily in the common stocks of companies with market capitaliza-
tions of $100 million to $2 billion dollars. Securities selected for the Port-
folio will be chosen from the New York Stock Exchange and American Stock Ex-
change or from the over the counter markets operated by the National Associa-
tion of Securities Dealers.
The security selection process for the Portfolio focuses on those companies
within the market capitalization specified above and that rank above average
on the Adviser's proprietary ranking system. The ranking system consists of
five buying tests that are ranked according to decile. The Adviser believes
that companies with smaller capitalizations that possess a higher "ranking
score" are likely to provide superior rates of return over an extended period
of time relative to the stock market in general. The components of the ranking
system include past earnings per share growth rates, earnings acceleration,
prospective earnings "surprise" probabilities, relative price strength, and
cash reinvestment rates. The Adviser screens a universe of several thousand
smaller to medium capitalized companies to identify potentially attractive se-
curities. The list of potential investments is narrowed further by the use of
traditional fundamental security analysis. In addition, the Adviser focuses
particular attention on those companies whose earnings momentum are accelerat-
ing and/or whose recent earnings have exceeded the Adviser's expectations.
It is anticipated that under normal circumstances, cash reserves will repre-
sent less than 20% of the Portfolio's assets. For temporary defensive purpos-
es, however, the Portfolio may reduce its holdings of equity securities and
increase, up to 100%, its holdings in short-term investments.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, from time to time,
shares of foreign based companies may be purchased if they pass the selection
process outlined above. In addition, if shares of a foreign company are pur-
chased, they must be traded in the United States as American Depositary Re-
ceipts ("ADRs"), which are U.S. domestic securities representing ownership
rights in foreign companies. Under normal circumstances, ADRs will not com-
prise more than 20% of the Portfolio's assets. (See "FOREIGN INVESTMENTS.")
10
<PAGE>
EQUITY PORTFOLIO. The Portfolio seeks to achieve its objective by investing
primarily in common stocks of companies that are small, medium and large capi-
talization companies deemed by the Adviser to offer long-term potential.
The security selection process for the Portfolio will focus on those compa-
nies that rank high on the Adviser's proprietary ranking system. The ranking
system consists of five buying tests that are ranked according to decile. The
Adviser believes that companies that possess a higher "ranking score" are
likely to provide superior rates of return over an extended period of time
relative to the stock market in general. The components of the ranking system
include past earnings per share growth rates, earnings acceleration, prospec-
tive earnings "surprise" probabilities, relative price strength and cash rein-
vestment rates. The Adviser screens a universe of approximately 4,000 compa-
nies to identify potentially attractive securities. The list of potential in-
vestments is narrowed further by the use of traditional fundamental security
analysis. The Adviser focuses particular attention on those companies whose
recent earnings have exceeded consensus expectations.
In seeking to fulfill its investment objective, the Portfolio, under normal
circumstances, will invest at least 90% of its assets in equity securities,
consisting primarily of common stock; however, the Portfolio may also invest
in convertible bonds or convertible preferred stocks. The Portfolio may invest
a portion of its assets in shares of foreign based companies. If shares of a
foreign company are purchased, they must be traded in the United States as
sponsored ADRs. (See "FOREIGN INVESTMENTS.")
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corporation
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated, deter-
mined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the
11
<PAGE>
Adviser, of an investment quality comparable with other debt securities which
may be purchased by each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is also required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price if such securities mature in less than one year.
The Administrator and the Adviser will mark to market daily the value of the
securities purchased.
The use of repurchase agreements involves certain risks. For example, a de-
fault by the seller of the agreement may cause a Portfolio to experience a
loss or delay in the liquidation of the collateral securing the repurchase
agreement. The Portfolio might also incur disposition costs in liquidating the
collateral. While the Fund's management acknowledges these risks, it is ex-
pected that they can be controlled through stringent security selection crite-
ria and careful monitoring procedures.
The Fund has received permission from the SEC to pool daily uninvested cash
balances of the Fund's Portfolios in order to invest in repurchase agreements
on a joint basis. By entering into joint repurchase agreements, a Portfolio
may incur lower transactions costs and earn higher rates of interest on joint
repurchase agreements. Each Portfolio's contribution would determine its re-
turn from a joint repurchase agreement. (See "SHORT-TERM INVESTMENTS.")
12
<PAGE>
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors who need to borrow securities in order to complete certain transac-
tions. A Portfolio will not loan portfolio securities to the extent that
greater than one-third of its assets at fair market value, would be committed
to loans. By lending its investment securities, a Portfolio attempts to in-
crease its income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Portfolio. A Portfolio may
lend its investment securities to qualified brokers, dealers, domestic and
foreign banks or other financial institutions, so long as the terms, the
structure and the aggregate amount of such loans are not inconsistent with the
Investment Company Act of 1940, as amended. All relevant facts and circum-
stances, including the creditworthiness of the broker, dealer or institution,
will be considered in making decisions with respect to the lending of securi-
ties, subject to review by the Fund's Board of Directors.
At the present time, the SEC does not object if an investment company pays
reasonable negotiated fees in connection with loaned securities so long as
such fees are set forth in a written contract and approved by the investment
company's Board of Directors. The Portfolio will continue to retain any voting
rights with respect to the loaned securities. If a material event occurs af-
fecting an investment on loan, the loan must be called and the securities vot-
ed.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It
is possible that the market price of the securities at the time of delivery
may be higher or lower than the purchase price. Each Portfolio will maintain a
separate account of cash or liquid securities at least equal to the value of
purchase commitments until payment is made. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery is
made although the Portfolio may earn income on securities it has deposited in
a segregated account.
Each Portfolio engages in these types of purchases in order to buy securi-
ties that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
13
<PAGE>
PORTFOLIO TURNOVER
It is expected that the annual portfolio turnover rate for the Portfolios
will not exceed 150%. In addition to Portfolio trading costs, higher rates of
portfolio turnover may result in the realization of capital gains. To the ex-
tent net short-term capital gains are realized, any distributions resulting
from such gains are considered ordinary income for federal income tax purpos-
es. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES" for more informa-
tion on taxation.) The Portfolios will not normally engage in short-term trad-
ing, but each reserves the right to do so. The tables set forth in "Financial
Highlights" present the Portfolios' historical portfolio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has received a ruling from the SEC which allows each of its Portfo-
lios to invest the greater of 5% of its total assets or $2.5 million in the
Fund's DSI Money Market Portfolio for cash management purposes provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN INVESTMENTS
Investing in foreign companies may involve additional risks and considera-
tions which are not typically associated with investing in U.S. companies.
Since stocks of foreign companies are normally denominated in foreign curren-
cies, the Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, comparable information may not be readily avail-
able about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S. compa-
nies. In addition,
14
<PAGE>
with respect to certain foreign countries, there is the possibility of expro-
priation or confiscatory taxation, political or social instability, or diplo-
matic developments which could affect U.S. investments in those countries.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. Each of the Portfolio may also invest up
to 15% of its net assets (except the Special Equity Portfolio which may invest
up to 10% of its net assets) in illiquid securities. The prices realized from
the sales of these securities could be more or less than those originally paid
by the Portfolio or less than what may be considered the fair value of such
securities.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a "majority of the out-
standing voting securities" of a Portfolio, as defined in the 1940 Act.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the U.S. Government or any agency or instrumentality there-
of);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the portfolio adopts a temporary defensive position.
(e) make loans except (i) by purchasing bonds, debentures or similar obli-
gations which are publicly distributed, (including repurchase agree-
ments provided, however, that repurchase agreements maturing in more
than seven days, together with securities which are not readily mar-
ketable,
15
<PAGE>
will not exceed 10% of the Portfolio's total assets), and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent with
the 1940 Act or the Rules and Regulations or interpretations of the
SEC thereunder;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 33
1/3% (10% for the Special Equity Portfolio) of the Portfolio's gross
assets valued at the lower of market or cost, and (ii) a Portfolio may
not purchase additional securities when borrowings exceed 5% of total
assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment objectives of the Portfolios are fundamental and with respect
to each Portfolio may be changed only with the approval of the holders of a
majority of the outstanding shares of such Portfolio. Except for limitations
(a), (b), (d), (e) and (f)(i), the Strategic Balanced and Growth Portfolios'
investment limitations and policies described in this Prospectus and in the
Statement of Additional Information are not fundamental and may be changed by
the Fund's Board of Directors upon reasonable notice to investors. The invest-
ment limitations of the Special Equity Portfolio described here and in the SAI
are fundamental policies and may be changed only with the approval of the
holders of a majority of the outstanding shares of the Portfolio. If a per-
centage limitation on investment or utilization of assets as set forth above
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or total cost of the Portfolios' assets
will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor") without a sales commission, at the net asset value per
share next determined after an order is received by the Fund and payment is
received by the Custodian. (See "SERVICE AND DISTRIBUTION PLANS" and "VALUA-
TION OF SHARES.") The minimum initial investment required is $2,500. The mini-
mum initial investment for IRA accounts is $500. The minimum initial invest-
ment for spousal IRA accounts is $250. Certain exceptions may be made by the
officers of the Fund.
The Portfolios issue two classes of shares: Institutional Class and Institu-
tional Service Class. The two classes of shares each represent interests in
the same portfolio of investments, have the same rights and are identical in
all respects, except that the Service Class Shares offered by this Prospectus
bear shareholder servicing expenses, may in the future bear distribution plan
expenses, and have exclusive
16
<PAGE>
voting rights with respect to the Rule 12b-1 Distribution Plan pursuant to
which the distribution fee may be paid. The two classes have different ex-
change privileges. (See "EXCHANGE PRIVILEGE") The net income attributable to
Service Class Shares and the dividends payable on Service Class Shares will be
reduced by the amount of the shareholder servicing and distribution fees; ac-
cordingly, the net asset value of the Service Class Shares will be reduced by
such amount to the extent the Portfolio has undistributed net income.
Some Service Agents may also impose additional or different conditions or
other account fees on the purchase and redemption of Portfolio shares, which
are not subject to the Rule 12b-1 Service and Distribution Plans, which may
include transaction fees and/or service fees paid by the Fund from the Fund
assets attributable to the Service Agent and, would not be imposed if shares
of the Portfolio were purchased directly from the Fund or the Distributor. The
Service Agents may provide shareholder services to their customers that are
not available to a shareholder dealing directly with the Fund. Each Service
Agent is responsible for transmitting to its customers a schedule of any such
fees and information regarding any additional or different conditions regard-
ing purchases and redemptions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. A salesperson and any other person entitled to receive compen-
sation for selling or servicing Portfolio shares may receive different compen-
sation with respect to one particular class of shares over another in the
Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent, Chase Global Funds Services Company, prior to the close of its business
day to receive that day's share price. Proper payment for the order must be
received by the Sub-Transfer Agent no later than the time when the Portfolio
is priced on the following business day. Service Agents are responsible to
their customers and the Fund for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it together with a check made
payable to UAM Funds, to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
17
<PAGE>
Payment for purchases of shares received by mail will be credited to an ac-
count at the next share price calculated for the Portfolio after receipt. (See
"OTHER PURCHASE INFORMATION.") Payment does not need to be converted into Fed-
eral Funds (monies credited to the Fund's Custodian Bank by a Federal Reserve
Bank) before the Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
.instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
the Custodian Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be purchased is identified on the check or wire.
Prior to wiring additional investments, please notify the UAM Funds Service
Center by calling the number on the cover of this Prospectus. Mail orders
should include, when possible, the "Invest by Mail" stub which accompanies any
Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when,
18
<PAGE>
in the judgment of management, such suspension or rejection is in the best in-
terests of the Fund. Purchases of a Portfolio's shares will be made in full
and fractional shares of the Portfolio calculated to three decimal places.
Certificates for fractional shares will not be issued. Certificates for whole
shares will not be issued except at the written request of the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining to such securities shall become the property of the Portfolio and must
be delivered to the Fund by the investor upon receipt from the issuer. Securi-
ties acquired through an in-kind purchase will be acquired for investment and
not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be in-
cluded in the Portfolio (current market quotations must be readily
available for such securities);
. the investor represents and agrees that all securities offered to
be exchanged are liquid securities and not subject to any restric-
tions upon their sale by the Portfolio under the Securities Act of
1933, or otherwise; and
. the value of any such securities (except U.S. Government securi-
ties) being exchanged together with other securities of the same
issuer owned by the Portfolio will not exceed 5% of the net assets
of the Portfolio immediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of the shares depending
on the market value of investment securities held by the Portfolio.
19
<PAGE>
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which they are regis-
tered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pen-
sion and profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the
wire redemption privilege) by completing appropriate sections of
the Application; and
. call the Fund and instruct that the redemption proceeds be mailed
to you or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated
to receive redemption proceeds (this can be accomplished only by a
written request signed by each shareholder, with each signature
guaranteed);
. redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as prior to effecting each transaction requested by
telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or the Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
20
<PAGE>
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than
the registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other
than the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after the
receipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by a Portfolio in lieu of cash
in conformity with applicable rules of the SEC. Investors may incur brokerage
charges on the sale of portfolio securities received in payment of redemp-
tions.
SERVICE AND DISTRIBUTION PLANS
Under the Service Plan for Service Class Shares, adopted pursuant to Rule
12b-1 under the 1940 Act, the Fund may enter into service agreements with
Service Agents (broker-dealers or other financial institutions) who receive
fees with respect to the Fund's Service Class Shares owned by shareholders for
whom the Service Agent is the dealer or holder of record, or for whom the
Service Agent performs Servicing, as defined below. These fees are paid out of
the assets allocable to Service Class Shares to the Distributor, to the Serv-
ice Agent directly or through the Distributor. The Fund reimburses the Dis-
tributor or the Service Agent, as the case may be, for payments made at an an-
nual rate of up to .25 of 1% of the average daily value of Service Class
Shares of the Portfolios owned by clients of such Service Agent during the pe-
riod payments for Servicing are being made to it. Such
21
<PAGE>
payments are borne exclusively by the Service Class Shares. Each item for
which a payment may be made under the Service Plan constitutes personal serv-
ice and/or shareholder account maintenance and may constitute an expense of
distributing Fund Service Class Shares as the SEC construes such term under
Rule 12b-1. The fees payable for servicing reflect actual expenses incurred up
to the limit described herein.
Servicing may include assisting clients in changing dividend options, ac-
count designations and addresses; performing sub-accounting; establishing and
maintaining shareholder accounts and record; processing purchase and redemp-
tion transactions; investing client cash account balances automatically in
Service Class Shares; providing periodic statements showing a client's account
balance and integrating such statements with those of other transactions and
balances in the client's other accounts serviced by the Service Agent; arrang-
ing for bank wires; and such other services as the Fund may request, to the
extent the Service Agent is permitted by applicable statute, rule or regula-
tion.
The Glass-Steagall Act and other applicable laws prohibit Federally chart-
ered or supervised banks from engaging in certain aspects of the business of
issuing, underwriting, selling and/or distributing securities. Accordingly,
banks will be engaged to act as Service Agent only to perform administrative
and shareholder servicing functions, including transaction-related agency
services for their customers. If a bank is prohibited acting as a transfer
agent, alternative means for servicing its shareholders clients would be
sought and the shareholders clients of the bank will remain Fund shareholders.
The Distributor promotes the distribution of the Service Class Shares of the
Fund in accordance with the terms of a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act. The Distribution Plan provides for the use of
Fund assets allocable to Service Class Shares to pay expenses of distributing
such shares.
The Distribution Plan and the Service Plan (together, the "Plans") were ap-
proved by the Board of Directors, including a majority of the directors who
are not "interested persons" of the Fund as defined in the 1940 Act (and each
of whom has no direct or indirect financial interest in the Plans or any
agreement related thereto, referred to herein as the "12b-1 Directors"). The
Plans may be terminated at any time by the vote of the Board or the 12b-1 Di-
rectors, or by the vote of a majority of the outstanding voting securities of
the Service Class Shares.
While the Plans continue in effect, the selection of the 12b-1 Directors is
committed to the discretion of such persons then in office. The Plans provide
generally that a Portfolio may incur distribution and service costs under the
Plans which may not exceed 0.75% per annum of that Portfolio's net assets. The
Board has currently limited payments under the Plans to 0.50% per annum of a
Portfolio's net assets. The Service Class Shares offered by this Prospectus
currently are not
22
<PAGE>
making any payments under the Distribution Plan. Upon implementation, the Dis-
tribution Plan would permit payments to the Distributor, broker-dealers, other
financial institutions, sales representatives or other third parties who ren-
der promotional and distribution services, for items such as advertising ex-
penses, selling expenses, commissions or travel reasonably intended to result
in sales of shares of the Service Class Shares and for the printing of pro-
spectuses sent to prospective purchasers of the Service Class Shares of the
Portfolios.
Although the Plans may be amended by the Board of Directors, any change in
the Plans which would materially increase the amounts authorized to be paid
under the Plans must be approved by shareholders of the class involved. The
total amounts paid with respect to a class of shares of a Portfolio under the
foregoing arrangements may not exceed the maximum limits specified above, and
the amounts and purposes of expenditures under the Plans must be reported to
the12b-1 Directors quarterly. The amounts allowable under the Plans for each
Class of Shares of the Portfolios are also limited under certain rules of the
National Association of Securities Dealers, Inc.
In addition to payments by the Fund under the Plans, the Distributor, United
Asset Management Corporation ("UAM"), the parent company of the Adviser, the
Adviser, or any of their affiliates, may, at its own expense, compensate a
Service Agent or other person for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to the Fund, a Portfolio
or any Class of Shares of a Portfolio. The person making such payments may do
so out of its revenues, its profits or any other source available to it. Such
services arrangements, when in effect, are made generally available to all
qualified service providers. The Adviser may compensate its affiliated compa-
nies for referring investors to the Portfolios.
The Distributor, the Adviser and certain of their other affiliates also par-
ticipate, at the date of this Prospectus, in an arrangement with Smith Barney
Inc. under which Smith Barney provides certain defined contribution plan mar-
keting and shareholder services and receives from such entities an amount
equal to up to 33.3% of the portion of the investment advisory fees attribut-
able to the invested assets of Smith Barney's eligible customer accounts with-
out regard to any expense limitation in addition to amounts payable to all
selling dealers. The Fund also compensates Smith Barney for services it pro-
vides to certain defined contribution plan shareholders that are not otherwise
provided by UAMFSI.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Service Class Shares of each Portfolio may be exchanged for Service Class
Shares of any other UAM Funds Portfolio (See the list of Portfolios of the UAM
Funds at the end of this Prospectus.) Exchange requests should be made by con-
tacting the UAM Funds Service Center.
23
<PAGE>
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE."
An exchange into another UAM Funds Portfolio is a sale of shares and may re-
sult in a gain or loss for income tax purposes. The Fund may modify or termi-
nate the exchange privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets attributable to the class, less any liabilities attrib-
utable to the class, by the number of shares outstanding attributable to the
class The net asset value per share of each Portfolio is determined as of the
close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. Securities purchased with remaining
maturities of
24
<PAGE>
60 days or less are valued at amortized cost when the Board of Directors de-
termines that amortized cost reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in a Portfolio over a
given period of time, expressed as an annual percentage rate. Yields are cal-
culated according to a standard that is required for all bond funds. As this
differs from other accounting methods, the quoted yield may not equal the in-
come actually paid to shareholders.
Total return is the change in value of an investment in a Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance is calculated separately for Institutional Class and Service
Class Shares. Dividends paid by a Portfolio with respect to Institutional
Class and Service Class Shares, to the extent any dividends are paid, will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that service fees, distribution charges and any incre-
mental transfer agency costs relating to Service Class Shares will be borne
exclusively by that class.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
Performance is calculated separately for Institutional Class and Service
Class Shares. Dividends paid by a Portfolio with respect to Institutional
Class and Service Class Shares, to the extent any dividends are paid, will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that services fees, distribution charges and any in-
cremental transfer agency costs relating to Service Class Shares will be borne
exclusively by that class.
25
<PAGE>
The Portfolios' Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. To
receive an Annual Report, contact the UAM Funds Service Center at the address
or telephone number on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income to shareholders in quarterly dividends. If any net capital gains
are realized, each Portfolio will normally distribute them annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of the Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October and November to shareholders of record in such
a month will be treated as if they had been paid by the Fund and received by
the shareholders on December 31 of the same calendar year, provided that the
dividends are paid before February of the following year.
Dividends declared in December will be deemed to have been paid by the Fund
and received by shareholders on the record date provided that the dividends
are paid before February 1 of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions)
paid to shareholders who have not complied with IRS taxpayer identification
regulations. In order to avoid this withholding requirement, you must certify
that your Social
26
<PAGE>
Security or Taxpayer Identification Number provided is correct and that either
you are not currently subject to backup withholding, or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
The investment adviser to the Portfolios, Sirach Capital Management, Inc.,
is a Washington corporation whose predecessor was formed in 1970 and is lo-
cated at 3323 One Union Square, Seattle, Washington 98101. The Adviser is a
wholly-owned subsidiary of United Asset Management Corporation and provides
investment management services to corporations, pension and profit-sharing
plans, 401(k) and thrift plans, trusts, estates and other institutions and in-
dividuals. As of the date of this Prospectus, the Adviser had approximately $7
billion in assets under management. For further information on Sirach Capital
Management, Inc.'s investment services, please call (206) 624-3800.
The investment professionals of the Adviser who are primarily responsible
for the day-to-day management of the Portfolios and a description of their
business experience during the past five years are as follows:
STRATEGIC BALANCED PORTFOLIO -- George B. Kauffman, Stephen J. Romano,
and Robert L. Stephenson, Jr.;
GROWTH PORTFOLIO -- George B. Kauffman and Harvey G. Bateman; and
SPECIAL EQUITY PORTFOLIO -- Harvey G. Bateman and Stefan W. Cobb.
EQUITY PORTFOLIO -- Harvey G. Bateman and George B. Kauffman
HARVEY G. BATEMAN, CFA, CIC -- Principal. Mr. Bateman joined the Adviser in
1988. He has managed equity funds for the Adviser since 1989. Mr. Bateman as-
sumed responsibility for managing the Special Equity Portfolio in 1989, the
Growth Portfolio in 1995 and Equity Portfolio in 1996.
GEORGE B. KAUFMAN, CFA, CIC -- Principal. Mr. Kauffman joined the Adviser in
1981. He has managed balanced and growth funds for the Adviser since 1981. Mr.
Kauffman assumed responsibility for managing the Strategic Balanced and Growth
Portfolios in 1993, and Equity Portfolio in 1996.
ROBERT L. STEPHENSON, JR., CFA, CIC -- Principal. Mr. Stephenson joined the
Adviser in 1987. He has managed balanced and growth funds for
27
<PAGE>
the Adviser since 1987. Mr. Stephenson assumed responsibility for managing the
Strategic Balanced Portfolio in 1993.
STEPHEN J. ROMANO, CFA -- Principal. Mr. Romano joined the Adviser in 1991.
Prior to that, he was a Senior Investment Officer at Seattle-First National
Bank where he managed equity and fixed income portfolios for private banking
clients. Mr. Romano has managed fixed income funds for the Adviser since 1991.
He assumed responsibility for managing the fixed income portion of the Strate-
gic Balanced Portfolio in 1993.
STEFAN W. COBB -- Principal. Mr. Cobb joined the Adviser in 1994. Prior to
that, he was a Vice President at the investment banking firm of Robertson,
Stephens & Company where he was engaged in institutional sales. Mr. Cobb as-
sumed responsibility for managing the Special Equity Portfolio in 1994.
Under Investment Advisory Agreements (the "Advisory Agreements") with the
Fund, dated as of September 27, 1989 and October 29, 1993, the Adviser, sub-
ject to the control and supervision of the Fund's Board of Directors and in
conformance with the stated investment objectives and policies of the Portfo-
lios, manages the investment and reinvestment of the assets of the Portfolios.
In this regard, it is the responsibility of the Adviser to manage the Fund's
Portfolios and to place purchase and sales orders for the Portfolios.
As compensation for the services rendered by the Adviser under the Advisory
Agreements, each Portfolio pays the Adviser an annual fee, in monthly install-
ments, calculated by applying the following annual percentage rates to each of
the Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
-----
<S> <C>
Strategic Balanced Portfolio.......................................... 0.650%
Growth Portfolio...................................................... 0.650%
Special Equity Portfolio.............................................. 0.700%
Equity Portfolio...................................................... 0.650%
</TABLE>
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume as the Adviser's own expense operating expenses otherwise pay-
able by the Portfolios, if necessary, in order to reduce expense ratios. As of
the date of this Prospectus, the Adviser has agreed to keep the Equity Portfo-
lio Institutional Service Class Shares from exceeding 1.15%, of average daily
net assets. The Fund will not reimburse the Adviser for any advisory fees that
are waived or Portfolio expenses that the Adviser may bear on behalf of a
Portfolio for a given fiscal year.
In addition, the Adviser may compensate its affiliated companies for refer-
ring investors to the Portfolios. The Distributor, UAM, the Adviser, or any of
their affiliates, may, at its own expense, compensate a Service Agent or other
person for marketing, shareholder servicing, record-keeping and/or other serv-
ices performed
28
<PAGE>
with respect to the Fund, a Portfolio or any Class of Shares of a Portfolio.
The person making such payments may do so out of its revenues, its profits or
any other source available to it. Such service arrangements, when in effect,
are made generally available to all qualified service providers.
ADVISER'S HISTORICAL PERFORMANCE
Set forth below are certain performance data provided by the Adviser relat-
ing to the composite of equity accounts of clients of the Adviser. These ac-
counts have the same investment objective as the Equity Portfolio, and were
managed using substantially similar, though not in all cases identical, in-
vestment strategies and techniques as those contemplated for use by the Ad-
viser in managing the Equity Portfolio. (See "INVESTMENT OBJECTIVES AND POLI-
CIES.") The results presented are not intended to predict or suggest the re-
turns to be experienced by the Equity Portfolio or the return an individual
investor might achieve by investing in the Equity Portfolio. Results may dif-
fer because of, among other things, difference in brokerage commissions, ac-
count expenses, including investment advisory fees, the size of positions
taken in relation to account size, diversification of securities, timing of
purchases and sales, availability of cash for new investments and private
character of the accounts compared with the Equity Portfolio and its share-
holders. Investors should be aware that the use of methods of determining per-
formance different from that used below could result in different performance
data. Investors should not rely on the following performance data. The perfor-
mance data shown is that of the Adviser's private accounts and is not indica-
tive of the Equity Portfolio's future performance.
TOTAL ANNUALIZED RETURN FOR VARIOUS PERIODS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INSTITUTIONAL S&P
EQUITY ACCOUNTS 500 INDEX
--------------- ---------
<S> <C> <C>
One-year period.................................... % %
Five-year period................................... % %
Ten-year period.................................... % %
Fourteen-year period*.............................. % %
</TABLE>
- -----------
* Inception of performance record
29
<PAGE>
1. Equity performance results reflect a blending of 95% of the actual return
from the equity only portion of Sirach Capital Management's Equity Compos-
ite with 5% of the return of the Salomon Brothers 3 Month Treasury Bill
rate. Results are based on the actual performance of an asset weighted com-
posite of fully discretionary, non-restricted, unleveraged accounts. The
composite totaled $1.519 billion as of 12/31/95. This performance is not
calculated according to AIMR.
2. The S&P 500 is an unmanaged index composite of 400 industrial, 40 finan-
cial, 40 utilities and 20 transportation stocks, which assumes reinvestment
of dividends and is generally considered representative of U.S. large capi-
talization stocks.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio-specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The following Portfolio-specific fees are calculated from the
aggregate net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Strategic Balanced Portfolio........................................... 0.06%
Growth Portfolio....................................................... 0.04%
Special Equity Portfolio............................................... 0.04%
Equity Portfolio....................................................... 0.04%
</TABLE>
30
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, with its
principal office located at 211 Congress Street, Boston, MA 02110, distributes
the shares of the Fund. Under the Fund's Distribution Agreement (the "Agree-
ment"), the Distributor, as agent of the Fund, agrees to use its best efforts
as sole distributor of the Fund's shares. The Distributor does not receive any
fee or other compensation under the Agreement (except as described under
"Service and Distribution Plans" above). The Agreement continues in effect so
long as such continuance is approved at least annually by the Fund's Board of
Directors, including a majority of those Directors who are not parties to such
Agreement or interested persons of any such party. The Agreement provides that
the Fund will bear the costs of the registration of its shares with the SEC
and various states and the printing of its prospectuses, SAIs and reports to
shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreement authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each of the Fund's Portfolios. The Agreement directs the Adviser to use its
best efforts to obtain the best available price and most favorable execution
for all transactions of the Portfolios. If consistent with the interests of
the Portfolios, the Adviser may select brokers on the basis of the research,
statistical and pricing services they provide to the Portfolios. Such brokers
may be paid a higher commission than that which another qualified broker would
have charged for effecting the same transaction, provided that such commis-
sions are paid in compliance with the Securities Exchange Act of 1934, as
amended, and that the Adviser determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Adviser to the Portfolios and the Adviser's other clients.
31
<PAGE>
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more of these other clients served by the Ad-
viser is considering a purchase at or about the same time, transactions in
such securities will be allocated among the Portfolio and clients in a manner
deemed fair and reasonable by the Adviser. Although there is no specified for-
mula for allocating such transactions, such allocations are subject to peri-
odic review by the Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc."
The Fund's Articles of Incorporation, as amended, permit the Directors to
issue three billion shares of common stock, with an $.001 par value. The Di-
rectors have the power to designate one or more series or classes of shares of
common stock and to classify or reclassify any unissued shares without further
action by shareholders. At its discretion, the Board of Directors of the Fund
may create additional Portfolios and Classes of shares.
The shares of each Portfolio and Class of the Fund are fully paid and nonas-
sessable, and have no preference as to conversion, exchange, dividends, re-
tirement or other features and have no pre-emptive rights. The shares of each
Portfolio and Class have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors
can elect 100% of the Directors. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his name on the books of the Fund.
As of December 6, 1996, Hartnat & Co., Rochester, NY held of record 37.4% of
the outstanding shares of Sirach Growth Portfolio Service Class Shares and
75.5% of Sirach Special Equity Portfolio Service Class Shares for which owner-
ship is disclaimed or presumed disclaimed. The persons or organizations owning
25% or more of the outstanding shares of a Portfolio may be presumed to "con-
trol" (as that term is defined in the 1940 Act) such Portfolio. As a result,
those persons or organizations could have the ability to vote a majority of
the shares of the Portfolio on any matter requiring the approval of sharehold-
ers of such Portfolio. Both Institutional Class and Institutional Service
Class Shares represent an interest in the same assets of a Portfolio. Service
Class Shares bear certain expenses related to shareholder servicing, may bear
expenses related to the distribution of such shares
32
<PAGE>
and have exclusive voting rights with respect to matters relating to such dis-
tribution expenditures.
Both Institutional Class and Service Class Shares represent an interest in
the same assets of a Portfolio. Service Class Shares bear certain expenses re-
lated to shareholder servicing and may bear expenses related to the distribu-
tion of such shares, and have exclusive voting rights with respect to matters
relating to such distribution expenditures. For information about the Institu-
tional Class Shares of the Portfolios contact the UAM Funds Service Center.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters to the extent required by
the undertaking.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Cen-
ter.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
33
<PAGE>
UAM FUNDS -- SERVICE CLASS SHARES
BHM&S Total Return Bond Portfolio
FPA Crescent Fund
MJI International Equity Portfolio
NWQ Balanced Portfolio
Sirach Equity Portfolio
Sirach Growth Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
TJ Core Equity Portfolio
34
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Sirach Capital Management, Inc.
3323 One Union Square
Seattle, Wa 98101
(206) 624-3800
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
Sterling Partners'
Portfolios
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
STERLING PARTNERS' PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: STERLING CAPITAL MANAGEMENT COMPANY
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series of shares
(known as "Portfolios"), each of which has different investment objectives and
policies. Certain Portfolios currently offer two separate classes of shares:
Institutional Class Shares and Institutional Service Class Shares ("Service
Class Shares"). The securities offered in this Prospectus are Institutional
Class Shares of four diversified, no-load Portfolios of the Fund managed by
Sterling Capital Management Company.
STERLING PARTNERS' BALANCED PORTFOLIO. The objective of the Sterling Part-
ners' Balanced Portfolio ("Balanced Portfolio") is to provide maximum long-
term total return consistent with reasonable risk to principal, by investing
in a balanced portfolio of common stocks and fixed income securities.
STERLING PARTNERS' EQUITY PORTFOLIO. The objective of the Sterling Partners'
Equity Portfolio ("Equity Portfolio") is to provide maximum long-term total
return consistent with reasonable risk to principal, by investing primarily in
common stocks.
STERLING PARTNERS' SMALL CAP VALUE PORTFOLIO. The objective of the Sterling
Partners' Small Cap Value Portfolio ("Small Cap Value Portfolio") is to pro-
vide maximum long-term total return consistent with reasonable risk to princi-
pal by investing primarily in equity securities of smaller companies, in terms
of market capitalization.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO. The objective of the
Sterling Partners' Short-Term Fixed Income Portfolio ("Short-Term Fixed Income
Portfolio") is to provide a high level of current income consistent with the
maintenance of principal and liquidity by investing primarily in investment
grade fixed income securities with an average weighted maturity between 1 and
3 years.
There can be no assurance that any of the Portfolios will meet its stated
objective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
FUND EXPENSES
The following table illustrates expenses and fees an Institutional Class
shareholder of the Portfolios would incur. Transaction fees may be charged if
a broker-dealer or other financial intermediary deals with the Fund on your
behalf. (see "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP
BALANCED EQUITY FIXED INCOME VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS CLASS CLASS CLASS
SHARES SHARES SHARES SHARES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales Load Imposed on
Purchases.............. NONE NONE NONE NONE
Sales Load Imposed on
Reinvested Dividends... NONE NONE NONE NONE
Deferred Sales Load..... NONE NONE NONE NONE
Redemption Fees......... NONE NONE NONE NONE
Exchange Fees........... NONE NONE NONE NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<CAPTION>
SHORT-TERM SMALL CAP
BALANCED EQUITY FIXED INCOME VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS CLASS CLASS CLASS
SHARES SHARES SHARES SHARES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment Advisory
Fees................... 0.75% 0.75% 0.50% 1.00%
Administrative Fees..... 0.19% 0.28% 0.37% 0.19%
12b-1 Fees.............. NONE NONE NONE NONE
Other Expenses.......... 0.11% 0.19% 0.26% 0.06%
Advisory Fees Waived.... -- (0.23)% (0.58)% --
---- ----- ----- ----
Total Operating Expenses
(After Fee Waivers).... 1.05%+ 0.99%*+ 0.55%*+ 1.25%
</TABLE>
- -----------
* Without the Adviser's fee waiver, annualized Total Operating Expenses of the
Equity and Short-Term Fixed Income Portfolios Institutional Class Shares for
the fiscal year ended October 31, 1996 would have been 1.22% and 1.13%, re-
spectively.
+ The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, annualized Total Operating Expenses
of the Balanced Portfolio Institutional Class Shares would be 1.06%. If ex-
pense offsets were excluded, annualized Total Operating Expenses of the Eq-
uity and Short-Term Fixed Income Portfolios Institutional Class Shares would
not differ. The Small Cap Value Portfolio has not yet begun operations.
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolios (if necessary) in
order to keep the expense ratios of (i) the Balanced Portfolio Institutional
Class Shares from
1
<PAGE>
exceeding 1.11% of its average daily net assets; (ii) the Equity Portfolio In-
stitutional Class Shares from exceeding 0.99% of its average daily net assets;
(iii) the Short-Term Fixed Income Portfolio Institutional Class Shares from
exceeding 0.55% of its average daily net assets; and (iv) the Small Cap Value
Portfolio Institutional Class Shares from exceeding 1.25% of its average daily
assets. The Fund will not reimburse the Adviser for any advisory fees that are
waived or Portfolio expenses that the Adviser may bear on behalf of a Portfo-
lio for a given fiscal year.
The table above shows various fees and expenses an investor in the Institu-
tional Class Shares of the Portfolios would bear directly or indirectly. The
expenses and fees listed are based on the operations of the Balanced, Equity
and Short-Term Fixed Income Portfolios' Institutional Class Shares during the
fiscal year ended October 31, 1996, except that Administrative Fees have been
restated to reflect current fees. (See "ADMINISTRATIVE SERVICES" herein and in
the SAI.) The fees and expenses set forth above for the Sterling Partners'
Small Cap Value Institutional Class Shares are estimated amounts for its first
year of operations assuming average net assets of $25 million.
The following example shows the expenses that a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. The Portfolios
charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Portfolio Institutional Class
Shares....................................... $11 $33 $58 $128
Equity Portfolio Institutional Class Shares... $10 $32 $55 $121
Short-Term Fixed Income Portfolio Institu-
tional Class Shares.......................... $ 6 $18 $31 $ 69
Small Cap Value Portfolio Institutional Class
Shares....................................... $13 $40 * *
</TABLE>
- -----------
* As the Small Cap Value Portfolio Institutional Class is not yet operational,
the Fund has not projected expenses beyond the three year period shown.
This example should not be considered a representation of past or future ex-
penses or performance. Actual expenses may be greater or lesser than those
shown.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Sterling Capital Management Inc. (the "Adviser"), an investment counseling
firm founded in 1970, is the investment adviser to the Fund's Sterling Part-
ners' Portfolios. The Adviser currently manages over $1.6 billion in assets
for institutional clients and high net worth individuals. (See "INVESTMENT AD-
VISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"). The shares are available to investors at net asset value
without a sales commission. Shares can be purchased by sending investments di-
rectly to the Fund. The minimum initial investment for the Institutional Class
Shares is $2,500. The minimum for subsequent investments is $100. The minimum
initial investment for IRA accounts is $500. The minimum initial investment
for spousal IRA accounts is $250. Certain exceptions to the initial or minimum
investment amounts may be made by the officers of the Fund. (See "PURCHASE OF
SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will automatically be rein-
vested in Portfolio shares unless an investor elects to receive cash distribu-
tions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed without cost at any time, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agent services
for the Fund. (See "ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors should consider the following: (1) The fixed income securities held
by the Balanced Portfolio and the Short-Term Fixed Income Portfolio will be
affected by general changes in interest rates resulting in increases or de-
creases in the value of the obligations held by each Portfolio. The value of
the securities held by the Portfolios can be expected to vary inversely with
changes in prevailing interest rates; i.e., as interest rates decline, market
value tends to increase and vice versa. (2) The common stock of companies hav-
ing small market capitalizations held by the Portfolios, may exhibit greater
volatility than common stock of companies having larger capitalizations. (3)
Each Portfolio may invest a portion of its assets in derivatives, including
futures contracts and options. (See "FUTURES CONTRACTS AND OPTIONS.") (4) Each
Portfolio may use various investment practices involving special considera-
tions, including investing in repurchase agreements, when issued, forward de-
livery and delayed settlement securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
STERLING INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS SHARES
The following tables show selected per share information for a share out-
standing throughout each period presented for the Balanced, Equity and Short-
Term Fixed Income Portfolios' Institutional Class Shares. These tables are
part of the Portfolios' Financial Statements, which are in the Portfolios' Oc-
tober 31, 1996 Annual Report to Shareholders. The Financial Statements are in-
corporated into the Portfolios' SAI. The Portfolios' October 31, 1996 Finan-
cial Statements have been examined by Price Waterhouse LLP. Their unqualified
opinion on the October 31, 1996 Financial Statements is also incorporated into
the Portfolios' SAI. Please read the following information in conjunction with
the Portfolios' 1996 Annual Report to Shareholders.
STERLING PARTNERS' BALANCED PORTFOLIO
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------------------
MARCH 15,**
1991 TO
OCTOBER 31,
1991 1992 1993 1994 1995 1996
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.26 $ 10.71 $ 11.51 $ 11.13 $ 11.86
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.22 0.37 0.34 0.32 0.46 0.34
Net Realized and
Unrealized Gain (Loss)
on Investments......... 0.23 0.50 0.94 (0.25) 1.04 1.38
------- ------- ------- ------- ------- -------
Total From Investment
Operations............ 0.45 0.87 1.28 0.07 1.50 1.72
------- ------- ------- ------- ------- -------
Distributions
Net Investment Income... (0.19) (0.37) (0.32) (0.32) (0.45) (0.36)
Net Realized Gain....... (0.00) (0.05) (0.16) (0.13) (0.32) (0.67)
------- ------- ------- ------- ------- -------
Total Distributions.... (0.19) (0.42) (0.48) (0.45) (0.77) (1.03)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.26 $ 10.71 $ 11.51 $ 11.13 $ 11.86 $ 12.55
======= ======= ======= ======= ======= =======
TOTAL RETURN............ 4.54% 8.65% 12.23% 0.66% 14.23% 15.52%
======= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
NET ASSETS, END OF
PERIOD (THOUSANDS)..... $19,501 $39,129 $47,016 $64,673 $64,933 $58,691
Ratio of Expenses to
Average Net Assets..... 1.11%* 1.09% 0.99% 1.01% 0.96% 1.03%
Ratio of Net Investment
Income to Average Net
Assets................. 3.85%* 3.52% 3.08% 3.05% 3.96% 2.77%
Portfolio Turnover
Rate................... 40% 80% 49% 70% 130% 84%
Average Commission Rate
#...................... N/A N/A N/A N/A N/A $0.0684
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A 0.96% 1.02%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission per share it paid for trades
on which commissions were charged.
5
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------
MARCH 15,**
1991 TO
OCTOBER 31, 1991 1992 1993 1994 1995 1996
---------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $10.29 $ 11.01 $ 12.39 $ 12.54 $ 13.69
------ ------ ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.06 0.17 0.15 0.16 0.21 0.15
Net Realized and
Unrealized Gain on In-
vestments.............. 0.29 0.75 1.53 0.27 1.73 3.01
------ ------ ------- ------- ------- -------
Total from Investment
Operations............ 0.35 0.92 1.68 0.43 1.94 3.16
------ ------ ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income... (0.06) (0.16) (0.16) (0.15) (0.20) (0.16)
Net Realized Gain....... -- (0.04) (0.14) (0.13) (0.59) (0.97)
------ ------ ------- ------- ------- -------
Total Distributions.... (0.06) (0.20) (0.30) (0.28) (0.79) (1.13)
------ ------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $10.29 $11.01 $ 12.39 $ 12.54 $ 13.69 $ 15.72
====== ====== ======= ======= ======= =======
TOTAL RETURN+........... 3.51% 9.01% 15.46% 3.50% 16.61% 24.76%
====== ====== ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
NET ASSETS, END OF
PERIOD (THOUSANDS)..... $2,515 $9,725 $15,982 $23,352 $31,969 $32,943
Ratio of Expenses to
Average Net Assets..... 1.11%* 1.04% 0.93% 0.99% 1.00% 0.99%
Ratio of Net Investment
Income to Average Net
Assets................. 1.43%* 1.73% 1.30% 1.34% 1.64% 1.01%
Portfolio Turnover
Rate................... 24% 84% 55% 73% 135% 78%
Average Commission
Rate*.................. N/A N/A N/A N/A N/A $0.0687
Voluntary Waived Fees
and Expenses Assumed by
the Adviser Per Share.. N/A N/A $0.09 $0.06 $0.04 $0.03
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A N/A 0.99% 0.99%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Total return would have been lower if certain fees and expenses had not
been waived or assumed by the Adviser during the periods indicated.
# For the fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
6
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------
FEBRUARY 10,**
1992 TO
OCTOBER 31,
1992 1993 1994 1995 1996
-------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.07 $ 10.12 $ 9.74 $ 9.96
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.30 0.53 0.49 0.54 0.56
Net Realized and
Unrealized Gain on
Investments............ 0.07 0.06 (0.38) 0.23 (0.03)
------- ------- ------- ------- -------
Total From Investment
Operations............ 0.37 0.59 0.11 0.77 0.53
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income... (0.30) (0.53)+ (0.48) (0.55) (0.55)
In Excess of Net Invest-
ment Income............ -- -- -- -- # (0.01)
Net Realized Gain....... -- (0.01) -- -- --
Return of Capital....... -- -- (0.01) -- --
Total Distributions.... (0.30) (0.54) (0.49) (0.55) (0.56)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.07 $ 10.12 $ 9.74 $ 9.96 $ 9.93
======= ======= ======= ======= =======
TOTAL RETURN++.......... 3.75% 5.98% 1.16% 8.16% 5.51%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
NET ASSETS, END OF
PERIOD (THOUSANDS)..... $12,101 $20,256 $24,382 $24,722 $22,717
RATIO OF EXPENSES TO
AVERAGE NET ASSETS+.... 0.50%* 0.50% 0.53% 0.55% 0.55%
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET
ASSETS................. 5.00%* 5.24% 5.00% 5.55% 5.66%
Portfolio Turnover
Rate................... 122% 78% 100% 58% 48%
Voluntarily Waived Fees
and Expenses Assumed by
the Adviser Per Share.. $0.03 $0.05 $0.05 $0.04 $0.06
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A N/A N/A 0.55% 0.55%
</TABLE>
- -----------
* Annualized
** Commencement of Operations
+ Because of the differences between book and tax basis accounting, approx-
imately $.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 if certain fees and expenses had not
been waived or assumed by the Adviser during the periods indicated.
# Value is less than $0.01 per share.
7
<PAGE>
INVESTMENT OBJECTIVES
STERLING PARTNERS' BALANCED PORTFOLIO. The objective of the Balanced Portfo-
lio is to provide maximum long-term return consistent with reasonable risk to
principal, by investing in a balanced portfolio of common stocks and fixed in-
come securities. A typical asset mix for the Portfolio is expected to be 60%
in equities and 40% in fixed income securities and cash. The total return on
the Portfolio will consist of both capital appreciation and income, with the
relative proportions depending upon the underlying asset mix as well as spe-
cific security holdings.
STERLING PARTNERS' EQUITY PORTFOLIO. The objective of the Equity Portfolio
is to provide maximum long-term total return consistent with reasonable risk
to principal, by investing primarily in common stocks. The Portfolio may also
invest in other equity-related securities such as preferred stocks, convert-
ible preferred stocks, convertible bonds, options, futures, rights and war-
rants.
STERLING PARTNERS' SMALL CAP VALUE PORTFOLIO. The objective of the Small Cap
Value Portfolio is to provide maximum long-term total return consistent with
reasonable risk to principal by investing primarily in equity securities of
smaller companies, in terms of market capitalization. The equity securities in
which the Portfolio may invest consist of common stocks (both domestic and in-
ternational) preferred stocks, convertible bonds, distressed bonds with a high
likelihood of future equity conversion, options, futures, rights and warrants.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO. The objective of the
Short-Term Fixed Income Portfolio is to provide investors with a high level of
current income consistent with the maintenance of principal and liquidity by
investing primarily in investment grade fixed income securities with an aver-
age weighted maturity between 1 and 3 years. Investments in this Portfolio
represent a middle ground between the risk associated with short-term money
market accounts and longer term bond funds. Investors in this Portfolio seek
incremental returns to money market accounts but do not want the down side ex-
posure to longer term bond funds in a risky rate environment.
INVESTMENT POLICIES
STERLING PARTNERS' BALANCED PORTFOLIO. The Balanced Portfolio incorporates
within a single investment vehicle the two investment disciplines employed by
the Adviser. The first discipline provides for stock selection; and the second
chooses among fixed income securities, including coupon bonds, zero coupon
bonds and cash equivalents. A targeted asset mix for the Portfolio is expected
to be 60% in equities and, 40% in fixed income securities and cash. However,
at least 25% of the Portfolio's total assets will always be invested in fixed
income senior securities, including debt securities and preferred stocks.
8
<PAGE>
Individual equity securities are selected using approaches identical to
those described below for the Equity Portfolio. Simply stated, the Adviser's
stock selection is designed to identify equities priced at a discount from the
estimated value of their underlying businesses.
The universe of stocks the Adviser chooses from is focused on larger capi-
talization issues. While the Portfolio may invest in small capitalization com-
panies, the majority of stocks in the Portfolio will have a market capitaliza-
tion in excess of $500 million at the time of purchase, and the Adviser will
strive to maintain an average market capitalization in excess of $10 billion.
This further ensures the quality and stability of the Portfolio.
The fixed income portion of the Portfolio will be invested primarily in in-
vestment grade securities of varying maturities. These include securities of
the U.S. Government and its agencies, corporate bonds, mortgage-backed securi-
ties, asset-backed securities, and various short-term instruments such as com-
mercial paper, U.S. Treasury bills, and certificates of deposit.
Within the Portfolio, fixed income investments are regarded as opportunities
for capital appreciation, as a source of liquidity and as a means to reduce
overall portfolio volatility. The management of the fixed income segment con-
sists of three important steps. First, the Adviser uses proprietary analytical
tools to manage the interest rate risk of the Portfolio. After arriving at an
appropriate average maturity for the Portfolio, the Adviser uses a "top down"
approach to select the most attractively valued sectors for the fixed income
investments. Finally, the Adviser analyzes the spectrum of the yield curve to
identify the most desirable maturities at which to invest the Portfolio. The
Adviser's fixed income strategy emphasizes quality and capital preservation.
STERLING PARTNERS' EQUITY PORTFOLIO. The Equity Portfolio seeks to achieve
its objective by investing under normal circumstances, at least 65% of its to-
tal assets in common stocks. The Portfolio may also invest in other equity re-
lated securities such as preferred stocks, convertible preferred stocks, con-
vertible bonds, options, futures, rights, and warrants. However, at all times,
the Portfolio's primary interest will be direct ownership of common equity
stocks. It is anticipated that cash reserves will represent a relatively small
percentage of the Portfolio's assets (generally less than 10%).
The Adviser's stock selection process focuses on identifying securities
which are priced below the estimated value of the underlying business. As
such, the Adviser approaches each investment as a businessman would approach a
private transaction. All factors relevant to the worth of an ongoing business
are examined using traditional fundamental securities analysis. Such factors
include balance sheet quality, normalized earnings power, industry stability,
capital intensity, reinvest-
9
<PAGE>
ment opportunities, and management talent. This "businessman's approach" is
designed to result in a high quality portfolio.
The Adviser's sell discipline is as important as its buy discipline. For ev-
ery stock it buys, it defines in writing the thesis for owning it. Each thesis
rests on the fundamental factors noted above. Any stock that underperforms its
sector is reviewed against a pre-written outline, and those which fail to dem-
onstrate fundamental progress in keeping with the original thesis are sold.
The universe of stocks the Adviser chooses from is focused on larger capi-
talization issues. While the Portfolio may invest in small capitalization com-
panies, the majority of stocks will have a market capitalization in excess of
$500 million at the time of purchase, and the Adviser will strive to maintain
an average market capitalization in excess of $10 billion. This further en-
sures the quality and stability of the Portfolio.
Another important aspect of the Adviser's approach is an emphasis on diver-
sification across a wide range of industries. It divides the S&P 500 into in-
dustry groupings, and uses the groupings as a comparison yardstick for the
Portfolio. The Adviser's policies seek to ensure a healthy representation
within each sector. The result is that volatility may be controlled within an
acceptable range.
The Adviser anticipates that the majority of the investments will be in
United States based companies. However, from time to time, shares of foreign
based companies may also be purchased. The most common vehicle for such pur-
chases will be American Depository Receipts ("ADRs") which are U.S. domestic
securities representing ownership rights in foreign companies. Under normal
circumstances, investments in foreign based companies will not comprise more
than 20% of the Portfolio assets. Most ADRs are traded on a U.S. stock ex-
change. Issuers of unsponsored ADRs are not continually obligated to disclose
material information in the U.S. and therefore, there may not be a correlation
between such information and the market value of the unsponsored ADR.
STERLING PARTNERS' SMALL CAP VALUE PORTFOLIO. The Sterling Partners' Small
Cap Value Portfolio seeks to achieve its objective by investing under normal
circumstances, at least 65% of its total assets in equity securities of small
companies, which consist of market capitalizations of $1 billion or less. The
Portfolio may invest in both domestic and international common stocks, pre-
ferred stocks, convertible preferred stocks, convertible bonds, distressed
bonds with a high likelihood of future equity conversion, options, futures,
rights and warrants. It is anticipated that cash reserves will represent a
relatively small percentage of the Portfolio's assets (generally less than
10%).
Small capitalization stocks have historically been more volatile in price
than the larger capitalization stocks. Among the reasons for the greater price
volatility
10
<PAGE>
of these securities are the less certain growth prospects of smaller firms,
the lower degree of liquidity in the markets for such stocks, and small com-
pany stocks also may, to a degree, fluctuate independently of larger company
stocks. Small company stocks may decline in price as large company stocks
rise, or rise in price as large company stocks decline. Small capitalization
stocks may have many of the characteristics of securities of new or unseasoned
companies.
The Adviser anticipates that the majority of the investments will be in
United States based companies. However, from time to time, shares of foreign
based companies may also be purchased. The most common vehicle for such pur-
chases will be American Depositary Receipts ("ADRs"), which are U.S. domestic
securities representing ownership rights in foreign companies. Under normal
circumstances, investments in foreign based companies will not comprise more
than 20% of the Portfolio's assets.
The Adviser's stock selection process focuses on identifying securities
which are priced below the estimated value of the underlying business. As
such, the Adviser approaches each investment as a businessman would approach a
private transaction. All factors relevant to the worth of an ongoing business
are examined using traditional fundamental securities analysis. Such factors
include balance sheet quality, normalized earnings power, industry stability,
capital intensity, reinvestment opportunities, and management talent. This
"businessman's approach" is designed to result in a high quality portfolio.
The Adviser's sell discipline is as important as its buy discipline. For ev-
ery stock it buys, it defines in writing the thesis for owning it. Each thesis
rests on the fundamental factors noted above. Any stock that underperforms is
reviewed against a pre-written outline, and those which fail to demonstrate
fundamental progress in keeping with the original thesis are sold.
The Portfolio will invest primarily in equity securities having a market
capitalization of $1 billion or less at the time of purchase.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO. The Short-Term Fixed
Income Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 65% of its total assets in the following fixed income
instruments:
(1) Short-term and intermediate-term corporate debt securities rated A or
better by Moody's Investors Service, Inc. ("Moody's") or by Standard &
Poor's Corporation ("S&P");
(2) U.S. Treasury and U.S. Government agency obligations;
(3) Bank obligations, including certificates of deposit and bankers' ac-
ceptances;
(4) Commercial paper rated A-1 by S&P or Prime-1 by Moody's; and
(5) Repurchase agreements collateralized by these securities.
11
<PAGE>
In an effort to minimize fluctuations in market value, the Short-Term Fixed
Income Portfolio is expected to maintain an average weighted maturity between
1 and 3 years. The Short-Term Fixed Income Portfolio may also hold securities
of foreign issuers provided such securities are denominated in U.S. dollars,
and may invest in bond (interest rate) futures and options to a limited ex-
tent. (See "OTHER INVESTMENT POLICIES" for a description of these and other
investment practices of the Portfolio.)
With respect to the Balanced and Short-Term Fixed Income Portfolios, the Ad-
viser reserves the right to retain securities which are downgraded by either
Moody's or S&P or both, if in the Adviser's judgement, considering market con-
ditions, the retention of such securities is warranted.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolios may invest a por-
tion of their assets in domestic and foreign money market instruments includ-
ing certificates of deposit, bankers' acceptances, time deposits, U.S. Govern-
ment obligations, U.S. Government agency securities, short-term corporate debt
securities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corpo-
ration or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated,
determined by the Adviser to be of comparable quality.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
12
<PAGE>
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the UAM Funds' DSI Money Market Portfolio (See "INVESTMENT COM-
PANIES").
AMERICAN DEPOSITARY RECEIPTS
ADRs are depositary receipts typically used by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign corpora-
tion. Generally, ADR's in registered form are designed for use in the U.S. se-
curities market and ADRs in bearer form are designed for use in securities mar-
kets outside the United States. ADRs may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
ADRs may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be di-
rectly involved in the creation of the program. Although regulatory require-
ments with respect to sponsored and unsponsored programs are generally similar,
in some cases it may be easier to obtain financial information from an issuer
that has participated in the creation of a sponsored program. Accordingly,
there may be less information available regarding issuers of securities under-
lying unsponsored programs and there may not be a correlation between such in-
formation and the market value of the depositary receipts. ADRs also involve
the risks of other investments in foreign securities, as discussed in the Pro-
spectus. For purposes of the Equity Portfolio's investment policies, the Port-
folio's investments in depositary receipts will be deemed to be investments in
the underlying securities.
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits to
sell that security back at an agreed upon price plus an agreed upon market rate
of interest. Under a repurchase agreement, the seller is required to maintain
the value of securities subject to the agreement at not less than 100% of the
repurchase price if such securities mature in less than one year. The Adminis-
trator and the Adviser will mark to market daily the value of the securities
purchased. The use of repurchase agreements involves certain risks. For exam-
ple, a default by the seller of the agreement may cause a Portfolio to experi-
ence a loss or delay in the liquidation of the collateral securing the repur-
chase agreement. The Portfolio might also incur disposition costs in liquidat-
ing the collateral. While the Fund's management acknowledges these risks, it is
expected that they can be controlled through stringent security selection cri-
teria and careful monitoring procedures. The Fund has received permission from
the SEC to pool daily uninvested cash balances of the
13
<PAGE>
Fund's Portfolios in order to invest in repurchase agreements on a joint basis.
By entering into joint repurchase agreements, a Portfolio may incur lower
transaction costs and earn higher rates of interest on joint repurchase agree-
ments. Each Portfolio's contribution would determine its return from a joint
repurchase agreement. (See "SHORT TERM INVESTMENTS.")
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by a Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It
is possible that the market price of the securities at the time of delivery may
be higher or lower than the purchase price. Each Portfolio will maintain a sep-
arate account of cash or liquid securities at least equal to the value of pur-
chase commitments until payment is made. Typically, no income accrues on secu-
rities purchased on a delayed delivery basis prior to the time delivery is made
although the Portfolio may earn income on securities it has deposited in a seg-
regated account.
Each Portfolio may engage in these types of purchases in order to buy securi-
ties that fit with its investment objectives at attractive prices--not to in-
crease its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover rate for the Small Cap Value Portfolio will not exceed
100%. The Portfolios will not normally engage in short-term trading but each
reserves the right to do so.
The Short-Term Fixed Income Portfolio may have a high portfolio turnover rate
due to the short maturities of the securities purchased. However, this high
turnover rate should not increase the Portfolio's cost since brokerage commis-
sions are not normally charged on the purchase or sale of fixed income securi-
ties. In addition to Portfolio trading costs, higher rates of portfolio turn-
over may result in the realization of capital gains. (See "DIVIDENDS, CAPITAL
GAINS DISTRIBUTIONS AND TAXES" for information on taxation.) The tables set
forth in "FINANCIAL HIGHLIGHTS" present the Portfolios' historical portfolio
turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-end or
closed-end
14
<PAGE>
investment companies. No more than 5% of the investing Portfolio's total assets
may be invested in the securities of any one investment company nor may it ac-
quire more than 3% of the voting securities of any other investment company.
The Portfolio will indirectly bear its proportionate share of any management
fees paid by an investment company in which it invests in addition to the advi-
sory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfolios
to invest, for cash management purposes, the greater of 5% of its total assets
or $2.5 million in the Fund's DSI Money Market Portfolio provided that the in-
vestment is consistent with the Portfolio's investment policies and restric-
tions. Based upon a Portfolio's assets invested in the DSI Money Market Portfo-
lio, the investing Portfolio's adviser will waive its investment advisory fee
and any other fees earned as a result of the Portfolio's investment in the DSI
Money Market Portfolio. The investing Portfolio will bear expenses of the DSI
Money Market Portfolio on the same basis as all of its other shareholders.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested and to reduce transaction costs, the Bal-
anced Portfolio may invest in stock and bond futures and interest rate futures
contracts; the Equity and the Small Cap Value Portfolios may invest in stock
futures and options; and the Short-Term Fixed Income Portfolio may invest in
bond, bond index, and interest rate futures and options thereon. Because trans-
action costs associated with futures and options may be lower than the costs of
investing in stocks and bonds directly, it is expected that the use of index
futures and options to facilitate cash flows may reduce a Portfolio's overall
transaction costs. Each Portfolio may enter into futures contracts provided
that not more than 5% of the Portfolio's assets are required as a margin de-
posit to secure obligations under such contracts. A Portfolio will engage in
futures and options transactions for hedging purposes only.
Futures and options can be volatile and involve various degrees and types of
risk. If the Portfolio judges market conditions incorrectly or employs a strat-
egy that does not correlate well with its investments, use of futures and op-
tions contracts could result in a loss. The Portfolio could also suffer losses
if it is unable to liquidate its position due to an illiquid secondary market.
In the opinion of the Directors of the Fund, the risk that the Portfolio will
be unable to close out a futures position or options contract will be minimized
by only entering into futures contracts or options transactions traded on na-
tional exchanges and for which there appears to be a liquid secondary market.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered for
sale to the general public but which are eligible for resale to qualified in-
stitutional investors under Rule 144A of the Securities Act of 1933. Under the
supervision of
15
<PAGE>
the Fund's Board of Directors, the Adviser determines the liquidity of such in-
vestments by considering all relevant factors. Provided that a dealer or insti-
tutional trading market in such securities exists, these restricted securities
are not treated as illiquid securities for purposes of a Portfolio's investment
limitations. A Portfolio will invest no more than 10% of its net assets in il-
liquid securities. The prices realized from the sales of these securities could
be less than those originally paid by the Portfolio or less than what would be
considered the fair value of such securities.
INVESTMENT LIMITATIONS
A Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% of the
Portfolio's gross assets valued at the lower of market or cost (33
1/3% for the Small Cap Value Portfolio), and a Portfolio may not pur-
chase additional securities when borrowings exceed 5% of total gross
assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value (33 1/3% for the
Small Cap Value Portfolio)
The investment limitations described here and in the SAI are fundamental pol-
icies and may be changed only with the approval of the holders of a majority of
16
<PAGE>
the outstanding shares of each Portfolio of the Fund. If a percentage limita-
tion on investment or utilization of assets as set forth above is adhered to at
the time an investment is made, a later change in percentage resulting from
changes in the value or total cost of the Portfolio's assets will not be con-
sidered a violation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor") without a sales commission, at the net asset value per share
next determined after an order is received by the Fund and payment is received
by the custodian. (See "VALUATION OF SHARES.") The minimum initial investment
required is $2,500. The minimum initial investment for IRA accounts is $500.
The minimum initial investment for spousal IRA accounts is $250. Certain excep-
tions may be made by the officers of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a shareholder
dealing directly with the Fund. A salesperson and any other person entitled to
receive compensation for selling or servicing Portfolio shares may receive dif-
ferent compensation with respect to one particular class of shares over another
in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their custom-
ers. If shares of a Portfolio are purchased in this manner, the Service Agent
must receive your investment order before the close of trading on the New York
Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer Agent prior
to the close of their business day to receive that day's share price. Proper
payment for the order must be received by the Sub-Transfer Agent no later than
the time when the Portfolio is priced on the following business day. Service
Agents are responsible to their customers and the Fund for timely transmission
of all subscription and redemption requests, investment information, documenta-
tion and money.
17
<PAGE>
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it together with a check made pay-
able to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for purchases of shares received by mail will be credited to an ac-
count at the next share price calculated for the Portfolio after receipt. Pay-
ment does not need to be converted into Federal Funds (monies credited to the
Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will accept
it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
(Your Account Registration)_______
(Your Account Number)_______
(Wire Control Number)_______
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
the Custodian Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be purchased are identified on the check or wire. Prior to wiring
additional investments, notify the UAM Funds Service Center by calling the
number on the cover of this Prospectus. Mail orders should include, when pos-
sible, the "Invest by Mail" stub which accompanies any Fund confirmation
statement.
18
<PAGE>
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional shares will not be issued. Certif-
icates for whole shares will not be issued except at the written request of
the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the time
of the next determination of net asset value after acceptance. Shares issued
by a Portfolio in exchange for securities will be issued at net asset value
determined as of the same time. All dividends, interest, subscription, or
other rights pertaining to such securities shall become the property of the
Portfolio and must be delivered to the Fund by the investor upon receipt from
the issuer. Securities acquired through an in-kind purchase will be acquired
for investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be included in
the Portfolio (current market quotations must be readily available for
such securities);
. the investor represents and agrees that all securities offered to be ex-
changed are liquid securities and not subject to any restrictions upon
their sale by the Portfolio under the Securities Act of 1933, or other-
wise; and
. the value of any such securities (except U.S. Government securities) be-
ing exchanged together with other securities of the same issuer owned by
the Portfolio will not exceed 5% of the net assets of the Portfolio im-
mediately after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of secu-
rities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
19
<PAGE>
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of your shares depending
on the market value of the investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of shares
or dollar amount to be redeemed, signed by all registered owners of the
shares in the exact names in which they are registered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of es-
tates, trusts, guardianships, custodianships, corporations, pension and
profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the wire
redemption privilege) by completing appropriate sections of the Applica-
tion; and
. call the Fund and instruct that the redemption proceeds be mailed to you
or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated to
receive redemption proceeds (this can be accomplished only by a written
request signed by each shareholder, with each signature guaranteed);
. redemption of certificated shares by telephone.
The Fund and the Fund's Sub-Transfer Agent will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and they
may be liable for any losses if they fail to do so. These procedures include
requiring the investor to provide certain personal identification at the time
an account is opened, as well as prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction
20
<PAGE>
requests. The Fund or Sub-Transfer Agent may be liable for any losses due to
unauthorized or fraudulent telephone instructions if the Fund or Sub-Transfer
Agent does not employ the procedures described above. Neither the Fund nor the
Sub-Transfer Agent will be responsible for any loss, liability, cost or ex-
pense for following instructions received by telephone that it reasonably be-
lieves to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other than
the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after the
receipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by a Portfolio in lieu of cash
in conformity with applicable rules of the SEC. Investors may incur brokerage
charges on the sale of portfolio securities received in payment of redemp-
tions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by contacting the UAM Funds Service Center.
21
<PAGE>
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES--BY TELEPHONE". An exchange
into another UAM Funds Portfolio is a sale of shares and may result in a gain
or loss for income tax purposes. The Fund may modify or terminate the exchange
privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets attributable to the class, less any liabilities attrib-
utable to the class, by the number of shares outstanding attributable to the
class. The net asset value per share of each Portfolio is determined as of the
close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities.
22
<PAGE>
Securities purchased with remaining maturities of 60 days or less are valued
at amortized cost when the Board of Directors determines that amortized cost
reflects fair value.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Dividends paid by the Portfolio with respect to Institu-
tional Class and Service Class Shares, to the extent any dividends are paid,
will be calculated in the same manner at the same time on the same day and
will be in the same amount, except that service and distribution fees relating
to Service Class Shares will be borne exclusively by that class.
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. Con-
tact the UAM Funds Service Center at the address or telephone number on the
cover of this Prospectus.
23
<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, each Portfolio will normally distribute them
annually. All dividends and capital gains distributions will be automatically
reinvested in additional shares of each Portfolio unless the Fund is notified
in writing that the shareholder elects to receive the distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
24
<PAGE>
INVESTMENT ADVISER
Sterling Capital Management Company is a North Carolina corporation formed
in 1970 and located at One First Union Center, 301 S. College Street, Suite
3200, Charlotte, NC 28202. The Adviser is a wholly-owned subsidiary of United
Asset Management Corporation ("UAM") and provides investment management serv-
ices to corporations, pension and profit-sharing plans, trusts, estates and
other institutions and individuals. The Adviser currently has over $1.6 bil-
lion in assets under management.
Since 1982, the Adviser has been involved with the distribution of the North
Carolina Capital Management Trust, which consists of two portfolios, a bond
fund and a money market mutual fund offered exclusively to public units in the
state, the first such fund to be registered with the SEC. As of December 31,
1995, the asset value of this fund was approximately $1.9 billion.
An investment policy committee is responsible for the day-to-day management
of each Portfolio's investments.
Under Investment Advisory Agreements with the Fund, dated as of March 8,
1991, November 25, 1991 and January 2, 1997, the Adviser manages the invest-
ment and reinvestment of the assets of the Portfolios. The Adviser must adhere
to the stated investment objectives and policies of the Portfolios, and is
subject to the control and supervision of the Fund's Board of Directors.
As compensation for its services as an Adviser, each Portfolio pays the Ad-
viser an annual fee in monthly installments, calculated by applying the fol-
lowing annual percentage rate to each Portfolio's average daily net assets for
the month:
<TABLE>
<S> <C>
Balanced Portfolio..................................................... 0.75%
Equity Portfolio....................................................... 0.75%
Small Cap Value Portfolio.............................................. 1.00%
Short-Term Fixed Income Portfolio...................................... 0.50%
</TABLE>
The Adviser has voluntarily agreed to maintain operating expenses of the
Portfolios' Institutional Class Shares from exceeding the following percentage
of each Portfolio's average daily net assets:
<TABLE>
<S> <C>
Balanced Portfolio..................................................... 1.11%
Equity Portfolio....................................................... 0.99%
Small Cap Value Portfolio.............................................. 1.25%
Short-Term Fixed Income Portfolio...................................... 0.55%
</TABLE>
The Fund will not reimburse the Adviser for any advisory fees that are
waived or Portfolio expenses that the Adviser may bear on behalf of a Portfo-
lio for a given fiscal year.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing,
25
<PAGE>
shareholder servicing, record-keeping and/or other services performed with re-
spect to the Fund, a Portfolio or any Class of Shares of a Portfolio. Payments
made for any of these purposes may be made from the paying entity's revenues,
its profits or any other source available to it. When such service arrange-
ments are in effect, they are made generally available to all qualified serv-
ice providers.
The Distributor, the Adviser and certain of their other affiliates also par-
ticipate, at the date of this Prospectus, in an arrangement with Smith Barney
Inc. under which Smith Barney provides certain defined contribution plan mar-
keting and other shareholder services and receives from such entities .15 of
1% of the daily net asset value of Institutional Class Shares held by Smith
Barney's eligible customer accounts in addition to amounts payable to all
selling dealers. The Fund also compensates Smith Barney for services it pro-
vides to certain defined contribution plan shareholders that are not otherwise
provided by the Administrator.
The Adviser and the Distributor deal with one Service Agent,
Interstate/Johnson Lane, which provides marketing and shareholders services.
In the first year of investment, the Adviser pays the Service Agent amounts
which represent up to 50% of the advisory fee payable from Institutional Class
Shares assets held by eligible customer accounts (without regard to any ex-
pense limitation in effect at that time). The fee rate declines in the second,
third and fourth years.
ADVISER'S HISTORICAL PERFORMANCE
Set forth below are certain performance data provided by the Adviser per-
taining to a separately managed account of the Adviser that is managed with
substantially similar (although not necessarily identical) objectives, poli-
cies and strategies as those of the Small Cap Value Portfolio. The performance
data for the managed accounts is net of all fees and expenses. The investment
returns of the Portfolio may differ from those of the separately managed ac-
count because such separately managed account may have fees and expenses that
differ from those of the Portfolio. Further, the separately managed account is
not subject to investment limitations, diversification requirements, and other
restrictions imposed by the 1940 Act and Internal Revenue Code; such condi-
tions, if applicable, may have lowered the returns for the separately managed
account. The results presented are not intended to predict or suggest the re-
turn to be experienced by the Portfolio or the return an investor might
achieve by investing in the Portfolio.
STERLING CAPITAL MANAGEMENT SMALL CAP ACCOUNT RETURNS
(PERCENTAGE RETURNS NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
ADVISER RUSSELL 2000
YEAR TO DATE ------- ------------
<S> <C> <C>
(January 1996*--September 1996)......................... 19.52% 10.74%
Value of $1 invested during 1996........................ $ 1.195 $ 1.107
</TABLE>
- -----------
* The Adviser began managing separately managed accounts using its Small Cap
style in January 1996.
26
<PAGE>
Notes:
1.The annualized return is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable meth-
ods set forth by the Association for Investment Management Research,
The Bank Administration Institute, and the Investment Counsel Associa-
tion of America. Market value of the account was the sum of the ac-
count's total assets, including cash, cash equivalents, short term in-
vestments, and securities valued at current market prices.
2. The Russell 2000 Small Stock Index consists of the 2,000 smallest
stocks in the Russell 3000 Index. The Russell 3000 Index is composed
of equity issues of 3,000 large U.S. companies by market capitaliza-
tion representing approximately 98% of the U.S. equity market. The
smallest company has a market value of roughly $25 million. It is an
unmanaged index which assumes reinvestment of dividends and is gener-
ally considered representative of securities similar to those invested
in by the Adviser for purpose of the composite performance numbers set
forth above.
3. The Adviser's average annual management fee over the period January
1996--September 1996 assumed at was 1% or 100 basis points, but no
fee was actually charged. Net returns to investors vary depending on
the management fee. The Small Cap Value Portfolio will be charged an
advisory fee of 1.00%.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The following Portfolio specific fees are calculated from the
aggregate net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Balanced Portfolio..................................................... 0.06%
Equity Portfolio....................................................... 0.06%
Small Cap Value Portfolio.............................................. 0.04%
Short-Term Fixed Income Portfolio...................................... 0.04%
</TABLE>
27
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative assets
and are subject to a graduated minimum fee schedule per Portfolio, which starts
at $2,000 per month and increases to $70,000 annually after two years. If a
separate class of shares is added to a Portfolio, its minimum annual fee in-
creases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, MA 02110, distributes shares of the Fund. Under the Distribution Agree-
ment (the "Agreement"), the Distributor, as agent for the Fund, agrees to use
its best efforts as sole distributor of Fund shares. The Distributor does not
receive any fee or other compensation under the Agreement with respect to the
Institutional Class Shares offered in this Prospectus. The Agreement continues
in effect as long as it is approved at least annually by the Fund's Board of
Directors. Those approving the Agreement must include a majority of Directors
who are neither parties to the Agreement nor interested persons of any such
party. The Agreement provides that the Fund will bear costs of registration of
its shares with the SEC and various states as well as the printing of its pro-
spectuses, its SAI and its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for each
Portfolio. The Agreements direct the Adviser to use its best efforts to obtain
the best available price and most favorable execution for all transactions of
the Portfolios. If consistent with the interests of the Portfolios, the Adviser
may select brokers on the basis of research, statistical and pricing services
these brokers provide to the Portfolios in addition to required Adviser servic-
es. Such brokers may be paid a higher commission than that which another quali-
fied broker would have charged for effecting the same transaction, provided
that such commissions are paid in compliance with the Securities Exchange Act
of 1934, as amended, and that the Adviser determines in good faith that the
commission is reasonable in terms either of the transaction or the overall re-
sponsibility of the Adviser to the Portfolios and
28
<PAGE>
the Adviser's other clients. Although not a typical practice, the Adviser may
place portfolio orders with qualified broker-dealers who refer clients to the
Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is con-
sidered at or about the same time, transactions in such securities will be al-
located among the Portfolio and clients in a manner deemed fair and reasonable
by the Adviser. Although there is no specified formula for allocating such
transactions, allocations are subject to periodic review by the Fund's Direc-
tors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was changed
to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund was changed
to "UAM Funds, Inc." The Fund's Articles of Incorporation, as amended, permit
the Directors to issue three billion shares of common stock, with an $.001 par
value. The Directors have the power to designate one or more series or classes
of shares of common stock and to classify or reclassify any unissued shares
without further action by shareholders.
At its discretion, the Board of Directors may create additional Portfolios
and classes of shares. The shares of each Portfolio are fully paid and nonas-
sessable, and have no preference as to conversion, exchange, dividends, retire-
ment or other features and no pre-emptive rights. They have noncumulative vot-
ing rights, which means that holders of more than 50% of shares voting for the
election of Directors can elect 100% of the Directors. A shareholder is enti-
tled to one vote for each full share held (and a fractional vote for each frac-
tional share held), then standing in his name on the books of the Fund.
Both Institutional Class and Institutional Service Class Shares represent an
interest in the same assets of a Portfolio. Service Class Shares bear certain
expenses related to shareholder servicing, and may bear expenses related to
distribution. Service Class shares have exclusive voting rights for matters re-
lating to such distribution expenditures. Information about the Service Class
Shares of the Portfolios is available upon request by contacting the UAM Funds
Service Center.
Annual meetings will not be held except as required by the 1940 Act and other
applicable laws. The Fund has undertaken that its Directors will call a meeting
of shareholders if such a meeting is requested in writing by the holders of not
less than 10% of the outstanding shares of the Fund. The Fund will assist
shareholder communications in such matters to the extent required by the under-
taking.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
29
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or number listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
30
<PAGE>
UAM FUNDS--INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
Rice, Hall James Mid Cap Portfolio
Rice, Hall James Small Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
31
<PAGE>
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
32
<PAGE>
UAM FUNDS SERVICE CENTER
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
INVESTMENT ADVISER
Sterling Capital Management Company
One First Union Center
301 S. College Street, Suite 3200
Charlotte, NC 28202
(704) 372-8670
DISTRIBUTOR
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
JANUARY 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
Sterling Partners'
Portfolios
Institutional Service
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
STERLING PARTNERS' PORTFOLIOS
INSTITUTIONAL SERVICE CLASS SHARES
INVESTMENT ADVISER: STERLING CAPITAL MANAGEMENT COMPANY
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open end, management investment company
known as a "mutual fund" The Fund consists of multiple series of shares (known
as "Portfolios"), each of which has different investment objectives and poli-
cies. Certain Portfolios currently offer two separate classes of shares: In-
stitutional Class Shares and Institutional Service Class Shares ("Service
Class Shares"). Shares of each class represent equal, pro rata interests in a
Portfolio and accrue dividends in the same manner except that Service Class
Shares bear fees payable by the class (at the maximum rate of .25% per annum)
to financial institutions for services they provide to the owners of such
shares. (See "SERVICE AND DISTRIBUTION PLANS.") The securities offered in this
Prospectus are Service Class Shares of the four diversified Portfolios of the
Fund managed by Sterling Capital Management Company.
STERLING PARTNERS' BALANCED PORTFOLIO. The objective of the Sterling Part-
ners' Balanced Portfolio ("Balanced Portfolio") is to provide maximum long-
term total return consistent with reasonable risk to principal, by investing
in a balanced portfolio of common stocks and fixed income securities.
STERLING PARTNERS' EQUITY PORTFOLIO. The objective of the Sterling Partners'
Equity Portfolio ("Equity Portfolio") is to provide maximum long term total
return consistent with reasonable risk to principal, by investing primarily in
common stocks.
STERLING PARTNERS' SMALL CAP VALUE PORTFOLIO. The objective of the Sterling
Partners' Small Cap Value Portfolio ("Small Cap Value Portfolio") is to pro-
vide maximum long-term total return consistent with reasonable risk to princi-
pal, by investing primarily in equity securities of smaller companies, in
terms of market capitalization.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO. The objective of the
Sterling Partners' Short-Term Fixed Income Portfolio ("Short-Term Fixed Income
Portfolio") is to provide a high level of current income consistent with the
maintenance of principal and liquidity by investing primarily in investment
grade fixed income securities with an average weighted maturity between 1 and
3 years.
There can be no assurance that any of the Portfolios will meet its stated
objective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 3
Investment Objectives...................................................... 4
Investment Policies........................................................ 5
Other Investment Policies.................................................. 8
Investment Limitations..................................................... 11
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 15
Service and Distribution Plans............................................. 17
Shareholder Services....................................................... 20
Valuation of Shares........................................................ 20
Performance Calculations................................................... 21
Dividends, Capital Gains Distributions and Taxes........................... 22
Investment Adviser......................................................... 23
Adviser's Historical Performance........................................... 24
Administrative Services.................................................... 25
Distributor................................................................ 25
Portfolio Transactions..................................................... 26
General Information........................................................ 26
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees a Service Class share-
holder of the Portfolios would incur. Transaction fees may be charged if a
broker-dealer or other financial intermediary deals with the Fund on your be-
half (see "PURCHASE OF SHARES.").
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP
BALANCED EQUITY FIXED INCOME VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SERVICE SERVICE SERVICE SERVICE
CLASS CLASS CLASS CLASS
SHARES SHARES SHARES SHARES
--------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases.... NONE NONE NONE NONE
Sales Load Imposed on Reinvested
Dividends........................ NONE NONE NONE NONE
Deferred Sales Load................ NONE NONE NONE NONE
Redemption Fees.................... NONE NONE NONE NONE
Exchange Fees...................... NONE NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP
BALANCED EQUITY FIXED INCOME VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SERVICE SERVICE SERVICE SERVICE
CLASS CLASS CLASS CLASS
SHARES SHARES SHARES SHARES
--------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Investment Advisory Fees........ 0.75% 0.75 % 0.50 % 1.00 %
Administrative Fees............. 0.22% 0.34 % 0.45 % 0.19 %
12b-1 Fees (Including
Shareholder Servicing Fees)*.. 0.25% 0.25 % 0.125 % 0.25 %
Other Expenses.................. 0.11% 0.19 % 0.26 % 0.06 %
Advisory Fees Waived............ -- (0.29)% (0.66)% --
---- ----- ----- ----
Total Operating Expenses (After
Fee Waivers).................. 1.33% 1.24 %** 0.675 %** 1.50 %
</TABLE>
- -----------
* See "Service and Distribution Plans."
** Without the Adviser's fee waiver, annualized Total Operating Expenses of
the Equity and Short-Term Fixed Income Portfolios Service Class Shares
would be 1.53% and 1.335%, respectively. The Sterling Partners' Service
Class Portfolios are not yet operational.
1
<PAGE>
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume operating expenses otherwise payable by the Portfolios (if nec-
essary) in order to keep the expense ratios of (i) the Balanced Portfolio
Service Class Shares from exceeding 1.36% of its average daily net assets;
(ii) the Equity Portfolio Service Class Shares from exceeding 1.24% of its av-
erage daily net assets; (iii) the Short-Term Fixed Income Portfolio Service
Class Shares from exceeding 0.675% of its average daily net assets; and (iv)
the Small Cap Value Portfolio Service Class Shares from exceeding 1.50% of its
average daily net assets. The Fund will not reimburse the Adviser for any ad-
visory fees that are waived or Portfolio expenses that the Adviser may bear on
behalf of a Portfolio for a given fiscal year.
The table above shows various fees and expenses an investor in the Service
Class Shares of the Portfolios would bear directly or indirectly. The expenses
and fees listed are based on the operations of the Balanced, Equity and Short-
Term Fixed Income Portfolios' Institutional Class Shares during the fiscal
year ended October 31, 1996, except that such information has been restated to
include 12b-1 fees and to reflect current administrative fees. The fees and
expenses set forth above for the Sterling Partners' Small Cap Value Portfolio
Service Class Shares are estimated amounts for its first year of operations
assuming average net assets of $25 million.
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. The Portfolios
charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Portfolio Service Class Shares....... $14 $42 $73 $160
Equity Portfolio Service Class Shares......... $13 $39 $68 $150
Short-Term Fixed Income Portfolio Service
Class Shares................................ $7 $22 $38 $84
Small Cap Value Portfolio Service Class
Shares...................................... $15 $47 * *
</TABLE>
- -----------
* As the Small Cap Value Portfolio Service Class is not yet operational, the
Fund has not projected expenses beyond the three year period shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
NOTE TO EXPENSE TABLE
The information set forth in the table and example above relates only to
Service Class Shares of the Portfolios. Service Class Shares are subject to
different total fees and expenses than Institutional Class Shares. Service
Agents may charge other fees to their customers who are beneficial owners of
Service Class Shares in connection with their customer accounts. (See "SERVICE
AND DISTRIBUTION PLANS.")
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Sterling Capital Management Inc. (the "Adviser"), an investment counseling
firm founded in 1970, is the investment adviser to the Fund's Sterling Part-
ners' Portfolios. The Adviser currently manages over $1.6 billion in assets
for institutional clients and high net worth individuals. (See "INVESTMENT AD-
VISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor") to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment is $100,000. The minimum for subsequent invest-
ments is $100. The minimum initial investment for IRA accounts is $500. The
minimum initial investment for spousal IRA accounts is $250. Certain excep-
tions to the initial or minimum investment amounts may be made by the officers
of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. Each Portfolio will distribute any real-
ized net capital gains annually. Distributions will automatically be rein-
vested in Portfolio shares unless an investor elects to receive cash distribu-
tions. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed without cost at any time, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors in the Fund should consider the following: (1) The fixed income se-
curities held by the Balanced Portfolio and the Short-Term Fixed Income Port-
folio will be affected by general changes in interest rates resulting in in-
creases or decreases in the value of the obligations held by each Portfolio.
The value of the securities held by the Portfolios can be expected to vary in-
versely with changes in prevailing interest rates, i.e., as interest rates de-
cline, market value tends to increase and vice versa; (2) The common stock of
companies having small market capitalizations held by the Portfolios, may ex-
hibit greater volatility than common stock of companies having larger capital-
izations; (3) Each Portfolio may invest a portion of its assets in derivatives
including futures contracts and options. (See "FUTURES CONTRACTS AND OP-
TIONS.") (4) Each Portfolio may use various investment practices involving
special considerations, including investing in repurchase agreements, when is-
sued, forward delivery and delayed settlement securities. (See "OTHER INVEST-
MENT POLICIES.")
INVESTMENT OBJECTIVES
STERLING PARTNERS' BALANCED PORTFOLIO. The objective of the Balanced Portfo-
lio is to provide maximum long-term return consistent with reasonable risk to
principal, by investing in a balanced portfolio of common stocks and fixed in-
come securities. A typical asset mix for the Portfolio is expected to be 60%
in equities and 40% in fixed income securities and cash. The total return on
the Portfolio will consist of both capital appreciation and income, with the
relative proportions depending upon the underlying asset mix as well as spe-
cific security holdings.
STERLING PARTNERS' EQUITY PORTFOLIO. The objective of the Equity Portfolio
is to provide maximum long-term total return consistent with reasonable risk
to principal, by investing primarily in common stocks. The Portfolio may also
invest in other equity-related securities such as preferred stocks, convert-
ible preferred stocks, convertible bonds, options, futures, rights and war-
rants.
STERLING PARTNERS' SMALL CAP VALUE PORTFOLIO. The objective of the Small Cap
Value Portfolio is to provide maximum long-term total return consistent with
reasonable risk to principal by investing primarily in equity securities of
smaller companies, in terms of market capitalization. The equity securities in
which the Portfolio may invest consist of common stocks (both domestic and in-
ternational) preferred stocks, convertible bonds, distressed bonds with a high
likelihood of future equity conversion, options, futures, rights and warrants.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO. The objective of the
Short-Term Fixed Income Portfolio is to provide investors with a high level of
4
<PAGE>
current income consistent with the maintenance of principal and liquidity by
investing primarily in investment grade fixed income securities with an aver-
age weighted maturity between 1 and 3 years. Investments in this Portfolio
represent a middle ground between the risk associated with short-term money
market accounts and longer term bond funds. Investors in this Portfolio seek
incremental returns to money market accounts but do not want the down side ex-
posure to longer term bond funds in a risky interest rate environment.
INVESTMENT POLICIES
STERLING PARTNERS' BALANCED PORTFOLIO. The Balanced Portfolio incorporates
within a single investment vehicle the two investment disciplines employed by
the Adviser. The first discipline provides for stock selection; and the second
chooses among fixed income securities, including coupon bonds, zero coupon
bonds and cash equivalents. A targeted asset mix for the Portfolio is expected
to be 60% in equities and 40% in fixed income securities and cash. However, at
least 25% of the Portfolio's total assets will always be invested in fixed in-
come senior securities, including debt securities and preferred stocks.
Individual equity securities are selected using approaches identical to
those described below for the Equity Portfolio. Simply stated, the Adviser's
stock selection is designed to identify equities priced at a discount from the
estimated value of their underlying businesses.
The universe of stocks the Adviser chooses from is focused on larger capi-
talization issues. While the Portfolio may invest in small capitalization com-
panies, the majority of stocks in the Portfolio will have a market capitaliza-
tion in excess of $500 million at the time of purchase; and the Adviser will
strive to maintain an average market capitalization in excess of $10 billion.
This further ensures the quality and stability of the Portfolio.
The fixed income portion of the Portfolio will be invested primarily in in-
vestment grade securities of varying maturities. These include securities of
the U.S. Government and its agencies, corporate bonds, mortgage-backed securi-
ties, asset-backed securities, and various short-term instruments such as com-
mercial paper, U.S. Treasury bills, and certificates of deposit.
Within the Portfolio, fixed income investments are regarded as opportunities
for capital appreciation, as a source of liquidity and as a means to reduce
overall portfolio volatility. The management of the fixed income segment con-
sists of three important steps. First, the Adviser uses proprietary analytical
tools to manage the interest rate risk of the Portfolio. After arriving at an
appropriate average maturity for the Portfolio, the Adviser uses a "top down"
approach to select the most attractively valued sectors for the fixed income
investments. Finally, the Adviser
5
<PAGE>
analyzes the spectrum of the yield curve to identify the most desirable matu-
rities at which to invest the Portfolio. The Adviser's fixed income strategy
emphasizes quality and capital preservation.
STERLING PARTNERS' EQUITY PORTFOLIO. The Equity Portfolio seeks to achieve
its objective by investing, under normal circumstances, at least 65% of its
total assets in common stocks. The Portfolio may also invest in other equity
related securities such as preferred stocks, convertible preferred stocks,
convertible bonds, options, futures, rights, and warrants. However, at all
times, the Portfolio's primary interest will be direct ownership of common eq-
uity stocks. It is anticipated that cash reserves will represent a relatively
small percentage of the Portfolio's assets (generally less than 10%).
The Adviser's stock selection process focuses on identifying securities
which are priced below the estimated value of the underlying business. As
such, the Adviser approaches each investment as a businessman would approach a
private transaction. All factors relevant to the worth of an ongoing business
are examined using traditional fundamental securities analysis. Such factors
include balance sheet quality, normalized earnings power, industry stability,
capital intensity, reinvestment opportunities, and management talent. This
"businessman's approach" is designed to result in a high quality portfolio.
The Adviser's sell discipline is as important as its buy discipline. For ev-
ery stock it buys, it defines in writing the thesis for owning it. Each thesis
rests on the fundamental factors noted above. Any stock that underperforms its
sector is reviewed against a pre-written outline, and those which fail to dem-
onstrate fundamental progress in keeping with the original thesis are sold.
The universe of stocks the Adviser chooses from is focused on larger capi-
talization issues. While the Portfolio may invest in small capitalization com-
panies, the majority of stock will have a market capitalization in excess of
$500 million at the time of purchase, and the Adviser will strive to maintain
an average market capitalization in excess of $10 billion. This further en-
sures the quality and stability of the Portfolio.
Another important aspect of the Adviser's approach is an emphasis on diver-
sification across a wide range of industries. It divides the S&P 500 into in-
dustry groupings, and uses the groupings as a comparison yardstick for the
Portfolio. The Adviser's policies seek to ensure a healthy representation
within each sector. The result is that volatility may be controlled within an
acceptable range.
The Adviser anticipates that the majority of the investments will be in
United States based companies. However, from time to time, shares of foreign
based companies may also be purchased. The most common vehicle for such pur-
chases will be American Depository Receipts ("ADRs") which are U.S. domestic
securi-
6
<PAGE>
ties representing ownership rights in foreign companies. Under normal circum-
stances, investments in foreign based companies will not comprise more than
20% of the Portfolio assets. Most ADRs are traded on a U.S. stock exchange.
Issuers of unsponsored ADRs are not continually obligated to disclose material
information in the U.S. and therefore, there may not be a correlation between
such information and the market value of the unsponsored ADR.
STERLING PARTNERS' SMALL CAP VALUE PORTFOLIO. The Sterling Partners' Small
Cap Value Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities of small
companies, which consist of market capitalizations of $1 billion or less. The
Portfolio may invest in both domestic and international common stocks, pre-
ferred stocks, convertible preferred stocks, convertible bonds, distressed
bonds with a high likelihood of future equity conversion, options, futures,
rights and warrants. It is anticipated that cash reserves will represent a
relatively small percentage of the Portfolio's assets (generally less than
10%).
Small capitalization stocks have historically been more volatile in price
than the larger capitalization stocks. Among the reasons for the greater price
volatility of these securities are the less certain growth prospects of
smaller firms, the lower degree of liquidity in the markets for such stocks,
and small company stocks also may, to a degree, fluctuate independently of
larger company stocks. Small company stocks may decline in price as large com-
pany stocks rise, or rise in price as large company stocks decline. Small cap-
italization stocks may have many of the characteristics of securities of new
or unseasoned companies.
The Adviser anticipates that the majority of the investments will be in
United States based companies. However, from time to time, shares of foreign
based companies may also be purchased. The most common vehicle for such pur-
chases will be American Depositary Receipts ("ADRs"), which are U.S. domestic
securities representing ownership rights in foreign companies. Under normal
circumstances, investments in foreign based companies will not comprise more
than 20% of the Portfolio's assets.
The Adviser's stock selection process focuses on identifying securities
which are priced below the estimated value of the underlying business. As
such, the Adviser approaches each investment as a businessman would approach a
private transaction. All factors relevant to the worth of an ongoing business
are examined using traditional fundamental securities analysis. Such factors
include balance sheet quality, normalized earnings power, industry stability,
capital intensity, reinvestment opportunities, and management talent. This
"businessman's approach" is designed to result in a high quality portfolio.
The Adviser's sell discipline is as important as its buy discipline. For ev-
ery stock it buys, it defines in writing the thesis for owning it. Each thesis
rests on the
7
<PAGE>
fundamental factors noted above. Any stock that underperforms is reviewed
against a pre-written outline, and those which fail to demonstrate fundamental
progress in keeping with the original thesis are sold.
The Portfolio will invest primarily in equity securities having a market
capitalization of $1 billion or less at the time of purchase.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO. The Short-Term Fixed
Income Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 65% of its total assets in the following fixed income
instruments:
(1) Short-term and intermediate-term corporate debt securities rated A or
better by Moody's Investors Service, Inc. ("Moody's") or by Standard &
Poor's Corporation ("S&P");
(2) U.S. Treasury and U.S. Government agency obligations;
(3) Bank obligations, including certificates of deposit and bankers' ac-
ceptances;
(4) Commercial paper rated A-1 by S&P or Prime-1 by Moody's; and
(5) Repurchase agreements collateralized by these securities.
In an effort to minimize fluctuations in market value, the Short-Term Fixed
Income Portfolio is expected to maintain an average weighted maturity between
1 and 3 years. The Short-Term Fixed Income Portfolio may also hold securities
of foreign issuers provided such securities are denominated in U.S. dollars,
and may invest in bond (interest rate) futures and options to a limited ex-
tent. (See "OTHER INVESTMENT POLICIES" for a description of these and other
investment practices of the Portfolio).
With respect to the Balanced and Short-Term Fixed Income Portfolios, the Ad-
viser reserves the right to retain securities which are downgraded by either
Moody's or S&P or both, if in the Adviser's judgment, considering market con-
ditions, the retention of such securities is warranted.
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolios may invest a por-
tion of their assets in domestic and foreign money market instruments includ-
ing certificates of deposit, bankers' acceptances, time deposits, U.S. Govern-
ment obligations, U.S. Government agency securities, short-term corporate debt
securities, and commercial paper rated A-1 or A-2 by Standard & Poor's Corpo-
ration or Prime-1 or Prime-2 by Moody's Investors Service, Inc. or if unrated,
determined by the Adviser to be of comparable quality.
8
<PAGE>
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the UAM Funds' DSI Money Market Portfolio (See "INVESTMENT
COMPANIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is required to
maintain the value of securities subject to the agreement at not less than
100% of the repurchase price. The Administrator and the Adviser will mark to
market daily the value of the securities purchased. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause a Portfolio to experience a loss or delay in the liquida-
tion of the collateral securing the repurchase agreement. The Portfolio might
also incur disposition costs in liquidating the collateral. While the Fund's
management acknowledges these risks, it is expected that they can be con-
trolled through stringent security selection criteria and careful monitoring
procedures. The Fund has received permission from the SEC to pool daily
uninvested cash balances of the Fund's Portfolios in order to invest in repur-
chase agreements on a joint basis. By entering into joint repurchase agree-
ments, a Portfolio may incur lower transaction costs and earn higher rates of
interest on joint
9
<PAGE>
repurchase agreements. Each Portfolio's contribution would determine its re-
turn from a joint repurchase agreement. (See "SHORT TERM INVESTMENTS.")
AMERICAN DEPOSITARY RECEIPTS
ADRs are depositary receipts typically used by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign corpora-
tion. Generally, ADRs in registered form are designed for use in the U.S. se-
curities market and ADRs in bearer form are designed for use in securities
markets outside the United States. ADRs may not necessarily be denominated in
the same currency as the underlying securities into which they may be convert-
ed. ADRs may be issued pursuant to sponsored or unsponsored programs. In spon-
sored programs, an issuer has made arrangements to have its securities traded
in the form of depositary receipts. In unsponsored programs, the issuer may
not be directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from
an issuer that has participated in the creation of a sponsored program. Ac-
cordingly, there may be less information available regarding issuers of secu-
rities underlying unsponsored programs and there may not be a correlation be-
tween such information and the market value of the depositary receipts. ADRs
also involve the risks of other investments in foreign securities, as dis-
cussed in the Prospectus. For purposes of the Equity Portfolio's investment
policies, the Portfolio's investments in depositary receipts will be deemed to
be investments in the underlying securities.
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to gain or loss depending on any increase or decrease in the market price
of the securities loaned. Lending of securities is subject to review by the
Fund's Board of Directors. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which
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a market exists, but which are not available for immediate delivery. When-is-
sued and forward delivery transactions may be expected to occur a month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will oc-
cur sometime in the future. No payment or delivery is made by a Portfolio un-
til it receives payment or delivery from the other party to any of the above
transactions. It is possible that the market price of the securities at the
time of delivery may be higher or lower than the purchase price. Each Portfo-
lio will maintain a separate account of cash or liquid securities at least
equal to the value of purchase commitments until payment is made. Typically,
no income accrues on securities purchased on a delayed delivery basis prior to
the time delivery is made although the Portfolio may earn income on securities
it has deposited in a segregated account.
Each Portfolio may engage in these types of purchases in order to buy secu-
rities that fit with its investment objectives at attractive prices--not to
increase its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover rate for the Small Cap Value Portfolio will not exceed
100%. The Portfolios will not normally engage in short-term trading but each
reserves the right to do so.
The Short-Term Fixed Income Portfolio may have a high portfolio turnover
rate due to the short maturities of the securities purchased. However, this
high turnover rate should not increase the Portfolio's cost since brokerage
commissions are not normally charged on the purchase or sale of fixed income
securities. In addition to Portfolio trading costs, higher rates of portfolio
turnover may result in the realization of capital gains. (See "DIVIDENDS, CAP-
ITAL GAINS DISTRIBUTIONS AND TAXES" for information on taxation.)
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any investment compa-
ny. The Portfolio will indirectly bear its proportionate share of any manage-
ment fees paid by an investment company in which it invests in addition to the
advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio.
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The investing Portfolio will bear expenses of the DSI Money Market Portfolio
on the same basis as all of its other shareholders.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested and to reduce transaction costs, the Bal-
anced Portfolio may invest in stock and bond futures and interest rate futures
contracts; the Equity and the Small Cap Value Portfolios may invest in stock
futures and options; and the Short-Term Fixed Income Portfolio may invest in
bond, bond index, and interest rate futures and options thereon. Because
transaction costs associated with futures and options may be lower than the
costs of investing in stocks and bonds directly, it is expected that the use
of index futures and options to facilitate cash flows may reduce a Portfolio's
overall transaction costs. Each Portfolio may enter into futures contracts
provided that not more than 5% of the Portfolio's assets are required as mar-
gin deposit to secure obligations under such contracts. A Portfolio will en-
gage in futures and options transactions for hedging purposes only. Each Port-
folio will maintain assets sufficient to meet its obligations under such con-
tracts in a segregated account with the Fund's custodian bank.
Futures and options can be volatile and involve various degrees and types of
risk. If the Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts could result in a loss. The Portfolio could also suffer
losses if it is unable to liquidate its position due to an illiquid secondary
market. In the opinion of the Directors of the Fund, the risk that the Portfo-
lio will be unable to close out a futures position or options contract will be
minimized by only entering into futures contracts or options transactions
traded on national exchanges and for which there appears to be a liquid sec-
ondary market.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. A Portfolio will invest no more than 10%
of its net assets in illiquid securities. The prices realized from the sales
of these securities could be less than those originally paid by the Portfolio
or less than what would be considered fair value of such securities.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are not fundamental and the Directors may
change such policies without an affirmative vote of a majority of the out-
standing voting securities of a Portfolio, as defined in the Investment Com-
pany Act of 1940 ("1940 Act").
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INVESTMENT LIMITATIONS
A Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the Rules and Regulations
or interpretations of the SEC;
(f) (i) borrow, except from banks and as a temporary measure for extraor-
dinary or emergency purposes and then, in no event, in excess of 10%
of the Portfolio's gross assets valued at the lower of market or cost
(33 1/3% for the Small Cap Value Portfolio), and (ii) a Portfolio may
not purchase additional securities when borrowings exceed 5% of total
gross assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value (33 1/3% for the
Small Cap Value Portfolio).
The investment limitations described here and in the SAI are fundamental
policies and may be changed only with the approval of the holders of a major-
ity of the outstanding shares of each Portfolio of the Fund. If a percentage
limitation on investment or utilization of assets as set forth above is ad-
hered to at the time an investment is made, a later change in percentage re-
sulting from changes in the value or total cost of the Portfolio's assets will
not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor") without a sales commission, at the net asset value per
share next
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<PAGE>
determined after an order is received by the Fund and payment is received by
the custodian. The minimum initial investment required is $100,000. Certain
exceptions may be made by the officers of the Fund. The minimum for subsequent
investments is $100. The minimum initial investment for IRA accounts is $500.
The minimum initial investment for a spousal IRA is $250. Certain exceptions
may be made by the officers of the Fund.
The Portfolios issue two classes of shares: Institutional Class and Service
Class. The two classes of shares each represent interests in the same portfo-
lio of investments, have the same rights and are identical in all respects,
except that the Service Class Shares offered by this Prospectus bear share-
holder servicing expenses, may in the future bear distribution plan expenses,
and have exclusive voting rights with respect to the Rule 12b-1 Distribution
Plan pursuant to which the distribution fee may be paid. The two classes have
different exchange privileges. (See "EXCHANGE PRIVILEGE.") The net income at-
tributable to Service Class Shares and the dividends payable on Service Class
Shares will be reduced by the amount of the shareholder servicing and distri-
bution fees; accordingly, the net asset value of the Service Class Shares will
be reduced by such amount to the extent the Portfolio has undistributed net
income.
Shares of the Portfolio may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") that have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions or other accounts
fees on the purchase and redemption of Portfolio shares by their customers.
Each Service Agent is responsible for transmitting to its customers a schedule
of any such fees and information regarding any additional or different condi-
tions regarding purchases and redemptions. Shareholders who are customers of
Service Agents should consult their Service Agent for information regarding
these fees and conditions. Amounts paid to Service Agents may include transac-
tion fees and/or service fees paid by the Fund from the Fund assets attribut-
able to the Service Agent, and would not be imposed if shares of the Portfolio
were purchased directly from the Fund or Distributor. The Service Agents may
provide services to their customers that are not available to a shareholder
dealing with the Fund. A salesperson and any other person entitled to receive
compensation for selling or servicing Portfolio shares may receive different
compensation with respect to one particular class of shares over another in
the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares are purchased in this manner, the Service Agent must receive
the investment order before the close of trading on the New York Stock Ex-
change ("NYSE") and transmit it to the Fund's Sub-Transfer Agent, prior to the
close of the Sub-Transfer Agent's business day to receive the day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are
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responsible to their customers and the Fund for timely transmission of all
subscription and redemption requests, investment information, documentation
and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it together with a check made
payable to UAM Funds to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment does not need to be converted into Federal Funds (monies
credited to the Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
Credit DDA. #9102772952
Ref: Portfolio Name
(Your Account Registration)
(Your Account Number)
(Wire Control Number)
. Forward a completed Application to the Fund at the address shown on the
form. Federal Funds purchases will be accepted only on a day on which
both the NYSE and the Custodian Bank are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $1,000. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
the Custodian Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be
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<PAGE>
purchased are identified on the check or wire. Prior to wiring additional in-
vestments, notify the UAM Funds Service Center by calling the number on the
cover of this Prospectus. Mail orders should include, when possible, the "In-
vest by Mail" stub which accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to suspend the offering of shares of each Portfolio or to reject pur-
chase orders when, in the judgment of management, such suspension or rejection
is in the best interests of the Fund. Purchases of a Portfolio's shares will
be made in full and fractional shares of the Portfolio calculated to three
decimal places. Certificates for fractional shares will not be issued. Certif-
icates for whole shares will not be issued except at the written request of
the shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of each Portfolio may be purchased in ex-
change for securities which are eligible for acquisition by the Portfolio, as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "VALUATION OF SHARES" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued by a Portfolio in exchange for securities will be issued at the relevant
net asset value determined as of the same time. All dividends, interest, sub-
scription, or other rights pertaining to such securities shall become the
property of the Portfolio and must be delivered to the Fund by the investor
upon receipt from the issuer. Securities acquired through an in-kind purchase
will be acquired for investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of exchange, such securities are eligible to be included in
the Portfolio (current market quotations must be readily available for
such securities);
. the investor represents and agrees that all securities offered to be ex-
changed are liquid securities and not subject to any restrictions upon
their sale by the Portfolio under the Securities Act of 1933, or other-
wise; and
. the value of any such securities (except U.S. Government securities) be-
ing exchanged together with other securities of the same issuer owned by
the Portfolio will not exceed 5% of the net assets of the Portfolio im-
mediately after the transaction.
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<PAGE>
Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of the
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone, at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of your shares depending
on the market value of the investment securities held by the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of shares
or dollar amount to be redeemed, signed by all registered owners of the
shares in the exact names in which they are registered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of es-
tates, trusts, guardianships, custodianships, corporations, pension and
profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the wire
redemption privilege) by completing appropriate sections of the Applica-
tion; and
. call the Fund and instruct that the redemption proceeds be mailed to you
or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated to
receive redemption proceeds (this can be accomplished only by a written
request signed by each shareholder, with each signature guaranteed);
. redemption of certificated shares by telephone.
The Fund and the Fund's Sub-Transfer Agent will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and they
17
<PAGE>
may be liable for any losses if they fail to do so. These procedures include
requiring the investor to provide certain personal identification at the time
an account is opened, as well as prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other than
the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven days after re-
ceipt of the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when either
both the NYSE or the Custodian Bank are closed, or under any emergency circum-
stances as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities received in payment
of redemptions.
SERVICE AND DISTRIBUTION PLANS
Under the Service Plan for Service Class Shares, adopted pursuant to
Rule 12b-1 under the 1940 Act, the Fund may enter into service agreements with
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<PAGE>
Service Agents (broker-dealers or other financial institutions) who receive
fees with respect to the Fund's Service Class Shares owned by shareholders for
whom the Service Agent is the dealer or holder of record, or for whom the
Service Agent performs Servicing, as defined below. These fees are paid out of
the assets allocable to Service Class Shares to the Distributor, to the Serv-
ice Agent directly or through the Distributor. The Fund reimburses the Dis-
tributor or the Service Agent, for payments made at an annual rate of up to
.25 of 1% of the average daily value of Service Class Shares of the Portfolios
owned by clients of such Service Agent during the period payments for Servic-
ing are being made to it. Such payments are borne exclusively by the Service
Class Shares. Each item for which a payment may be made under the Service Plan
constitutes personal service and/or shareholder account maintenance and may
constitute an expense of distributing Funds Service Class Shares as the SEC
construes such term under Rule 12b-1. The fees payable for Servicing reflect
actual expenses incurred up to the limit described herein.
Servicing may include: assisting clients in changing dividend options, ac-
count designations and addresses; performing sub-accounting; establishing and
maintaining shareholder accounts and records; processing purchase and redemp-
tion transactions; investing client cash account balances automatically in
Service Class Shares; providing periodic statements showing a client's account
balance and integrating such statements with those of other transactions and
balances in the client's other accounts serviced by the Service Agent; arrang-
ing for bank wires; and other services the Fund may request, to the extent the
Service Agent is permitted by applicable statute, rule or regulation.
The Glass-Steagall Act and other applicable laws prohibit federally chart-
ered or supervised banks from engaging in certain aspects of the business of
issuing, underwriting, selling and/or distributing securities. Accordingly,
banks are engaged to act as Service Agent only to perform administrative and
shareholder servicing functions, including transaction-related agency services
for their customers. If a bank is prohibited from acting as a Service Agent,
alternative means for continuing the servicing of its shareholders would be
sought and the shareholder clients of that bank will remain Fund shareholders.
The Distributor promotes the distribution of the Service Class Shares of the
Fund in accordance with the terms of a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act. The Distribution Plan provides for the use of
Fund assets allocable to Service Class Shares to pay expenses of distributing
such shares.
The Distribution Plan and the Service Plan (the "Plans") were approved by
the Board of Directors, including a majority of the directors who are not "in-
terested persons" of the Fund as defined in the 1940 Act (and each of whom has
no direct or indirect financial interest in the Plans or any agreement related
thereto, referred to herein as the "12b- 1 Directors"). The Plans may be ter-
minated at any time by the vote of the Board or the 12b-1 Directors, or by the
vote of a majority of the outstanding voting securities of the Service Class
Shares.
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<PAGE>
While the Plans continue in effect, the selection of the 12b-1 Directors is
committed to the discretion of such persons then in office. The Plans provide
generally that a Portfolio may incur distribution and service costs under the
Plans which may not exceed 0.75% per annum of that Portfolio's net assets. The
Board has currently limited payments under the Plans to 0.50% per annum of a
Portfolio's net assets. The Service Class Shares offered by this Prospectus
currently are not making any payments under the Distribution Plan. Upon imple-
mentation, the Distribution Plan would permit payments to the Distributor,
broker-dealers, other financial institutions, sales representatives or other
third parties who render promotional and distribution services, for items such
as advertising expenses, selling expenses, commissions or travel reasonably
intended to result in sales of shares of the Service Class Shares and for the
printing of prospectuses sent to prospective purchasers of the Service Class
Shares of the Portfolios.
Although the Plans may be amended by the Board of Directors, any change in
the Plans which would materially increase the amounts authorized to be paid
under the Plans must be approved by shareholders of the class involved. The
total amounts paid with respect to a class of shares of a Portfolio under the
foregoing arrangements may not exceed the maximum limits specified above, and
the amounts and purposes of expenditures under the Plans must be reported to
the 12b-1 Directors quarterly. The amounts allowable under the Plans for each
Class of Shares of the Portfolios are also limited under certain rules of the
National Association of Securities Dealers, Inc.
In addition to payments by the Fund under the Plans, the Distributor, United
Asset Management Corporation ("UAM"), the parent company of the Administrator
and of the Adviser, the Adviser, or any of their affiliates, may, at its own
expense, compensate a Service Agent or other person for marketing, shareholder
servicing, record-keeping and/or other services performed with respect to the
Fund, a Portfolio or any Class of Shares of a Portfolio. The person making
such payments may do so out of its revenues, its profits or any other source
available to it. Such services arrangements, when in effect, are made gener-
ally available to all qualified service providers. The Adviser may compensate
its affiliated companies for referring investors to the Portfolios.
The Distributor, the Adviser and certain of their other affiliates also par-
ticipate, at the date of this Prospectus, in an arrangement with Smith Barney,
Inc. under which Smith Barney provides certain defined contribution plan mar-
keting and shareholder services and receives from such entities an amount
equal to up to 33.3% of the portion of the investment advisory fees attribut-
able to the invested assets of Smith Barney's eligible customer accounts with-
out regard to any expense limitation in addition to amounts payable to all
selling dealers. The Fund also compensates Smith Barney for services it pro-
vides to certain defined contribution plan shareholders that are not otherwise
provided by the Administrator.
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<PAGE>
The Adviser and the Distributor deal with Interstate/Johnson Lane, a Service
Agent that provides marketing and shareholder services. The Adviser makes pay-
ments to Interstate/Johnson Lane equal (in the first year after an investment)
to amounts which represent up to 50% of the advisory fee payable (without re-
gard to any expense limitation in effect at that time) for Fund assets held by
eligible customer accounts. The fee rate declines in the second, third, and
fourth years.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Service Class Shares of each Portfolio may be exchanged for Service Class
Shares of any other UAM Funds Portfolio. (See the list of Portfolios of the
UAM Funds at the end of this Prospectus.) Exchange requests should be made by
contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 4
p.m. (ET) will be processed as of the close of business on the same day. Re-
quests received after 4 p.m. will be processed on the next business day. The
Board of Directors may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES BY TELEPHONE". An exchange
into another UAM Funds Portfolio is a sale of shares and may result in a gain
or loss for income tax purposes. The Fund may modify or terminate the exchange
privilege at any time.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets attributable to the class, less any liabilities attrib-
utable to the class, by the number of shares outstanding attributable to the
class. The net asset value per share of each Portfolio is determined as of the
close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price
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information on listed securities is taken from the exchange where the security
is primarily traded. Unlisted equity securities and listed securities not
traded on the valuation date for which market quotations are readily available
are valued neither exceeding the current asked prices nor less than the cur-
rent bid prices. Quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major
bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities.
Securities purchased with remaining maturities of 60 days or less are valued
at amortized cost using methods determined by the Board of Directors.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Directors.
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Income dividends paid by the Portfolio with respect to In-
stitutional Class and Service Class Shares, to the extent any dividends are
paid, will be calculated in the same manner at the same time on the same day
and will be in the same amount, except that service and distribution fees re-
lating to Service Class Shares will be borne exclusively by that class.
22
<PAGE>
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. Con-
tact the UAM Funds Service Center at the address or telephone number on the
cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, each Portfolio will normally distribute them
annually. All dividends and capital gains distributions will be automatically
reinvested in additional shares of each Portfolio unless the Fund is notified
in writing that the shareholder elects to receive the distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid
23
<PAGE>
this withholding requirement, you must certify that your Social Security or
Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
Sterling Capital Management Company is a North Carolina corporation formed
in 1970 and located at One First Union Center, 301 S. College Street, Suite
3200, Charlotte, NC 28202. The Adviser is a wholly owned subsidiary of United
Asset Management Corporation ("UAM") and provides investment management serv-
ices to corporations, pension and profit-sharing plans, trusts, estates and
other institutions and individuals. The Adviser currently has over $1.6 bil-
lion in assets under management.
Since 1982, the Adviser has been involved with the distribution of the North
Carolina Capital Management Trust, which includes two portfolios, a bond fund
and a money market mutual fund offered exclusively to public units in the
state, the first such fund to be registered with the SEC. As of December 31,
1995, the asset value of this fund was approximately $1.9 billion.
An investment policy committee is responsible for the day-to-day management
of each Portfolio's investments.
Under Investment Advisory Agreements with the Fund, dated as of March 8,
1991, November 25, 1991 and January 2, 1997, the Adviser manages the invest-
ment and reinvestment of the assets of the Portfolios. The Adviser must adhere
to the stated investment objectives and policies of the Portfolios, and is
subject to the control and supervision of the Fund's Board of Directors.
As compensation for its services as an Adviser, each Portfolio pays the Ad-
viser an annual fee, in monthly installments, calculated by applying the fol-
lowing annual percentage rate to each Portfolio's average daily net assets for
the month:
<TABLE>
<S> <C>
Balanced Portfolio..................................................... 0.75%
Equity Portfolio....................................................... 0.75%
Small Cap Value Portfolio.............................................. 1.00%
Short-Term Fixed Income Portfolio...................................... 0.50%
</TABLE>
24
<PAGE>
The Adviser has voluntarily agreed to maintain operating expenses of the
Portfolios from exceeding the percentage of each Portfolio's average daily as-
serts listed below:
<TABLE>
<S> <C>
Balanced Portfolio.................................................... 1.36 %
Equity Portfolio...................................................... 1.24 %
Small Cap Value Portfolio............................................. 1.50 %
Short-Term Fixed Income Portfolio..................................... 0.675%
</TABLE>
The Fund will not reimburse the Adviser for any advisory fees that are
waived or Portfolio expenses that the Adviser may bear on behalf of a Portfo-
lio for a given fiscal year.
ADVISER'S HISTORICAL PERFORMANCE
Set forth below are certain performance data provided by the Adviser per-
taining to the composite of separately managed accounts of the Adviser that
are managed with substantially similar (although not necessarily identical)
objectives, policies and strategies as those of the Small Cap Value Portfolio.
The performance data for the managed accounts is net of all fees and expenses.
The investment returns of the Portfolio may differ from those of the sepa-
rately managed accounts because such separately managed accounts may have fees
and expenses that differ from those of the Portfolio. Further, the separately
managed accounts are not subject to investment limitations, diversification
requirements, and other restrictions imposed by the 1940 Act and Internal Rev-
enue Code; such conditions, if applicable, may have lowered the returns for
the separately managed accounts. The results presented are not intended to
predict or suggest the return to be experienced by the Portfolio or the return
an investor might achieve by investing in the Portfolio.
STERLING CAPITAL MANAGEMENT SMALL CAP ACCOUNT COMPOSITE RETURNS
(PERCENTAGE RETURNS NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
YEAR TO DATE ADVISER RUSSELL 2000
------------ ------- ------------
<S> <C> <C>
(January 1996*--September 1996)........................ 19.52% 10.74%
Value of $1 invested during 1996....................... $1.195 $1.107
</TABLE>
- -----------
* The Adviser began managing separately managed accounts using its Small Cap
style in January 1996.
Notes:
1. The annualized return is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods
set forth by the Association for Investment Management Research, The Bank
Administration Institute, and the Investment Counsel Association of Ameri-
ca. Market value of the account was the sum of the account's total assets,
including cash, cash equivalents, short term investments, and securities
valued at current market prices.
25
<PAGE>
2. The Russell 2000 Small Stock Index consists of the 2,000 smallest stocks
in the Russell 3000 Index. The Russell 3000 Index is composed of equity
issues of 3,000 large U.S. companies by market capitalization representing
approximately 98% of the U.S. equity market. The smallest company has a
market value of roughly $25 million. It is an unmanaged index which as-
sumes reinvestment of dividends and is generally considered representative
of securities similar to those invested in by the Adviser for purpose of
the composite performance numbers set forth above.
3. The Adviser's average annual management fee over the period January 1996-
September 1996 was 1% or 100 basis points. Net returns to investors vary
depending on the management fee.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The following Portfolio specific fees are calculated from the
aggregate net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Balanced Portfolio..................................................... 0.06%
Equity Portfolio....................................................... 0.06%
Small Cap Value Portfolio.............................................. 0.04%
Short-Term Fixed Income Portfolio...................................... 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate
26
<PAGE>
class of shares is added to a Portfolio, its minimum annual fee increases by
$20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, MA 02110, distributes shares for the Fund. Under the Fund's Distribu-
tion Agreement (the "Agreement"), the Distributor, as agent of the Fund,
agrees to use its best efforts as sole distributor of Fund shares. The Dis-
tributor does not receive any fee or other compensation under the Agreement
(except as described under "SERVICE AND DISTRIBUTION PLANS" above). The Agree-
ment continues in effect as long as it is approved at least annually by the
Fund's Board of Directors. Those approving the Agreement must include a major-
ity of Directors who are neither parties to the Agreement or interested per-
sons of any such party. The Agreement provides that the Fund will bear costs
of registration of its shares with the SEC and various states as well as the
printing of its prospectuses, its SAIs and its reports to stockholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each Portfolio. The Agreements direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of research, statistical and pric-
ing services these brokers provide to the Portfolios in addition to required
Adviser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients. Although not a typical practice, the Adviser may place portfo-
lio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reason-
able by the Adviser. Although there is no specified formula for allocating
such transactions, allocations are subject to periodic review by the Fund's
Directors.
27
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series of shares of common stock and to classify or reclassify any unissued
shares without further action by shareholders. At its discretion, the Board of
Directors of the Fund may create additional Portfolios and Classes of shares.
The shares of each Portfolio and Class are fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and no pre-emptive rights. They have non-cumulative voting rights,
which means that the holders of more than 50% of shares voting for the elec-
tion of Directors can elect 100% of the Directors. A shareholder is entitled
to one vote for each full share held (and a fractional vote for each frac-
tional share held), then standing in his or her name on the books of the Fund.
Both Institutional Class and Service Class Shares represent an interest in
the same assets of a Portfolio. Service Class Shares bear certain expenses re-
lated to shareholder servicing and may bear expenses related to distribution
of such shares. Service Class shares have exclusive voting rights for matters
relating to such distribution expenditures. Information about the Institu-
tional Class Shares of the Portfolios is available upon request by contacting
the UAM Funds Service Center.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semiannual financial statements and annual
financial statements audited by Price Waterhouse LLP.
28
<PAGE>
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by writing to the Fund at the address
listed on the cover of this Prospectus or by calling 1-800-638-7983.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATION NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
29
<PAGE>
UAM FUNDS -- SERVICE CLASS SHARES
BHM&S Total Return Bond Portfolio
MJI International Equity Portfolio
NWQ Balanced Portfolio
Sirach Growth Portfolio
Sirach Special Equity Portfolio
TJ Core Equity Portfolio
30
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Sterling Capital Management Company
One First Union Center
301 S. College Street, Suite 3200
Charlotte, NC 28202
(704) 372-8670
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
Dated January 3, 1997
<PAGE>
[LOGO OF UAM FUNDS APPEARS HERE]
The TS&W Portfolios
Institutional
Class Shares
January 3, 1997
P R O S P E C T U S
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
- -------------------------------------------------------------------------------
THE TS&W PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: THOMPSON, SIEGEL & WALMSLEY, INC.
- -------------------------------------------------------------------------------
PROSPECTUS -- JANUARY 3, 1997
UAM Funds, Inc. (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios"), each of which has different investment objectives and invest-
ment policies. The TS&W Portfolios currently offer only one class of shares.
The securities offered in this Prospectus are Institutional Class Shares of
three diversified, no-load Portfolios of the Fund managed by Thompson, Siegel
& Walmsley, Inc.
TS&W EQUITY PORTFOLIO. The objective of the TS&W Equity Portfolio is to pro-
vide maximum long-term total return consistent with reasonable risk to princi-
pal, by investing in a diversified portfolio of common stocks of relatively
large companies.
TS&W INTERNATIONAL EQUITY PORTFOLIO. The objective of the TS&W International
Equity Portfolio is to provide maximum long-term total return consistent with
reasonable risk to principal, by investing in a diversified portfolio of com-
mon stocks of primarily non-United States issuers on a world-wide basis.
TS&W FIXED INCOME PORTFOLIO. The objective of the TS&W Fixed Income Portfo-
lio is to provide maximum long-term total return with reasonable risk to prin-
cipal, by investing primarily in investment grade fixed income securities of
varying maturities.
There can be no assurance that the Portfolios will achieve their stated ob-
jective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" (SAI)
containing additional information about the Fund has been filed with the Secu-
rities and Exchange Commission. The SAI is dated January 3, 1997 and has been
incorporated by reference into this Prospectus. For a free copy of the SAI
contact the UAM Funds Service Center at the address or telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 1
Prospectus Summary......................................................... 3
Risk Factors............................................................... 4
Financial Highlights....................................................... 5
Investment Objectives...................................................... 8
Investment Policies........................................................ 8
Other Investment Policies.................................................. 13
Investment Limitations..................................................... 18
Purchase of Shares......................................................... 19
Redemption of Shares....................................................... 22
Shareholder Services....................................................... 24
Valuation of Shares........................................................ 25
Performance Calculations................................................... 26
Dividends, Capital Gains Distributions and Taxes........................... 26
Investment Adviser......................................................... 27
Adviser's Historical Performance........................................... 30
Administrative Services.................................................... 33
Distributor................................................................ 33
Portfolio Transactions..................................................... 34
General Information........................................................ 34
UAM Funds -- Institutional Class Shares.................................... 36
</TABLE>
<PAGE>
FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolios would incur. Transaction fees may be charged if a broker-dealer or
other financial intermediary deals with the Fund on your behalf. (See "PUR-
CHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
INT'L FIXED
EQUITY EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Sales Load Imposed on Purchases............... NONE NONE NONE
Sales Load Imposed on Reinvested Dividends.... NONE NONE NONE
Deferred Sales Load........................... NONE NONE NONE
Redemption Fees............................... NONE NONE NONE
Exchange Fees................................. NONE NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
INT'L FIXED
EQUITY EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Investment Advisory Fees....................... 0.75% 1.00% 0.45%
Administrative Fees............................ 0.17% 0.17% 0.19%
12b-1 Fees..................................... NONE NONE NONE
Distribution Costs............................. NONE NONE NONE
Other Expenses................................. 0.11% 0.19% 0.15%
Total Operating Expenses ...................... 1.03%* 1.36%* 0.79%*
</TABLE>
- -----------
* The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, annualized Total Operating Expenses
of the Equity, International Equity excluded Portfolio would be 1.37%. The
annualized Total Operating Expenses for the Equity and Fixed Income Portfo-
lios would not differ.
The table above shows various expenses an investor in the Portfolios would
bear directly or indirectly. The expenses and fees listed above are based on
the Portfolios' operations during the fiscal year ended October 31, 1996, ex-
cept that Administrative Fees are restated to reflect current fees. (See "AD-
MINISTRATIVE SERVICES" herein and in the SAI.)
The following example illustrates expenses a shareholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the ta-
ble above, the Portfolios charge no redemption fees of any kind.
1
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Portfolio............................. $11 $33 $57 $126
International Equity Portfolio............... $14 $43 $75 $164
Fixed Income Portfolio....................... $ 8 $25 $44 $ 98
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Thompson, Siegel & Walmsley, Inc. (the "Adviser"), an investment counseling
firm founded in 1969, serves as investment adviser to the Fund's TS&W Portfo-
lios. The Adviser presently manages over $5.0 billion in assets for institu-
tional clients and high net worth individuals. (See "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), to investors at net asset value without a sales commis-
sion. Share purchases may be made by sending investments directly to the Fund.
The minimum initial investment is $2,500. The minimum for subsequent invest-
ments is $100. The minimum initial investment for IRA accounts is $500. The
minimum initial investment for spousal IRA accounts is $250. Certain excep-
tions to the initial or minimum investment amounts may be made by the officers
of the Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends, except the Fixed Income Portfolio, which
will do so monthly and the International Equity Portfolio, which will do so
annually. Each Portfolio will distribute any realized net capital gains annu-
ally. Distributions will be reinvested in Portfolio shares automatically un-
less an investor elects to receive cash distributions. (See "DIVIDENDS, CAPI-
TAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. (See "REDEMPTION OF SHARES.")
ADMINISTRATIVE SERVICES
UAM Fund Services Inc. ("UAMFSI"), a wholly-owned subsidiary of United Asset
Management Corporation, is responsible for performing and overseeing adminis-
tration, fund accounting, dividend disbursing and transfer agency services
provided to the Fund and its Portfolios by third-party service providers. (See
"ADMINISTRATIVE SERVICES.")
3
<PAGE>
RISK FACTORS
The value of the Portfolios' shares can be expected to fluctuate in response
to changes in market and economic conditions as well as the financial condi-
tions and prospects of the issuers in which the Portfolios invest. Prospective
investors should consider the following: (1) The fixed income securities held
by the Fixed Income and International Equity Portfolios will be affected by
general changes in interest rates that may result in an increase or decrease
in the value of the Portfolios. The value of fixed income securities held by
the Portfolios can be expected to vary inversely with changes in interest
rates: as interest rates decline, the market value of fixed income securities
tends to increase and vice versa; (2) The International Equity Portfolio may
invest a portion of its assets in derivatives including futures contracts, op-
tions on futures contracts and options. (See "OTHER INVESTMENT POLICIES.");
(3) The Fixed Income Portfolio may invest in securities rated lower than Baa
by Moody's Investors Service, Inc. or BBB by Standard & Poor's Corporation.
Such securities carry a high degree of credit risk and are considered specula-
tive by the major rating agencies. (See "INVESTMENT POLICIES -- FIXED INCOME
PORTFOLIO."); (4) Each Portfolio may invest in securities of foreign issuers,
which are subject to certain risks not typically associated with domestic is-
suers. Since the International Equity Portfolio may invest in foreign issuers
of developing countries, the Portfolio may be subject to additional risks as-
sociated with investments in developing countries. (See "OTHER INVESTMENT POL-
ICIES."); (5) Although the International Equity Portfolio intends to emphasize
investments in larger, more seasoned or established companies, the Portfolio
may invest in companies with market capitalizations of $500 million or less.
Investments in such small capitalization companies are more vulnerable to fi-
nancial and other risks than larger capitalization companies and the securi-
ties of such small capitalization companies may involve a higher degree of
risk and price volatility than investments in the general equity markets; (6)
In general, the Portfolios will not trade for short-term profits, but when
circumstances warrant, investments may be sold without regard to the length of
time held. High turnover may result in additional costs and the realization of
capital gains. (See "OTHER INVESTMENT POLICIES".); (7) Each Portfolio may use
various investment practices, including investing in repurchase agreements,
when issued, forward delivery and delayed settlement securities and lending of
securities. (See "OTHER INVESTMENT POLICIES.")
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide financial highlights for a share outstanding
throughout each of the periods presented. The tables are part of the Portfo-
lios' Financial Statements included in the Portfolios' 1996 Annual Report to
Shareholders. The Financial Statements are incorporated into the Portfolios'
SAI. The Portfolios' Financial Statements have been audited by Price
Waterhouse LLP. Their unqualified opinion on the Financial Statements is also
incorporated in the Portfolios' SAI. Please read the following information in
conjunction with the Portfolios' 1996 Annual Report to Shareholders.
TS&W EQUITY PORTFOLIO
<TABLE>
<CAPTION>
JULY 17,**
1992 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, ----------------------------------
1992 1993 1994 1995 1996
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $10.00 $ 9.65 $ 11.02 $ 11.23 $ 12.47
------ ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income........ 0.02 0.14 0.19 0.23 0.26
Net Realized & Unrealized
Gain (Loss)................. (0.35) 1.36 0.33 1.34 2.34
------ ------- ------- ------- -------
Total From Investment
Operations.................. (0.33) 1.50 0.52 1.57 2.60
------ ------- ------- ------- -------
Distributions:
Net Investment Income........ (0.02) (0.13) (0.18) (0.22) (0.26)
Net Realized Gain............ -- -- (0.13) (0.11) (0.33)
------ ------- ------- ------- -------
Total Distributions.......... (0.02) (0.13) (0.31) (0.33) (0.59)
------ ------- ------- ------- -------
Net Asset Value, End of
Period...................... $ 9.65 $ 11.02 $ 11.23 $ 12.47 $ 14.48
====== ======= ======= ======= =======
Total Return................. (3.30)%+ 15.62% 4.82% 14.32% 21.45%
====== ======= ======= ======= =======
Ratios and Supplemental Data:
Net Assets, End of Period
(Thousands)................. $7,233 $30,953 $38,379 $60,352 $81,554
Ratio of Expenses to Average
Net Assets.................. 1.25%* 1.22% 1.10% 1.01% 1.01%
Ratio of Net Investment
Income to Average Net
Assets...................... 1.25%* 1.51% 1.74% 2.04% 1.93%
Portfolio Turnover Rate...... 17% 23% 23% 17% 40%
Average Commission Rate#..... N/A N/A N/A N/A $0.0692
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share........... $ 0.02 N/A N/A N/A N/A
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... N/A N/A N/A 0.99% 1.01%
</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 period indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
5
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 18,** YEARS ENDED
1992 TO OCTOBER 31,
OCTOBER 31, --------------------------
1993 1994 1995 1996
-------------- ------- ------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 10.00 $ 12.54 $ 13.85 $ 13.22
------- ------- ------- --------
Income From Investment Operations:
Net Investment Income.............. 0.05 0.07 0.13 0.10
Net Realized & Unrealized Gain
(Loss)............................ 2.49 1.29 (0.31) 1.04
------- ------- ------- --------
Total From Investment Operations... 2.54 1.36 (0.18) 1.14
------- ------- ------- --------
Distributions:
Net Investment Income.............. -- (0.05) (0.09) (0.14)
Net Realized Gain.................. -- -- (0.36) --
------- ------- ------- --------
Total Distributions................ (0.05) (0.45) (0.14)
------- ------- ------- --------
Net Asset Value, End of Period..... $ 12.54 $ 13.85 $ 13.22 $ 14.22
======= ======= ======= ========
Total Return....................... 25.40%+ 10.87% 1.11% 8.71%
======= ======= ======= ========
Ratios and Supplemental Data:
Net Assets, End of Period
(Thousands)....................... $28,030 $49,362 $77,553 $103,339
Ratio of Expenses to Average Net
Assets............................ 1.37%* 1.38% 1.32% 1.35%
Ratio of Net Investment Income to
Average Net Assets................ 1.02%* 0.70% 1.29% 0.84%
Portfolio Turnover Rate............ 11% 30% 23% 25%
Average Commission Rate#........... N/A N/A N/A $ 0.0015
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per Share.. $ 0.02 N/A N/A N/A
Ratio of Expenses to Average Net
Assets Including Expense Offsets.. N/A N/A 1.30% 1.34%
</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 period indicated.
# For the fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
6
<PAGE>
TS&W FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
JULY 17,**
1992 TO YEARS ENDED OCTOBER 31
OCTOBER 31, -----------------------------------
1992 1993 1994 1995 1996
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $10.00 $ 10.09 $ 10.75 $ 9.60 $ 10.42
------ ------- ------- ------- -------
Income From Investment Opera-
tions:
Net Investment Income........ 0.06 0.44 0.47 0.56 0.56
Net Realized & Unrealized
Gain (Loss)................. 0.07 0.68 (1.05) 0.82 (0.12)
------ ------- ------- ------- -------
Total From Investment Opera-
tions....................... 0.13 1.12 (0.58) 1.38 0.44
------ ------- ------- ------- -------
Distributions:
Net Investment Income........ (0.04) (0.46) (0.47) (0.56) (0.56)
Net Realized Gain............ -- -- (0.10) -- --
------ ------- ------- ------- -------
Total Distributions.......... (0.04) (0.46) (0.57) (0.56) (0.56)
------ ------- ------- ------- -------
Net Asset Value, End of Peri-
od.......................... $10.09 $ 10.75 $ 9.60 $ 10.42 $ 10.30
====== ======= ======= ======= =======
Total Return................. 1.31%+ 11.31% (5.46)% 14.73% 4.40%
====== ======= ======= ======= =======
Ratios and Supplemental Data:
Net Assets, End of Period
(Thousands)................. $9,385 $28,987 $32,118 $46,677 $61,692
Ratio of Expenses to Average
Net Assets.................. 1.30%* 1.15% 1.02% 0.76% 0.77%
Ratio of Net Investment In-
come to Average Net Assets.. 4.70%* 4.39% 4.73% 5.56% 5.50%
Portfolio Turnover Rate...... 5% 83% 27% 25% 59%
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share........... $ 0.02 N/A N/A N/A N/A
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... N/A N/A N/A 0.75% 0.77%
</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 period indicated.
7
<PAGE>
INVESTMENT OBJECTIVES
EQUITY PORTFOLIO. The objective of the Equity Portfolio is to provide maxi-
mum long-term total return consistent with reasonable risk to principal. The
Adviser intends to pursue this objective by investing the Portfolio's assets
in a diversified portfolio of common stocks of relatively large companies with
above-average financial characteristics in terms of balance sheet strength and
profitability levels, and which, in the Adviser's opinion, are undervalued at
the time of purchase. Capital return is likely to be the predominant component
of the Portfolio's total return.
INTERNATIONAL EQUITY PORTFOLIO. The objective of the International Equity
Portfolio is to provide maximum long-term total return consistent with reason-
able risk to principal. The Adviser intends to pursue this objective by in-
vesting the Portfolio's assets in a diversified portfolio of common stocks of
primarily non-United States issuers on a world-wide basis. Under normal cir-
cumstances, the Adviser will emphasize established companies in individual
foreign markets and attempt to stress companies and markets which, in its
opinion, are undervalued. Capital return is expected to be the predominant
component of the Portfolio's return.
FIXED INCOME PORTFOLIO. The objective of the Fixed Income Portfolio is to
provide maximum long-term total return consistent with reasonable risk to
principal. The Adviser intends to pursue this objective by investing the Port-
folio's assets primarily in investment grade fixed income securities of vary-
ing maturities. These include securities of the U.S. Government and its agen-
cies, corporate bonds, collateralized mortgage obligations ("CMOs"), mortgage-
backed securities, and various short term instruments such as commercial pa-
per, Treasury bills and certificates of deposit. Income return is expected to
be a predominant portion of the Portfolio's total return. Any capital return
on the Portfolio is dependent upon interest rate movements. The capital return
from the Portfolio will vary according to, among other factors, interest rate
changes and the average maturity (duration) of the Portfolio.
INVESTMENT POLICIES
EQUITY PORTFOLIO. The Equity Portfolio seeks to achieve its objective by in-
vesting at least 65% of its assets under normal circumstances in a diversified
portfolio of common stocks of companies that are relatively large in terms of
revenues and assets and in companies with market capitalizations that exceed
$300 million. Although the Equity Portfolio's holdings are drawn primarily
from large company common stocks, the Portfolio may also invest in equity se-
curities of other issuers and equity securities of issuers in a wide variety
of industries when deemed appropriate by the Adviser. The Portfolio may also
invest in convertible bonds or convertible preferred stocks.
8
<PAGE>
The Adviser pursues a relative value-oriented philosophy and attempts to be
risk averse believing that preserving capital in weak market environments
should lead to above-average returns over the long run. Typically, the Adviser
prefers to invest in stocks of companies that possess above-average financial
characteristics in terms of balance sheet strength and profitability measures
and yet are attractively valued relative to the market. Normally, the Portfo-
lio will be diversified and contain quality securities on balance.
The Adviser's stock selection process combines an economic top-down approach
with valuation and fundamental analysis. Through economic analysis, the Ad-
viser attempts to assess which areas of the economy are expected to exhibit
relative strength. Input for economic analysis is derived from a detailed
analysis of the economy and from an analysis of historical corporate earnings
trends, both prepared internally. Through valuation analysis, the Adviser at-
tempts to seek out sectors, industries and companies in the market which rep-
resent areas of undervaluation. Tools and measures utilized include a dividend
discount model and relative value screens as well as other traditional mea-
sures of value including price/earnings ratios, price to book ratios and divi-
dend yields. Fundamental analysis is performed on industries and companies in
order to verify their potential attractiveness for investment. The Adviser at-
tempts to purchase stocks of companies which should benefit from economic
trends which are attractively valued relative to their fundamentals and other
companies in the market.
Securities are sold when economic, valuation, and fundamental criteria are
no longer met, when more attractive alternatives are found, or when risk free
returns from cash equivalents appear to be more attractive.
As risks in the marketplace increase, cash reserves can be used for defen-
sive purposes. Under normal circumstances, it is anticipated that cash re-
serves will represent a relatively small percentage of the Portfolio's assets
as market timing is not a part of the Adviser's investment strategy.
The Adviser anticipates that the majority of the investments in the Portfo-
lio will be in United States based companies. However, shares of foreign based
companies may be purchased, if they pass the selection process outlined above.
The Portfolio may invest up to 20% of its assets in shares of foreign based
companies through sponsored American Depositary Receipts ("ADRs"). (See "FOR-
EIGN INVESTMENTS".)
INTERNATIONAL EQUITY PORTFOLIO. The International Equity Portfolio seeks to
achieve its objective by investing primarily in a diversified Portfolio of
common stocks of non-United States issuers on a worldwide basis. Generally,
the International Equity Portfolio will invest in equity securities of estab-
lished companies listed on U.S. or foreign securities exchanges, but it may
also invest in securities traded over-the-counter. Although larger, more sea-
soned or established companies
9
<PAGE>
will be emphasized, investments will include companies of varying size as mea-
sured by assets, sales or capitalization. The Portfolio may also invest in
convertible bonds, convertible preferred stocks, non-convertible preferred
stocks, and fixed income securities of governments, government agencies, su-
pranational agencies and companies when the Adviser believes the potential for
total return will equal or exceed that available from investments in equity
securities. These debt securities include those rated Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P") or those of equivalent quality as determined by the
Adviser. Bonds rated Baa or BBB may possess speculative characteristics and
may be more sensitive to changes in the economy and the financial condition of
issuers than higher rated bonds. Fixed income securities also may be held for
temporary defensive purposes when the Adviser believes market conditions so
warrant and for temporary investment. Similarly, the Portfolio may invest in
cash equivalents for temporary defensive purposes and for liquidity. The Port-
folio may invest in closed-end investment companies holding foreign securi-
ties. The Portfolio may purchase and sell options on any of these securities.
The Portfolio seeks to invest in companies the Adviser believes will benefit
from global trends, promising business or product developments and specific
country opportunities resulting from changing economic, social and political
trends. In the process of selecting securities, the Adviser stresses economic
analysis, fundamental security analysis and valuation analysis. It is expected
that investments will be diversified throughout the world and within markets
to minimize specific country and currency risks. While investments will be
made primarily in securities of companies domiciled in developed countries,
investments will also be made in developing countries as well. Under normal
circumstances, the Portfolio will invest at least 65% of its assets in equity
securities of foreign companies representing at least three countries other
than the United States.
The Portfolio, to a limited extent, may enter into futures contracts and may
purchase and sell put and call options on such contracts for hedging purposes.
The Portfolio may enter into forward foreign currency exchange contracts for
hedging purposes and purchase foreign currencies in the form of bank deposits.
See "OTHER INVESTMENT POLICIES" for a discussion of these policies and a de-
scription of special considerations and risks associated with investments in
foreign issues.
FIXED INCOME PORTFOLIO. The Fixed Income Portfolio seeks to achieve its ob-
jective by investing at least 65% of its assets in a diversified mix of in-
vestment grade fixed income securities of varying maturities including securi-
ties of the U.S. Government and its agencies, corporate bonds, CMOs, mortgage-
backed securities, asset-backed securities, and various short-term instruments
such as commercial paper, Treasury bills and certificates of deposit.
10
<PAGE>
Investment grade bonds are generally considered to be those bonds having one
of the four highest grades assigned by Moody's (Aaa, Aa, A or Baa) or S&P
(AAA, AA, A or BBB). Bonds rated Baa or BBB may possess speculative character-
istics and may be more sensitive to changes in the economy and the financial
condition of issuers than higher rated bonds. Mortgage-backed securities in
which the Portfolio may invest will either carry a guarantee from an agency of
the U.S. Government or a private issuer of the timely payment of principal and
interest or are sufficiently seasoned to be considered by the Adviser to be of
investment grade quality.
It is the Adviser's intention that the Portfolio's investments will be lim-
ited to the investment grades described above. However, up to 20% of the Port-
folio's assets may consist of securities rated Ba or B by Moody's or BB or B
by S&P if, in the Adviser's judgement, maintaining a position in the securi-
ties is warranted. The Adviser also reserves the right to retain securities
which are downgraded by one or both of the rating agencies, if in the Advis-
er's judgement, the retention of securities is warranted. In addition, the Ad-
viser may invest in preferred stocks and convertible securities. In the case
of convertible securities, the conversion privilege may be exercised but the
common stocks received will be sold.
Securities rated less than Baa by Moody's or BBB by S&P are classified as
non-investment grade securities. Such securities carry a high degree of risk
and are considered speculative by the major credit rating agencies. The fol-
lowing are excerpts from the Moody's and S&P definitions for speculative grade
debt obligations:
MOODY'S:--Ba rated bonds have "speculative elements," their future "cannot
be considered assured," and protection of principal and interest is "moderate"
and "not well safeguarded." B rated bonds "lack characteristics of a desirable
investment" and the assurance of interest or principal payments "may be
small."
S&P:--BB rated bonds have "less near-term vulnerability to default" than B
or CCC rated securities but face "major ongoing uncertainties . . . which may
lead to inadequate capacity" to pay interest or principal. B rated bonds have
a "greater vulnerability to default" than BB rated bonds and the ability to
pay interest or principal will likely be impaired by adverse business condi-
tions.
Credit quality of bonds in such ratings categories can change unexpectedly,
and even recently-issued credit ratings may not fully reflect the actual risks
posed by a particular high-yield security. It is the Portfolio's policy not to
rely primarily on ratings issued by established credit rating agencies but to
utilize such ratings in conjunction with the Adviser's own independent and on-
going review of credit quality.
The Adviser expects to actively manage the Portfolio in order to meet the
investment objectives. The Adviser attempts to be risk averse believing that
11
<PAGE>
preserving principal in periods of rising interest rates should lead to above-
average returns over the long run. The structure of the Portfolio will be
largely determined by the Adviser's assessment of current economic conditions
and trends, the Federal Reserve Board's management of monetary policy, fiscal
policy, inflation expectations, government and private credit demands and
global conditions. Once these factors have been carefully analyzed, an inter-
nally generated outlook for the direction of interest rates is formulated and
the maturity/duration of the Portfolio will be adjusted to reflect the Advis-
er's outlook. Under normal market conditions, the weighted maturity range over
a complete economic cycle will shift between six and twelve years. The dura-
tion range over a similar time period will be four to six years.
The Adviser also attempts to emphasize relative values within selected matu-
rity ranges. Interest rate spreads between different quality ranges, by types
of issues and within coupon areas are monitored, and the Portfolio will be
structured to take advantage of relative values within these areas. Market-
ability of individual issues and diversification within the Portfolio will be
emphasized.
While the Adviser anticipates that the majority of the assets of the Portfo-
lio will be U.S. dollar denominated securities, up to 20% of the Portfolio's
assets may consist of obligations of foreign governments, agencies, or corpo-
rations denominated either in U.S. dollars or foreign currencies. The credit
quality standards applied to foreign obligations are the same as those applied
to the selection of U.S. based securities. (See "FOREIGN INVESTMENTS" for a
more detailed description of the risks involved.)
12
<PAGE>
OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by S & P or Prime-1 or Prime-2
by Moody's or if unrated, determined by the Adviser to be of comparable quali-
ty.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, (ii) in the case of U.S. banks, it is a member of the Fed-
eral Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements, interest-
bearing or discounted commercial paper including dollar-denominated commercial
paper of foreign issuers, and any other short-term money market instruments
including variable rate demand notes and tax-exempt money instruments. By en-
tering into these investments on a joint basis, it is expected that a Portfo-
lio may earn a higher rate of return on investments relative to what it could
earn individually.
The Fund has received permission from the SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio. (See "INVESTMENT COMPA-
NIES.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, a Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of
13
<PAGE>
interest. Under a repurchase agreement, the seller is also required to main-
tain the value of securities subject to the agreement at not less than 100% of
the repurchase price. The Administrator and the Adviser will mark to market
daily the value of the securities purchased. The use of repurchase agreements
involves certain risks. For example, a default by the seller of the agreement
may cause a Portfolio to experience a loss or delay in the liquidation of the
collateral securing the repurchase agreement. The Portfolio might also incur
disposition costs in liquidating the collateral. While the Fund's management
acknowledges these risks, it is expected that they can be controlled through
stringent security selection criteria and careful monitoring procedures. The
Fund has received permission from the SEC to pool daily uninvested cash bal-
ances of the Fund's Portfolios in order to invest in repurchase agreements on
a joint basis. By entering into joint repurchase agreements, a Portfolio may
incur lower transaction costs and earn higher rates of interest on joint re-
purchase agreements. Each Portfolio's contribution would determine its return
from a joint repurchase agreement. (See "SHORT TERM INVESTMENTS.")
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. A Portfolio will not loan securities
to the extent that greater than one-third of its assets at fair market value
would be committed to loans. During the term of a loan, the Portfolio is sub-
ject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Directors. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Directors. The Portfolios will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on a loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime
in the future. No payment or delivery is made by a Portfolio until it receives
payment or
14
<PAGE>
delivery from the other party to any of the above transactions. It is possible
that the market price of the securities at the time of delivery may be higher
or lower than the purchase price. Each Portfolio will maintain a separate ac-
count of cash or liquid securities at least equal to the value of purchase
commitments until payment is made. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery is made al-
though the Portfolio may earn income on securities it has deposited in a seg-
regated account.
Each Portfolio may engage in these types of purchases in order to buy secu-
rities that fit with its investment objectives at attractive prices -- not to
increase its investment leverage.
PORTFOLIO TURNOVER
Portfolio turnover for the Portfolios is not anticipated to exceed 150%. In
addition to Portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" for more information on taxation). The Portfolios
will not normally engage in short-term trading, but each reserves the right to
do so. The tables set forth in "Financial Highlights" present the Portfolios'
historical portfolio turnover ratios.
INVESTMENT COMPANIES
Each Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of investment, in securities of other open-end or
closed-end investment companies. No more than 5% of the investing Portfolio's
total assets may be invested in securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. The Portfolio will indirectly bear its proportionate share of any
management fees paid by an investment company in which it invests in addition
to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio, provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory fee and any other fees earned as a result of the Portfolio's investment
in the DSI Money Market Portfolio. The investing Portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other share-
holders.
FOREIGN INVESTMENTS
Investing in foreign companies may involve special considerations not typi-
cally associated with investing in U.S. companies. Since the securities of
foreign companies are normally denominated in foreign currencies, the Portfo-
lio may be
15
<PAGE>
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations and may incur costs in connection with conversions between
various currencies.
The International Equity Portfolio may invest a portion of its assets in de-
veloping countries. The economies of individual developing countries may dif-
fer favorably or unfavorably from the United States economy in growth of gross
domestic product, rate of inflation, currency depreciation, capital reinvest-
ment, resource self sufficiency and balance of payments position. Economies of
developing countries generally are heavily dependent upon international trade
and have been and may continue to be adversely affected by trade barriers, ex-
change controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been or may continue to be adversely affected
by economic conditions in the countries with which they trade.
The International Equity Portfolio may invest in forward foreign currency
exchange contracts in order to protect against uncertainty in the level of fu-
ture foreign exchange rates in the purchase and sale of investment securities.
This Portfolio may not enter into such contracts for speculative purposes. A
forward foreign currency exchange contract is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. Such contracts, which protect the value of this
Portfolio's investment securities against a decline in the value of a curren-
cy, do not eliminate fluctuations caused by changes in the local currency
prices of the securities. Although such contracts tend to minimize the risk of
loss due to a decline in the value of the hedged currency, they also limit any
potential gain that might be realized should the value of such currency in-
crease.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, comparable information may not be readily avail-
able about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S. compa-
nies. In addition, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. Additionally, there may be
difficulty in obtaining and enforcing judgements against foreign issuers.
Although the Portfolios will endeavor to achieve the most favorable execu-
tion costs in portfolio transactions in foreign securities, commissions on
many foreign stock exchanges are generally higher than negotiated commissions
on U.S. exchanges.
16
<PAGE>
Certain foreign governments levy withholding taxes against dividend and in-
terest income. Although in some countries a portion of the taxes is recover-
able, the non-recovered portion of foreign withholding taxes will reduce the
income a Portfolio receives from the companies comprising its investments.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested and to reduce transaction costs, the In-
ternational Equity Portfolio may invest in stock and bond futures and interest
rate futures contracts. Because transaction costs associated with futures and
options may be lower than the costs of investing in stocks and bonds directly,
it is expected that the use of index futures and options to facilitate cash
flows may reduce this Portfolio's overall transaction costs.
The International Equity Portfolio will not enter into futures contract
transactions provided that immediately thereafter, the sum of its initial mar-
gin deposits on open contracts exceeds 5% of the market value of its total as-
sets. In addition, this Portfolio will not enter into futures contracts pro-
vided that its outstanding obligations to purchase securities under these con-
tracts in combination with its outstanding obligations with respect to options
transactions would exceed 5% of its total assets. The International Equity
Portfolio will engage in futures and/or options transactions only for hedging
purposes and not for speculative purposes.
Futures and options can be volatile and involve various degrees and types of
risk. If the Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts could result in a loss. The Portfolio could also suffer
losses if it is unable to liquidate its position due to an illiquid second
market. In the opinion of the Fund's Board of Directors, the risk that the
Portfolio will be unable to close out a futures position or options contract
will be minimized by only entering into futures contracts or options transac-
tions traded on national exchanges and for which there appears to be a liquid
secondary market.
DURATION
Duration is a measure of the expected timing of the cash flows (principal
and interest) of a fixed income security. It was developed as a more precise
alternative to the concept of "term to maturity." Duration incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure. Most debt obligations provide interest ("coupon") payments in ad-
dition to a final ("par") payment at maturity. Some obligations also have call
provisions. Depending on the relative magnitude of these payments, the market
values of debt obligations may respond differently to changes in the level and
structure of interest rates.
INTEREST RATES AND CURRENCY SWAPS
The International Equity Portfolio may enter into interest rate and/or cur-
rency swaps. An interest rate swap is an agreement to exchange the interest
income
17
<PAGE>
generated by one fixed income instrument for the interest income generated by
another fixed income instrument. The currency swaps in which this Portfolio
will engage will generally involve an agreement to pay interest streams calcu-
lated by reference to interest income linked to a specified index in one cur-
rency in exchange for a specified index in another currency.
The use of interest rate swaps involves investment techniques and risks dif-
ferent from those associated with ordinary portfolio securities transactions.
If the Adviser is incorrect in its forecasts of market values, interest rates
and other applicable factors, the investment performance of the Portfolio will
be less favorable than it would have been if this investment technique were
never used. Interest rate swaps do not involve the delivery of securities or
other underlying assets or principal. Thus, if the other party to an interest
rate swap defaults, the Portfolio's risk of loss consists of the net amount of
interest payments that the Portfolio is contractually entitled to receive.
The International Equity Portfolio expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio. The Portfolio may also enter into these transactions to pro-
tect against any increase in the price of securities the Portfolio anticipates
purchasing at a later date. If there is a default by the other party to such a
transaction, the Portfolio will have contractual remedies pursuant to the
agreements related to the transaction. Since a segregated account is main-
tained with respect to all interest rate and currency swaps, the Adviser be-
lieves that such obligations do not constitute senior securities (as defined
in the 1940 Act) and, accordingly, will not treat them as being subject to the
Portfolio's borrowing restrictions.
RESTRICTED SECURITIES
Each Portfolio may purchase restricted securities that are not registered
for sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the Fund's Board of Directors, the Adviser determines the
liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. A Portfolio will invest no more than 10%
of its net assets in illiquid securities. The prices realized from the sales
of these securities could be less than those originally paid by the Portfolio
or less than what would be considered fair value of such securities.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of any single issuer
(other than
18
<PAGE>
obligations issued or guaranteed as to principal and interest by the
U.S. government or any of its agencies or instrumentalities);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) a continuous op-
erating history of less than 3 years;
(d) invest more than 25% of its assets in companies within a single indus-
try; however, there are no limitations on investments made in instru-
ments issued or guaranteed by the U.S. Government and its agencies
when the Portfolio adopts a temporary defensive position.
(e) make loans except (i) by purchasing bonds, debentures or similar obli-
gations which are publicly distributed, (including repurchase agree-
ments; provided however, that repurchase agreements maturing in more
than seven days, together with securities which are not readily mar-
ketable, will not exceed 10% of the Portfolio's total assets), and
(ii) by lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not incon-
sistent with the 1940 Act, as amended, or the rules and regulations or
interpretations of the SEC thereunder;
(f) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% of the
Portfolio's gross assets valued at the lower of market or cost, and a
Portfolio may not purchase additional securities when borrowings ex-
ceed 5% of total gross assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value.
The investment objectives and investment limitations of the Portfolios are
fundamental and, may be changed only with the approval of the holders of a ma-
jority of the outstanding shares of such Portfolio. The Portfolios' investment
policies described in this Prospectus and in the SAI are not fundamental and
may be changed by the Fund's Board of Directors upon reasonable notice to in-
vestors. If a percentage limitation on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later
change in percentage resulting from changes in the value or total cost of the
Portfolio's assets will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of each Portfolio are offered through UAM Fund Distributors, Inc.
(the "Distributor"), without a sales commission, at the net asset value per
share next
19
<PAGE>
determined after an order is received by the Fund and payment is received by
the Custodian. (See "VALUATION OF SHARES.") The minimum initial investment is
$2,500. The minimum initial investment for IRA accounts is $500. The minimum
initial investment for spousal IRA accounts is $250. Certain exceptions may be
determined by the officers of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled to receive compensation for selling or servicing Portfolio shares may
receive different compensation with respect to one particular class of shares
over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their cus-
tomers. If shares of a Portfolio are purchased in this manner, the Service
Agent must receive your investment order before the close of trading on the
New York Stock Exchange ("NYSE"), and transmit it to the Fund's Sub-Transfer
Agent prior to the close of their business day to receive that day's share
price. Proper payment for the order must be received by the Sub-Transfer Agent
no later than the time when the Portfolio is priced on the following business
day. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Application and mail it, together with a check pay-
able to UAM Funds, to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
20
<PAGE>
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of the Portfolio next determined af-
ter receipt. Payment need not be converted into Federal Funds (monies credited
to the Fund's Custodian Bank by a Federal Reserve Bank) before the Fund will
accept it for investment.
BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. An account number will then be provided to you. Next,
. Instruct your bank to wire the specified amount to the Fund's Custodian:
The Chase Manhattan Bank
ABA #02100-0021
UAM Funds
DDA Acct. #9102772952
Ref: Portfolio Name
Your Account Number
Your Account Name
Wire Control Number
. Forward a completed Application to the UAM Funds Service Center at the
address shown thereon as soon as possible. Federal Funds purchases will
be accepted only on a day on which both the NYSE and the Custodian Bank
are open for business.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check to the UAM Funds Service Center (payable to "UAM Funds") at the above
address or by wiring monies to the Custodian Bank using the instructions out-
lined above. When making additional investments, be sure that your account
number, account name, and the selected Portfolio are specified on the check or
wire. Prior to wiring additional investments, notify the UAM Funds Service
Center by calling the number on the cover of this Prospectus. Mail orders
should include, when possible, the "Invest by Mail" stub which accompanies any
Fund confirmation statement.
OTHER PURCHASE INFORMATION
Investments received by 4 p.m. ET (the close of the NYSE) will be invested
at the share price calculated after the NYSE closes on that day. Investments
received after the close of the NYSE will be executed at the price computed on
the next day the NYSE is open. The Fund reserves the right, in its sole dis-
cretion, to
21
<PAGE>
suspend the offering of shares of each Portfolio or to reject purchase orders
when, in the judgment of management, such suspension or rejection is in the
best interests of the Fund. Purchases of a Portfolio's shares will be made in
full and fractional shares of the Portfolio calculated to three decimal
places. Certificates for fractional shares will not be issued. Certificates
for whole shares will not be issued except at the written request of the
shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the time
of the next determination of net asset value after such acceptance. Shares is-
sued by a Portfolio in exchange for securities will be issued at net asset
value determined as of the same time. All dividends, interest, subscription,
or other rights pertaining to such securities shall become the property of the
Portfolio and must be delivered to the Fund by the investor upon receipt from
the issuer. Securities acquired through an in-kind purchase will be acquired
for investment and not for immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless:
. at the time of the exchange, such securities are eligible to be included
in the Portfolio (current market quotations must be readily available
for such securities);
. the investor represents and agrees that all securities offered to be ex-
changed are not subject to any restrictions upon their sale by the Port-
folio under the Securities Act of 1933, or otherwise; and
. the value of any such securities (except U.S. Government securities) be-
ing exchanged together with other securities of the same issuer owned by
the Portfolio will not exceed 5% of the net assets of the Portfolio im-
mediately after the transaction.
Investors who are subject to Federal taxation may realize a gain or loss for
Federal income tax purposes upon the exchange depending upon the cost of the
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value of the Portfolio next determined after
receipt of the redemption request. No charge is made for redemptions. Any re-
demption may be more or less than the purchase price of shares depending on
the market value of the investment securities held by the Portfolio.
22
<PAGE>
BY MAIL
Address redemption requests to the UAM Funds Service Center. Requests to re-
deem shares must include:
. share certificates, if issued;
. a letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered owners
of the shares in the exact names in which they are registered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other supporting legal documents, if required in the case of es-
tates, trusts, guardianships, custodianships, corporations, pension and
profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the wire
redemption privilege) by completing appropriate sections of the Applica-
tion; and
. call the Fund and instruct that the redemption proceeds be mailed to you
or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated to
receive redemption proceeds (this can be accomplished only by a written
request signed by each shareholder, with each signature guaranteed);
. redemption of certificated shares by telephone.
The Fund and the Fund's Sub-Transfer Agent will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and they
may be liable for any losses if they fail to do so. These procedures include
requiring the investor to provide certain personal identification at the time
an account is opened as well as prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written in-
structions of such transaction requests. The Fund or Sub-Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instruction
if the Fund or Sub-Transfer Agent does not employ the procedures described
above. Neither the Fund nor the Sub-Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by tele-
phone that it reasonably believes to be genuine.
23
<PAGE>
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other than
the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under proper
procedures within one business day of and no more than seven business days af-
ter receipt the request, or earlier if required under applicable law. The Fund
may suspend the right of redemption or postpone the date at times when both
the NYSE and Custodian Bank are closed, or under any emergency circumstances
as determined by the SEC.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may in-
cur brokerage charges on the sale of portfolio securities received in payment
of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of each Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. (See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus.) Exchange requests should
be made by contacting the UAM Funds Service Center.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind for ex-
changes. Before making an exchange into a Portfolio, a shareholder should read
its Prospectus and consider the investment objectives of the Portfolio to be
purchased. For a copy of the Prospectus for the Portfolio(s) in which you are
interested, contact the
24
<PAGE>
UAM Funds Service Center. Exchanges can only be made with Portfolios that are
qualified for sale in a shareholder's state of residence. An exchange into an-
other UAM Funds Portfolio may result in a capital gain or loss for income tax
purposes. The Fund may modify or terminate the exchange privilege at any time.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued and if the registration of the two accounts will
be identical. Requests for exchanges received prior to 4 p.m. (ET) will be
processed as of the close of business on the same day. Requests received after
4 p.m. (ET) will be processed on the next business day. The Board of Directors
may limit the frequency and amount of exchanges permitted.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "REDEMPTION OF SHARES -- BY TELEPHONE" above.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the value of
the Portfolio's assets, less any liabilities, by the number of shares out-
standing. The net asset value per share of each Portfolio is determined as of
the close of the NYSE on each day that the NYSE is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities.
Securities purchased with remaining maturities of 60 days or less are valued
at amortized cost using methods approved by the Board of Directors.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Fund's Directors.
25
<PAGE>
PERFORMANCE CALCULATIONS
The Portfolios measure performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance.
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all bond funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
The Portfolios' performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolios' SAI. This information may also be included in sales
literature and advertising.
The Portfolios' Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. For a
free copy contact the UAM Funds Service Center at the address or telephone
number listed on the cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Equity Portfolio will normally distribute substantially all of its net
investment income (for tax purposes) to shareholders in quarterly dividends.
The International Equity Portfolio will normally distribute substantially all
of its net investment income (for tax purposes) to shareholders in an annual
dividend. The Fixed Income Portfolio declares dividends daily and will nor-
mally distribute substantially all of its net investment income (for tax pur-
poses) to shareholders in monthly dividends. If any net capital gains are re-
alized, each Portfolio will normally distribute them annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of each Portfolio unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
26
<PAGE>
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal in-
come tax purposes and to meet all other requirements that are necessary for it
(but not its shareholders) to be exempt from federal taxes on income and gains
paid to shareholders in the form of dividends. To do this, each Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month will be treated as if they had been paid by the Fund and
received by the shareholders on December 31 of the same calendar year, pro-
vided that the dividends are paid before February of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Application or on a
separate form supplied by the Fund.
Dividends and interest received by each Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce each
Portfolio's dividends but are included in the taxable income reported on your
tax statement if each Portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
INVESTMENT ADVISER
Thompson, Siegel & Walmsley, Inc. is a Virginia corporation formed in 1969
and is located at 5000 Monument Avenue, Richmond, Virginia 23230. The Adviser
is a wholly-owned subsidiary of United Asset Management Corporation ("UAM")
and provides investment management services to corporations, pension and prof-
it-sharing plans, 401(k) and thrift plans, trusts, estates and other institu-
tions and individuals. As of the date of this Prospectus, the Adviser had over
$5.0 billion in
27
<PAGE>
assets under management. For further information on Thompson, Siegel &
Walmsley's investment services, please call (804) 353-4500.
The Thompson, Siegel & Walmsley, Inc. team of investment professionals is as
follows:
JOHN T. SIEGEL, CFA -- Managing Director -- Princeton University, B.A.,
1961; U.S. Navy, Officer, 1961-1965; University of Virginia Graduate School of
Business Administration, M.B.A., 1967; Chartered Financial Analyst; Chartered
Investment Counsel; Co-founder of Thompson, Siegel & Walmsley, Inc. in 1969.
MATTHEW G. THOMPSON, CFA -- Managing Director -- Washington & Lee Universi-
ty, B.S. Commerce, 1964; University of Virginia Graduate School of Business
Administration, M.B.A., 1966; Chartered Financial Analyst; Chartered Invest-
ment Counsel; Co-founder of Thompson, Siegel & Walmsley, Inc. in 1969.
JERRY W. JENKINS -- Senior Vice President -- Hampden-Sydney College, B.A.
Economics, 1967; National Graduate Trust School, Northwestern University,
1972; The Executive Program, The Darden School, University of Virginia, 1982;
Thompson, Siegel & Walmsley, Inc. 1993 -- Present.
HORACE P. WHITWORTH, II, CFA, CPA -- Vice President -- University of Virgin-
ia, B.S. Commerce, 1978; Chartered Financial Analyst; Chartered Investment
Counsel; Thompson, Siegel & Walmsley, Inc., 1986 -- Present.
PAUL A. FERWERDA, CFA -- Vice President -- Auburn University, B.S. Finance,
1979; Duke University, Fuqua School of Business, M.B.A., 1982; Chartered Fi-
nancial Analyst; Chartered Investment Counsel; Thompson, Siegel & Walmsley,
Inc., 1987 -- Present.
PETER D. HARTMAN, CFA -- Vice President -- University of North Carolina,
B.S. Business Administration, 1975; State University of New York, M.A., 1980;
Chartered Financial Analyst; Thompson, Siegel & Walmsley, Inc., 1991 -- Pres-
ent.
CHARLES A. GOMER, III -- Vice President -- University of North Carolina,
Chapel Hill, A.B., 1971; University of Richmond, M.S., 1978; Thompson, Siegel
& Walmsley, Inc. 1991 -- Present.
G.D. ROTHENBERG, CFA -- Vice President -- University of Virginia, B.A.,
1975; UCLA Graduate School of Management, M.B.A., 1979; Chartered Financial
Analyst; Chartered Investment Counsel; Thompson, Siegel & Walmsley, Inc.,
1992 -- Present.
ELIZABETH CABELL JENNINGS, CFA -- Vice President -- The College of William
and Mary, B.A. Economics, 1985; Chartered Financial Analyst; Chartered Invest-
ment Counsel; Thompson, Siegel & Walmsley, Inc., 1986 -- Present.
28
<PAGE>
ALAN C. ASHWORTH, CFA -- Vice President -- The College of William and Mary,
B.B.A. Management, 1985; Chartered Financial Analyst; Thompson, Siegel &
Walmsley, Inc., 1987 -- Present.
STUART R. DAVIES, CFA -- Vice President -- Birmingham-Southern College, B.S.
Chemistry/Economics, 1985; Virginia Commonwealth University, M.S. Finance,
1994; Chartered Financial Analyst; Chartered Investment Counsel; Thompson,
Siegel & Walmsley, Inc. 1992 -- Present.
JOHN G. JORDAN, III, CFA -- Portfolio Manager/Analyst -- University of Vir-
ginia, B.S., Commerce, 1990; Chartered Financial Analyst; Chartered Investment
Counsel; Thompson, Siegel & Walmsley, Inc., 1991 -- Present.
J. SHELTON HORSLEY, IV, Portfolio Manager/Analyst -- University of Virginia,
B.A., 1985; University of Virginia, M.B.A., 1991; Thompson, Siegel & Walmsley,
Inc., 1994 -- Present.
BRANDON H. HARRELL, CFA -- Portfolio Manager/Analyst -- Wake Forest Univer-
sity, B.A. Economics, 1982; George Mason University, M.B.A., 1990; Chartered
Financial Analyst; Thompson, Siegel & Walmsley, Inc., 1996 --Present.
Investment committees are primarily responsible for the day-to-day manage-
ment of the Equity Portfolio and the Fixed Income Portfolio. G.D. Rothenberg
and Stuart R. Davies are primarily responsible for the day-to-day management
of the International Equity Portfolio and have been since its inception in De-
cember of 1992. Prior to joining the Adviser in 1992, Mr. Davies served in the
capacities of Vice President, Portfolio Manager and Securities Analyst at Cap-
itoline Investment Services, Inc. Prior to joining the Adviser in 1992, Mr.
Rothenberg was involved in international investment management at Scudder,
Stevens & Clark, Inc.
Under Investment Advisory Agreements with the Fund dated as of November 25,
1991 and November 3, 1992, the Adviser manages the investment and reinvestment
of the assets of the Portfolios. The Adviser must adhere to the stated invest-
ment objectives and policies of the Portfolios, and is subject to the control
and supervision of the Fund's Board of Directors.
As compensation for its services as an Adviser, each Portfolio pays the Ad-
viser an annual fee, in monthly installments. The fee is calculated by apply-
ing the following annual percentage rates to each Portfolio's average daily
net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Equity Portfolio....................................................... 0.75%
International Equity Portfolio......................................... 1.00%
Fixed Income Portfolio................................................. 0.45%
</TABLE>
The Adviser may compensate its affiliated companies for referring investors
to the Portfolios. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing,
29
<PAGE>
shareholder servicing, record-keeping and/or other services performed with re-
spect to the Fund, a Portfolio or any Class of Shares of a Portfolio. Payments
made for any of these purposes may be made from its revenues, its profits or
any other source available to it. When such service arrangements are in effect,
they are made generally available to all qualified service providers.
The Distributor, the Adviser, and certain of their affiliates also partici-
pate, at the date of this prospectus, in an arrangement with Smith Barney Inc.
under which Smith Barney provides certain defined contribution plan marketing
and shareholder services of its Consulting Group and receives .15 of 1% of the
daily net asset value of Institutional Class Shares held by Smith Barney's eli-
gible customer accounts in addition to amounts payable to all selling dealers.
ADVISER'S HISTORICAL PERFORMANCE
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, policies
and strategies as those of the Equity Portfolio. The investment returns of the
Equity Portfolio may differ from those of the separately managed accounts be-
cause such separately managed accounts may have fees and expenses that differ
from those of the Equity Portfolio. Further, the separately managed accounts
are not subject to investment limitations, diversification requirements and
other restrictions imposed by the Investment Company Act of 1940 and Internal
Revenue Code; such conditions, if applicable, may have lowered the returns for
separately managed accounts. The results presented are not intended to predict
or suggest the return to be experienced by the Equity Portfolio or the return
an investor might achieve by investing in the Equity Portfolio.
THOMPSON, SIEGEL & WALMSLEY, INC. -- EQUITY COMPOSITE
(PERCENTAGE RETURNS OF NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
THOMPSON, SIEGEL &
ONE YEAR PERIOD THROUGH: WALMSLEY, INC. S&P 500
------------------------ ------------------ --------
<S> <C> <C>
9/30/90........................................ (3.00)% (9.40)%
9/30/91........................................ 28.90 % 31.00 %
9/30/92........................................ 12.70 % 11.00 %
9/30/93........................................ 14.50 % 13.00 %
9/30/94........................................ 4.40 % 3.70 %
9/30/95........................................ 20.50 % 29.80 %
9/30/96........................................ 19.50 % 20.30 %
Year to Date (1/1/96-9/30/96).................. 12.60 % 13.50 %
Annualized..................................... 13.49 % 13.39 %
Cumulative..................................... 142.55 % 141.06 %
Seven-Year Mean................................ 13.93 % 14.20 %
Value of $1 invested during 7 years (9/30/89-
9/30/96)..................................... $ 2.43 $ 2.41
</TABLE>
30
<PAGE>
Notes:
1. The ANNUALIZED RETURN is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods set
forth by the Association for Investment Management Research, the Bank Admin-
istration Institute, and the Investment Counsel Association of America. Mar-
ket Value of the account was the sum of the account's total assets, includ-
ing cash, cash equivalents, short term investments, and securities valued at
current market prices.
2. The CUMULATIVE RETURN means that $1 invested in the composite account on
September 30, 1989 had grown to $2.41 by September 30, 1996.
3. The SEVEN-YEAR MEAN is the arithmetic average of the annual returns for the
years listed.
4. The S&P 500 is an unmanaged index which assumes reinvestment of dividends
and is generally considered representative of securities similar to those
invested in by the Adviser for the purpose of the composite performance num-
bers set forth above.
5. The Adviser's average annual management fee over the period shown was 0.48%
or 48 basis points. During the period, fees on the Adviser's individual ac-
counts ranged from 1.0% to 0.20% (100 basis points to 20 basis points). Net
returns to investors vary depending on the management fee.
Below are certain performance data provided by the Adviser pertaining to the
composite of separately managed accounts of the Adviser that are managed with
substantially similar (although not necessarily identical) objectives, policies
and strategies as those of the Fixed Income Portfolio. The investment returns
of the Fixed Income Portfolio may differ from those of the separately managed
accounts because such separately managed accounts may have fees and expenses
that differ from those of the Fixed Income Portfolio. Further, the separately
managed accounts are not subject to investment limitations, diversification re-
quirements and other restrictions imposed by the Investment Company Act of 1940
and Internal Revenue Code; such conditions, if applicable, may have lowered the
returns for separately managed accounts. The results presented are not intended
to predict or suggest the return to be experienced by the Fixed Income Portfo-
lio or the return an investor might achieve by investing in the Fixed Income
Portfolio.
31
<PAGE>
THOMPSON, SIEGEL & WALMSLEY, INC. -- FIXED INCOME COMPOSITE
(PERCENTAGE RETURNS OF NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
THOMPSON, SIEGEL & GOVERNMENT/
ONE YEAR PERIOD THROUGH: WALMSLEY, INC. CORPORATE INDEX
------------------------ ------------------ ---------------
<S> <C> <C>
9/30/90................................. 6.50 % 6.80 %
9/30/91................................. 16.90 % 15.90 %
9/30/92................................. 14.50 % 13.20 %
9/30/93................................. 10.50 % 11.40 %
9/30/94................................. (4.00)% (4.20)%
9/30/95................................. 13.90 % 14.30 %
9/30/96................................. 4.50 % 4.50 %
Year to Date (1/1/96-9/30/96)........... .10 % .10 %
Annualized.............................. 8.76 % 8.64 %
Cumulative.............................. 79.99 % 78.61 %
Seven-Year Mean......................... 8.97 % 8.840%
Value of $1 invested during 7 years
(9/30/89-9/30/96)..................... $1.80 $1.79
</TABLE>
Notes:
1. The ANNUALIZED RETURN is calculated from monthly data, allowing for com-
pounding. The formula used is in accordance with the acceptable methods set
forth by the Association for Investment Management Research, the Bank Ad-
ministration institute, and the Investment Counsel Association of America.
Market Value of the account was the sum of the account's total assets, in-
cluding cash, cash equivalents, short term investments, and securities val-
ued at current market prices.
2. The CUMULATIVE RETURN means that $1 invested in the composite account on
September 30, 1989 had grown to $2.41 by September 30, 1996.
3. The SEVEN-YEAR MEAN is the arithmetic average of the annual returns for the
years listed.
4. The LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX is an unmanaged index which
assumes reinvestment of dividends and is generally considered representa-
tive of securities similar to those invested in by the Adviser for the pur-
pose of the composite performance numbers set forth above.
5. The Adviser's average annual management fee over the period shown was 0.50%
or 50 basis points. During the period, fees on the Adviser's individual ac-
counts ranged from 1.0% to 0.20% (100 basis points to 20 basis points). Net
returns to investors vary depending on the management fee.
32
<PAGE>
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministrative, fund accounting, dividend disbursing and transfer agent services
provided to the Fund and its Portfolios. UAMFSI's principal office is located
at 211 Congress Street, Boston, MA 02110. UAMFSI has subcontracted some of
these services to Chase Global Funds Services Company ("CGFSC"), an affiliate
of The Chase Manhattan Bank, by a Mutual Funds Service Agreement dated April
15, 1996. CGFSC is located at 73 Tremont Street, Boston, MA 02108.
The Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC. The Portfolio specific fees are the following percentages of
aggregate net assets:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Equity Portfolio....................................................... 0.06%
International Equity Portfolio......................................... 0.06%
Fixed Income Portfolio................................................. 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11 of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than
$3 billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative as-
sets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of United Asset Man-
agement Corporation, with its principal office located at 211 Congress Street,
Boston, Massachusetts 02110, distributes the shares of the Fund. Under the
Fund's Distribution Agreement (the "Agreement"), the Distributor, as agent for
the Fund, agrees to use its best efforts as sole distributor of Fund shares.
The Distributor does not receive any fee or other compensation under the
Agreement with respect to the Portfolios included in this Prospectus. The
Agreement continues in effect so long as it is approved at least annually by
the Fund's Board of Directors. Those approving the Agreement must include a
majority of Directors who are neither parties to
33
<PAGE>
such Agreement nor interested persons of any such party. The Agreement pro-
vides that the Fund will bear the costs of the registration of its shares with
the SEC and various states and the printing of its prospectuses, its SAIs and
its reports to shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for
each Portfolio. The Agreements direct the Adviser to use its best efforts to
obtain the best available price and most favorable execution for all transac-
tions of the Portfolios. If consistent with the interests of the Portfolios,
the Adviser may select brokers on the basis of research, statistical and pric-
ing services these brokers provide to the Portfolios in addition to required
Adviser services. Such brokers may be paid a higher commission than that which
another qualified broker would have charged for effecting the same transac-
tion, provided that such commissions are paid in compliance with the Securi-
ties Exchange Act of 1934, as amended, and that the Adviser determines in good
faith that the commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Portfolios and the Adviser's
other clients. Although not a typical practice, the Adviser may place portfo-
lio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of a Portfolio and one or more other clients served by the Adviser is
considering a purchase at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser. Although there is no specified formula for al-
locating such transactions, allocations are subject to periodic review by the
Fund's Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on October 11, 1988 under
the name "ICM Fund, Inc." On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as
amended, permit the Directors to issue three billion shares of common stock,
with an $.001 par value. The Directors have the power to designate one or more
series or classes of shares of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios, without further action by
shareholders. The Board of Directors may create additional Portfolios and
Classes of shares at its discretion.
The shares of each Portfolio and Class of the Fund are fully paid and nonas-
sessable, have no preference as to conversion, exchange, dividends, retirement
or
34
<PAGE>
other features and have no pre-emptive rights. They have non-cumulative voting
rights which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors. A shareholder is
entitled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his name on the books of the Fund.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Directors will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank is Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number listed on the cover of this Prospectus.
LITIGATION
The Fund is not involved in any litigation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
35
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
DSI Balanced Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
IRC Enhanced Index Portfolio
Jacobs International Octagon Portfolio
MJI International Equity Portfolio
Newbold's Equity Portfolio
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
36
<PAGE>
Rice, Hall James Small Cap Portfolio
Rice, Hall James Small/Mid Cap Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SAMI Preferred Stock Income Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
37
<PAGE>
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
1-800-638-7983
Investment Adviser
Thompson, Siegel & Walmsley, Inc.
5000 Monument Avenue
Richmond, VA 23230
(804) 353-4500
Distributor
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, MA 02110
PROSPECTUS
January 3, 1997
<PAGE>
APPLICATION INSTITUTIONAL CLASS SHARES
UAM FUNDS
REGULAR MAIL: UAM Funds P.O. Box 2798 Boston, MA 02208-2798
Express Mail: UAM Funds 73 Tremont Street, 9th Floor Boston,
MA 02108-3913
FOR HELP WITH THIS APPLICATION, OR FOR MORE INFORMATION, CALL US TOLL FREE: 1-
800-638-7983.
Distributed by UAM Fund Distributors, Inc.
BEFORE YOU COMPLETE THE APPLICATION, PLEASE BE SURE TO READ THE INSTRUCTIONS
ON THE REVERSE SIDE.
1YOUR ACCOUNT REGISTRATION (Check one box.)
[_]
Individual or Joint Account
------------------------------
Owner's Name: First, Initial, Last
- -
------------------
Owner's Social Security Number
------------------------------
Joint Owner's Name: First, Initial, Last
- -
------------------
Joint Owner's Social Security Number
Joint accounts will be registered joint tenants with right of survivorship
unless otherwise indicated.
[_] Trust [_] Exempt [_] Non-Exempt [_] Qualified Plan
------------------------------
Trustee(s)' Name
------------------------------
Name of Trust Agreement
------------------------------
Beneficiary's Name
-
---------------
Taxpayer's ID -------------
Date of Trust Agreement
[_]
Corporation, Partnership or Other Entity
Type: [_] Corp.
[_] Partnership [_] Other
------------------------------
Name of Corp. or Other Entity
-
[_] Exempt[_] Non-
--------------- Exempt
Taxpayer ID Number
A Corporate Resolution Form is required.
2ADDRESS
------------------------------
Street or P.O. Box Number
------------------------------
City State Zip Code
( ) ( )
-------------- --------------
Daytime Phone Evening Phone
Citizenship: --------
[_] U.S.
[_] Resident-
Alien
[_] Non-
Resident
Alien
Specify Country
3INVESTMENT
Fill in the name of the Portfolio EXACTLY AS IT APPEARS ON THE FRONT OF THE
PROSPECTUS.
_______________________ $______
_______________________ $______
TOTAL $______
4METHOD OF PAYMENT
A.[_] Check (payable to UAM Funds) An Account No. will be assigned.
B.[_] This application confirms my prior wire purchase on (date): _____________
I was assigned the following wire reference control number:____________________
- -------------------------------------------------------------------------------
5DISTRIBUTIONS
Unless otherwise instructed, all distributions will be reinvested in
additional shares.
<TABLE>
<S> <C> <C>
All dividends
are to be [_] reinvested [_] paid in cash
All capital
gains are to be [_] reinvested [_] paid in cash
</TABLE>
6TELEPHONE REDEMPTION AND EXCHANGE
I/We authorize Chase Global Funds Services Company to honor any request(s)
believed to be authentic for the following:
[_] Telephone Exchange
[_] Telephone Redemption
[_] a. Mail proceeds to name and address in which account is registered.
[_] b. Wire redemption proceeds to bank indicated below.
A VOIDED CHECK OR DEPOSIT SLIP MUST BE ATTACHED.
- -------------------------------------------------------------------------------
Bank Name
- -------------------------------------------------------------------------------
Bank Address
- ------------------ ( )
Account Number -----------------------------------------------------------
Bank Phone
- -------------------------------------------------------------------------------
Name(s) in which Account is Registered
- -------------------------------------------------------------------------------
Bank Transit Routing Number (ABA #)
7OPTIONAL INFORMATION
- -------------------------------------------------------------------------------
Owner's Occupation Owner's Date of
Birth
- -------------------------------------------------------------------------------
Employer's Name
- -------------------------------------------------------------------------------
Employer's Address
- -------------------------------------------------------------------------------
Joint Owner's Occupation Joint
Owner's Date of Birth
- -------------------------------------------------------------------------------
Joint Owner's Employer's Name
- -------------------------------------------------------------------------------
Joint Owner's Employer's Address
8SIGNATURE(S)
I/We have full authority and legal capacity to purchase Fund shares.
I/We have received the current Prospectus of the Portfolio(s) and agree to
be bound by its (their) terms.
UNDER PENALTY OF PERJURY, I/WE ALSO
CERTIFY THAT --
A. THE NUMBER SHOWN ON THIS FORM IS
A CORRECT TAXPAYER ID NUMBER OR
SOCIAL SECURITY NUMBER.
B. I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE (I) I HAVE
NOT BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE THAT I
AM SUBJECT TO BACKUP WITHHOLDING
AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR
DIVIDENDS, OR (II) THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
(CROSS OUT ITEM "B" IF YOU HAVE
BEEN NOTIFIED BY THE IRS THAT
YOU ARE SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR
DIVIDENDS ON YOUR TAX RETURN.)
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
- ------------------------- ----------
Signature (Owner, Trustee, etc.)
Date
- ------------------------- ----------
Signature (Joint Owner, Co-trustee, etc.)
Date
9INTERESTED PARTY/BROKER-DEALER
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address City State Zip Code
UAM Funds Service Center
<PAGE>
APPLICATION INSTITUTIONAL SERVICE CLASS SHARES
UAM FUNDS
REGULAR MAIL: UAM Funds P.O. Box 2798 Boston, MA 02208-2798
Express Mail: UAM Funds 73 Tremont Street, 9th Floor Boston,
MA 02108-3913
FOR HELP WITH THIS APPLICATION, OR FOR MORE INFORMATION, CALL US TOLL FREE: 1-
800-638-7983.
Distributed by UAM Fund Distributors, Inc.
BEFORE YOU COMPLETE THE APPLICATION, PLEASE BE SURE TO READ THE INSTRUCTIONS
ON THE REVERSE SIDE.
1YOUR ACCOUNT REGISTRATION (Check one box.)
[_]
Individual or Joint Account
------------------------------
Owner's Name: First, Initial, Last
- -
------------------
Owner's Social Security Number
------------------------------
Joint Owner's Name: First, Initial, Last
- -
------------------
Joint Owner's Social Security Number
Joint accounts will be registered joint tenants with right of survivorship
unless otherwise indicated.
[_] Trust [_] Exempt [_] Non-Exempt [_] Qualified Plan
------------------------------
Trustee(s)' Name
------------------------------
Name of Trust Agreement
------------------------------
Beneficiary's Name
-
---------------
Taxpayer's ID -------------
Date of Trust Agreement
[_]
Corporation, Partnership or Other Entity
Type: [_] Corp.
[_] Partnership [_] Other
------------------------------
Name of Corp. or Other Entity
-
[_] Exempt[_] Non-
--------------- Exempt
Taxpayer ID Number
A Corporate Resolution Form is required.
2ADDRESS
------------------------------
Street or P.O. Box Number
------------------------------
City State Zip Code
( ) ( )
-------------- --------------
Daytime Phone Evening Phone
Citizenship: --------
[_] U.S.
[_] Resident-
Alien
[_] Non-
Resident
Alien
Specify Country
3INVESTMENT
Fill in the name of the Portfolio EXACTLY AS IT APPEARS ON THE FRONT OF THE
PROSPECTUS.
_______________________ $______
_______________________ $______
TOTAL $______
4METHOD OF PAYMENT
A.[_] Check (payable to UAM Funds) An Account No. will be assigned.
B.[_] This application confirms my prior wire purchase on (date): _____________
I was assigned the following wire reference control number:____________________
- -------------------------------------------------------------------------------
5DISTRIBUTIONS
Unless otherwise instructed, all distributions will be reinvested in
additional shares.
<TABLE>
<S> <C> <C>
All dividends
are to be [_] reinvested [_] paid in cash
All capital
gains are to be [_] reinvested [_] paid in cash
</TABLE>
6TELEPHONE REDEMPTION AND EXCHANGE
I/We authorize Chase Global Funds Services Company to honor any request(s)
believed to be authentic for the following:
[_] Telephone Exchange
[_] Telephone Redemption
[_] a. Mail proceeds to name and address in which account is registered.
[_] b. Wire redemption proceeds to bank indicated below.
A VOIDED CHECK OR DEPOSIT SLIP MUST BE ATTACHED.
- -------------------------------------------------------------------------------
Bank Name
- -------------------------------------------------------------------------------
Bank Address
- ------------------ ( )
Account Number -----------------------------------------------------------
Bank Phone
- -------------------------------------------------------------------------------
Name(s) in which Account is Registered
- -------------------------------------------------------------------------------
Bank Transit Routing Number (ABA #)
7OPTIONAL INFORMATION
- -------------------------------------------------------------------------------
Owner's Occupation Owner's Date of
Birth
- -------------------------------------------------------------------------------
Employer's Name
- -------------------------------------------------------------------------------
Employer's Address
- -------------------------------------------------------------------------------
Joint Owner's Occupation Joint
Owner's Date of Birth
- -------------------------------------------------------------------------------
Joint Owner's Employer's Name
- -------------------------------------------------------------------------------
Joint Owner's Employer's Address
8SIGNATURE(S)
I/We have full authority and legal capacity to purchase Fund shares.
I/We have received the current Prospectus of the Portfolio(s) and agree to
be bound by its (their) terms.
UNDER PENALTY OF PERJURY, I/WE ALSO
CERTIFY THAT --
A. THE NUMBER SHOWN ON THIS FORM IS
A CORRECT TAXPAYER ID NUMBER OR
SOCIAL SECURITY NUMBER.
B. I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE (I) I HAVE
NOT BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE THAT I
AM SUBJECT TO BACKUP WITHHOLDING
AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR
DIVIDENDS, OR (II) THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
(CROSS OUT ITEM "B" IF YOU HAVE
BEEN NOTIFIED BY THE IRS THAT
YOU ARE SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR
DIVIDENDS ON YOUR TAX RETURN.)
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
- ------------------------- ----------
Signature (Owner, Trustee, etc.)
Date
- ------------------------- ----------
Signature (Joint Owner, Co-trustee, etc.)
Date
9INTERESTED PARTY/BROKER-DEALER
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address City State Zip Code
UAM Funds Service Center
<PAGE>
APPLICATION INSTRUCTIONS
- --------------------------------------------------------------------------------
IF YOU NEED ASSISTANCE, A REPRESENTATIVE OF UAM FUNDS WILL BE PLEASED TO HELP
YOU. OUR TOLL-FREE NUMBER IS 1-800-638-7983.
- --------------------------------------------------------------------------------
NEW ACCOUNT APPLICATION. An account can be registered as only one of the
1 following:
Supply the Social Security Number of the registered account
owner who is to be taxed.
. individual . joint tenants
. a trust Supply the Taxpayer Identification Number of the legal entity
. a or organization that will report income and/or capital gains.
corporation,
partnership,
organization,
fiduciary
Please check the box that corresponds with the type of account you are opening
and fill in the required information exactly as you wish it to appear on the
account.
Redemption Authorizations. Corporations, other organizations, trusts and fidu-
ciaries will be required to furnish additional paperwork to authorize redemp-
tions. Call a representative of UAM Funds at 1-800-638-7983 for more informa-
tion.
2 Your Mailing Address. Please be sure to provide us with the address at
which you wish to receive your mail.
Your Investment. Please be sure to indicate the total amount invested. For
3 more than two investments, please attach a separate sheet or an additional
application.
Establishing Your Account.
4 A. Section 4A lets you open your account by check. Your check(s) should be
made payable to UAM Funds. Be sure to enclose your check(s) with this ap-
plication.
B. If you are confirming a new Fund purchase previously made by wire, be
sure to fill in Section 4B and provide the wire reference control number
you were assigned at the time of this purchase. A completed application
must follow all wire purchases.
All applications are subject to acceptance by UAM Funds.
Receiving Your Dividends and Capital Gains. Check the distribution option
5 you prefer. If you do not select an option, all dividends and capital
gains will be reinvested in your account.
Telephone Redemption and Exchange. Telephone redemption proceeds mailed to
6 a shareholder will be sent only to the address listed on the account. The
Funds' bank wire feature is available for redeeming out of your Fund ac-
count to your bank account. Be sure to check with your bank for proper
wiring instructions. The Funds require the transit/routing number of your
bank or its correspondent if your bank is unable to receive wires direct-
ly. Please complete Section 6 to add the bank wire feature.
Telephone exchanges may be made only if a Fund holds all share certifi-
cates and if the registration of the two accounts will be identical.
7 Employment Information. It is required by the National Association of Se-
curities Dealers, Inc. to request this information.
8 Your Signature(s). Please be sure to sign this application. If the account
is registered in the name of:
.an individual, the individual should sign
.joint tenants, both should sign
.a trust or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity)
.a corporation or other organization, an officer should sign (please indi-
cate corporate office or title)
9 Interested Party/Broker-Dealer. In addition to the account statement sent
to your registered address, you may also have a monthly consolidated
statement mailed to up to ten (10) interested parties. You may add a sheet
with additional interested party names and addresses. This section should
also be completed if you are investing through a Broker-Dealer.
--IMPORTANT--
REGULAR MAIL: UAM Funds P.O. Box 2798 Boston, MA 02208-2798
EXPRESS MAIL: UAM Funds 73 Tremont Street, 9th Floor Boston, MA 02108-3913
MORE QUESTIONS? Call a representative of UAM Funds at 1-800-638-7983.
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UAM FUNDS, INC.
(FORMERLY THE REGIS FUND, INC.)
POST-EFFECTIVE AMENDMENT NO. 43
PART B
The following Statements of Additional Information are included in this Post-
Effective Amendment No. 43:
. Acadian Portfolios Institutional Class Shares
. C & B Equity, C & B Balanced, C & B Equity for Taxable Investors, and
C & B Mid Cap Equity Portfolios Institutional Class Shares
. DSI Portfolios Institutional Class Shares and DSI Disciplined Value
Portfolio Institutional Service Class Shares
. FMA Small Company Portfolio Institutional Class Shares and
Institutional Service Class Shares
. ICM Fixed Income Portfolio Institutional Class Shares
. ICM Equity and ICM Small Company Portfolios Institutional Class Shares
. McKee Portfolios Institutional Class Shares
. NWQ Portfolios Institutional Class Shares and Institutional Service
Class Shares
. Rice, Hall, James Portfolios Institutional Class Shares
. SAMI Preferred Stock Income Portfolio Institutional Class Shares
. Sirach Portfolios Institutional Class Shares and Sirach Strategic
Balanced, Growth, Special Equity and Equity Portfolios Institutional
Service Class Shares
. Sterling Partners' Portfolios Institutional Class Shares and
Institutional Service Class Shares
. TS&W Portfolios Institutional Class Shares
The following Statement of Additional Information is also incorporated herein by
reference to Post-Effective Amendment No. 25 filed on December 23, 1993:
. Cambiar Anticipation Portfolio Institutional Class Shares (This
Portfolio and class of shares is not yet operational.)
The following Statement of Additional Information is also incorporated herein
by reference to Post-Effective Amendment No. 21 filed on August 30, 1993:
. HJMC Equity Portfolio Institutional Class Shares (This Portfolio and
class of shares is not yet operational.)
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PART B
UAM FUNDS
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ACADIAN PORTFOLIOS
INSTITUTIONAL CLASS SHARES
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STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
Acadian Portfolios dated January 3, 1997. To obtain a Prospectus, please call
the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
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PAGE
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Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 14
Redemption of Shares....................................................... 15
Shareholder Services....................................................... 16
Investment Limitations..................................................... 17
Management of the Fund..................................................... 19
Investment Adviser......................................................... 22
Portfolio Transactions..................................................... 24
Administrative Services.................................................... 24
Performance Calculations................................................... 25
General Information........................................................ 28
Appendix -- Description of Securities and Ratings.......................... A-1
Financial Statements.......................................................
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INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Acadian Emerging Markets and Acadian International Equity Portfolios (the
"Acadian Portfolios") as set forth in the Acadian Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable de-
posits maintained in a banking institution for a specified period of time
at a stated interest rate. Time deposits maturing in more than seven days
will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calendar days will not exceed 10% of the total
assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other
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currencies, (ii) in the case of U.S. banks, it is a member of the Federal De-
posit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, issued by a corporation having an outstanding unsecured
debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of
the U.S. Government and differ mainly in interest rates, maturities and
dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. These include securities
issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Ad-
ministration, Federal Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennes-
see Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
HEDGING STRATEGIES
Each Portfolio may engage in various portfolio strategies to hedge against
adverse movements in the equity, debt and currency markets. Each Portfolio has
authority to write (i.e., sell) covered put and call options on its portfolio
securities, purchase put and call options on securities and engage in transac-
tions in stock index options and stock index futures, and related options on
such futures. Each of these portfolio strategies is described below. Although
certain risks are involved in options and futures transactions, the Adviser
believes that, because the Portfolios will engage in options and futures
transactions only for hedging purposes, the options and futures portfolio
strategies of a Portfolio will not subject it to the risks frequently associ-
ated with the speculative use of options and futures transactions. While each
Portfolio's use of hedging strategies is intended to reduce the volatility of
the net asset value of Portfolio shares, the Portfolios' net asset value will
fluctuate. There can be no assurance that a Portfolio's hedging transactions
will be effective. Also, the Portfolios may not necessarily be engaging in
hedging activities when movements in any particular equity, debt or currency
market occur.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Portfolios may be affected favor-
ably or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the Portfolios may incur costs in connection with
conversions
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between various currencies. The Portfolios will conduct their foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract involves an obligation to purchase or sell a spe-
cific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market con-
ducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and
no commissions are charged at any stage for such trades.
The Portfolios may enter into forward foreign currency exchange contracts in
several circumstances. When a Portfolio enters into a contract for the pur-
chase or sale of a security denominated in a foreign currency, or when a Port-
folio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Portfolio may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for a fixed amount of dollars, for the purchase or sale of the amount
of foreign currency involved in the underlying transactions, the Portfolio
will be able to protect itself against a possible loss resulting from an ad-
verse change in the relationship between the U.S. dollar and the subject for-
eign currency during the period between the date on which the security is pur-
chased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received.
Additionally, when either of the Portfolios anticipates that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
such Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities in-
volved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the
value of these securities between the date on which the forward contract is
entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. From time to time, each Port-
folio may enter into forward contracts to protect the value of portfolio secu-
rities and enhance Portfolio performance. The Portfolios will not enter into
such forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate such Portfolio to deliver an
amount of foreign currency in excess of the value of such Portfolio securities
or other assets denominated in that currency.
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Under normal circumstances, consideration of the prospect for currency pari-
ties will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward con-
tracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. Except when a Portfolio enters into a for-
ward contract for the purchase or sale of a security denominated in a foreign
currency, which requires no segregation, a forward contract which obligates
the Portfolio to buy or sell currency will generally require the Fund's Custo-
dian to hold an amount of that currency or liquid securities denominated in
that currency equal to the Portfolio's obligations, or to segregate liquid
high grade assets equal to the amount of the Portfolio's obligation. If the
value of the segregated assets declines, additional liquid high grade assets
will be segregated on a daily basis so that the value of the segregated assets
will be equal to the amount of such Portfolio's commitments with respect to
such contracts.
The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio
may either sell the portfolio security and make delivery of the foreign cur-
rency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with
the same currency trader obligating it to purchase, on the same maturity date,
the same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Portfolio
is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters
into an offsetting contract for the purchase of the foreign currency, such
Portfolio will realize a gain to the extent that the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to pur-
chase. Should forward prices increase, such Portfolio would suffer a loss to
the extent that the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
Each of the Portfolios' dealings in forward foreign currency exchange con-
tracts will be limited to the transactions described above. Of course, the
Portfolios are not required to enter into such transactions with regard to
their foreign
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currency-denominated securities. It also should be realized that this method
of protecting the value of portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange which one can achieve at
some future point in time. Additionally, although such contracts tend to mini-
mize the risk of loss due to a decline in the value of the hedged currency, at
the same time, they tend to limit any potential gain which might result should
the value of such currency increase.
FUTURES CONTRACTS
Each Portfolio may enter into futures contracts for the purposes of hedging,
remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act
by the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agen-
cy.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Portfolio ex-
pects to earn interest income on its margin deposits.
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Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. The Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of each Portfolio. Each Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As evi-
dence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed," that is, equivalent
amounts of related securities will have been purchased or are being purchased
by the Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While a Portfolio will incur commission expenses in both opening and
closing out future positions, these costs are lower than transaction costs in-
curred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolios will not enter into futures contract transactions to the ex-
tent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. In addi-
tion, the Portfolios will not enter into futures contracts to the extent that
its outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolios will minimize the risk that they will be unable to close out
a futures position by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
each Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if a Portfolio has insuffi-
cient cash, it may have to sell securities to meet daily margin requirements
at a time when it may be disadvanta-
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geous to do so. In addition, a Portfolio may be required to make delivery of
the instruments underlying futures contracts it holds. The inability to close
futures positions also could have an adverse impact on a Portfolio's ability
to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in excess of
the amount invested in the contract. However, because the futures strategies
of the Portfolios are engaged in only for hedging purposes, the Adviser does
not believe that a Portfolio is subject to the risks of loss frequently asso-
ciated with futures transactions. A Portfolio would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying the futures con-
tracts have different maturities than the Portfolio securities being hedged.
It is also possible that a Portfolio could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss of margin deposits in the event of bankruptcy of a broker with
whom a Portfolio has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and, therefore, does not
limit potential losses because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
OPTIONS
The Portfolios may purchase and sell put and call options on futures con-
tracts for hedging purposes. Investments in options involve some of the same
considera-
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tions that are involved in connection with investments in futures contracts
(e.g., the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
security or contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract or securities.
WRITING COVERED OPTIONS
The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on
the securities alone. By writing covered call options, each Portfolio gives up
the opportunity, while the option is in effect, to profit from any price in-
crease in the underlying security above the option exercise price. In addi-
tion, each Portfolio's ability to sell the underlying security will be limited
while the option is in effect unless the Portfolio effects a closing purchase
transaction. A closing purchase transaction cancels out the Portfolio's posi-
tion as the writer of an option by means of an offsetting purchase of an iden-
tical option prior to the expiration of the option it has written. Covered
call options serve as a partial hedge against the price of the underlying se-
curity declining.
Each Portfolio writes only covered put options, which means that so long as
a Portfolio is obligated as the writer of the option it will, through its cus-
todian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt or equity securities denominated in
U.S. dollars or non-U.S. currencies with a securities depository with a value
equal to or greater than the exercise price of the underlying securities. By
writing a put, a Portfolio will be obligated to purchase the underlying secu-
rity at a price that may be higher than the market value of that security at
the time of exercise for as long as the option is outstanding. Each Portfolio
may engage in closing transactions in order to terminate put options that it
has written.
PURCHASING OPTIONS
The amount of any appreciation in the value of the underlying security will
be partially offset by the amount of the premium paid for the put option and
any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and profit or loss from the sale will de-
pend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs. A closing sale transaction
cancels out a Portfolio's position as the purchaser of an option by means of
an offsetting sale of an identical option prior to the expiration of the op-
tion it has purchased. In certain circumstances, a Portfolio may purchase call
options on securities held in its investment port-
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folio on which it has written call options or on securities which it intends
to purchase.
OPTIONS ON FOREIGN CURRENCIES
The Portfolios may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a de-
cline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminution in the value of portfolio securities, a Portfolio may purchase
put options on the foreign currency. If the value of the currency does de-
cline, the Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securi-
ties to be acquired are denominated is projected, thereby increasing the cost
of such securities, a Portfolio may purchase call options thereon. The pur-
chase of such options could offset, at least partially, the effects of the ad-
verse movements in exchange rates. As in the case of other types of options,
however, the benefit to a Portfolio deriving from purchases of foreign cur-
rency options will be reduced by the amount of the premium and related trans-
action costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, a Portfolio could sustain losses on
transaction in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
Each Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse fluctu-
ations in exchange rates it could, instead of purchasing a put option, write a
call option on the relevant currency. If the anticipated decline occurs, the
option will most likely not be exercised, and the diminution in value of port-
folio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an antici-
pated increase in the dollar cost of securities to be acquired, a Portfolio
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Portfolio to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will con-
stitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Portfolio would be required to purchase or sell the un-
derlying currency at a loss which may not be offset by the amount of the pre-
mium. Through the writing of options on foreign currencies, a
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Portfolio also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements in exchange
rates.
Each Portfolio intends to write covered call options on foreign currencies.
A call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without addi-
tional cash consideration (or for additional cash consideration held in a seg-
regated account by the Custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call option is also covered if a Portfolio
has a call on the same foreign currency and in the same principal amount as
the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the
Portfolio in cash, U.S. Government securities or other high grade liquid debt
securities in a segregated account with the Custodian.
Each Portfolio also intends to write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign cur-
rency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which
a Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate.
In such circumstances, a Portfolio collateralized the option by maintaining in
a segregated account with the Custodian, cash or U.S. Government securities or
other high grade liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to market daily.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on con-
tract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although for-
eign currency options are also traded on certain national securities ex-
changes, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to the regulation of the Commission. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading en-
vironment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over
a period of time. Although the purchase of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial invest-
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ments, due to the margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corpo-
ration ("OCC"), thereby reducing the risk of counterparty default. Further-
more, a liquid secondary market in options traded on a national securities ex-
change may be more readily available than in the over-the-counter market, po-
tentially permitting a Portfolio to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market de-
scribed above, as well as the risks regarding adverse market movements, mar-
gining of options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effect of other political and
economic events. In addition, exchange-traded options of foreign currencies
involve certain risks not presented by the over-the- counter market. For exam-
ple, exercise and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in applicable foreign
countries for this purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the orderly settle-
ment of foreign currency option exercises, or would result in undue burdens on
the OCC or its clearing member, impose special procedures on exercise and set-
tlement, such as technical changes in the mechanics of delivery of currency,
the fixing of dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward con-
tracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Portfo-
lio's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different exer-
cise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging transac-
tions, each Portfolio is required for Federal income tax purposes to recognize
as income
12
<PAGE>
for each taxable year its net unrealized gains and losses on forward currency
and regulated futures contracts as of the end of each taxable year as well as
those actually realized during the year. In most cases, any such gain or loss
recognized with respect to a regulated futures contract is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss
without regard to the holding period of the contract. Realized gain or loss
attributable to a foreign currency forward contract is treated as 100% ordi-
nary income. Furthermore, foreign currency futures contracts which are in-
tended to hedge against a change in the value of securities held by a Portfo-
lio may affect the holding period of such securities and, consequently, the
nature of the gain or loss on such securities upon disposition.
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of each Portfolio's gross income
for a taxable year must be derived from certain qualifying income, i.e., divi-
dends, interest, income derived from loans of securities and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business investing in stock, securities or curren-
cies. Any net gain realized from the closing out of futures contracts will,
therefore, generally be qualifying income for purposes of the 90% requirement.
Qualification as a regulated investment company also requires that less than
30% of a Portfolio's gross income be derived from the sale or other disposi-
tion of stock, securities, options, futures or forward contracts (including
certain foreign currencies not directly related to the Fund's business of in-
vesting in stock or securities) held less than three months. In order to avoid
realizing excessive gains on securities held for less than three months, a
Portfolio may be required to defer the closing out of futures contracts beyond
the time when it would otherwise be advantageous to do so. It is anticipated
that unrealized gains on futures contracts which have been open for less than
three months as of the end of a Portfolio's taxable year, and which are recog-
nized for tax purposes, will not be considered gains on securities held for
less than three months for the purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's taxable year) on futures trans-
actions. Such distribution will be combined with distributions of capital
gains realized on a Portfolio's other investments, and shareholders will be
advised on the nature of the payment.
SWAP CONTRACTS
Each Portfolio may enter into Swap Contracts. A swap is an agreement to ex-
change the return generated by one instrument for the return generated by an-
other instrument. The payment streams are calculated by reference to a speci-
fied
13
<PAGE>
index and agreed upon notional amount. The term "specified index" includes
fixed interest rates, total return on interest rate indices, fixed income in-
dices, and stock indices (as well as amounts derived from arithmetic opera-
tions on these indices). For example, a Portfolio may agree to swap the return
generated by a fixed-income index for the return generated by a second fixed-
income index.
The Portfolios will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with a Portfolio receiving or paying, as
the case may be, only the net amount of the two payments. A Portfolio's obli-
gations under a swap agreement will be accrued daily (offset against any
amounts owing to the Portfolio) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities, or high grade debt obliga-
tions, to avoid any potential leveraging of the Portfolio. Since swaps will be
entered into for good faith hedging purposes, the Adviser and the Fund believe
such obligations do not constitute "senior securities" under the Investment
Company Act of 1940 and, accordingly, will not treat them as being subject to
its borrowing restrictions.
Swaps do not involve the delivery of securities, other underlying assets, or
principal. Accordingly, the risk of loss with respect to swaps is limited to
the net amount of payments that a Portfolio is contractually obligated to
make. If the other party to a swap defaults, a Portfolio's risk of loss con-
sists of the net amount of interest payments that a Portfolio is contractually
entitled to receive. If there is a default by the counterparty, the Portfolios
may have contractual remedies pursuant to the agreements related to the trans-
action. The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap market
has become relatively liquid.
The use of swaps may involve investment techniques and risks different from
those associated with other portfolio transactions. If the Adviser is incor-
rect in its forecast of market values, interest rates and other applicable
factors, the investment performance of the Portfolio would diminish compared
to what it would have been if this investment technique was never used.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required for each Portfolio is $100,000 with certain excep-
tions as may be determined from time to time by the officers of the Fund. An
order received in proper form prior to the 4:00 p.m. Eastern Time (ET) close
of the New York Stock Exchange (the "Exchange") will be executed at the price
computed
14
<PAGE>
on the date of receipt; and an order received not in proper form or after the
4:00 p.m. close of the Exchange will be executed at the price computed on the
next day the Exchange is open after proper receipt. The Exchange will be
closed on the following days: President's Day, February 17, 1997; Good Friday,
March 28 1997; Memorial Day, May 26, 1997; Independence Day, July 4, 1997; La-
bor Day, September 1, 1997; Thanksgiving Day, November 27, 1997; Christmas
Day, December 25, 1997; and New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid, in whole or in part, in investment securities or in cash as the Direc-
tors may deem advisable; however, payment will be made wholly in cash unless
the Directors believe that economic or market conditions exist which would
make such a practice detrimental to the best interests of the Fund. If redemp-
tions are paid in investment securities, such securities will be valued as set
forth in the Prospectus under "Valuation of Shares", and a redeeming share-
holder would normally incur brokerage expenses if these securities were con-
verted to cash.
No charge is made by the Portfolios for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolios.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
("CGFSC") from fraud, signature guarantees are required for certain redemp-
tions. Signature guarantees are required for (1) redemptions where the pro-
ceeds are to be
15
<PAGE>
sent to someone other than the registered shareowner(s) or the registered ad-
dress or (2) share transfer requests. The purpose of signature guarantees is
to verify the identity of the party who has authorized a redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institution is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Serv-
ices" in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each Acadian Portfolio may be exchanged for
Institutional Class Shares of the other Acadian Portfolio. In addition, Insti-
tutional Class Shares of each Acadian Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds --Institutional Class Shares at the end of the Prospectus.) Exchange
requests should be made by calling the Fund (1-800-638-7983) or by writing to
UAM Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company,
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only available
with respect to Portfolios that are qualified for sale in the shareholder's
state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
16
<PAGE>
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder, and the reg-
istration of the two accounts will be identical. Requests for exchanges re-
ceived prior to 4:00 p.m. Eastern Time (ET) will be processed as of the close
of business on the same day. Requests received after 4:00 p.m. will be proc-
essed on the next business day. Neither the Fund nor the CGFSC will be respon-
sible for the authenticity of the exchange instructions received by telephone.
Exchanges may also be subject to limitations as to amounts or frequency and to
other restrictions established by the Fund's Board of Directors to assure that
such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on in-
vestment or utilization of assets, such limitation shall be determined immedi-
ately after and as a result of the Portfolio's acquisition of such security or
other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered
when determining whether the investment complies with the Portfolio's invest-
ment limitations.
A Portfolio's fundamental investment limitations cannot be changed without
approval by a "majority of the outstanding shares" (as defined in the 1940
Act) of that Portfolio. Except for the numbered investment limitations noted
as fundamental below, however, the limitations described below are not funda-
mental, and may be changed without the consent of shareholders.
AS A MATTER OF FUNDAMENTAL POLICY, EACH PORTFOLIO WILL NOT:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and policies, or entering into repur-
chase agreements, subject to the limitation described in (f) below
and (ii) by lending
17
<PAGE>
its portfolio securities to banks, brokers, dealers and other finan-
cial institutions so long as such loans are not inconsistent with the
1940 Act or the rules and regulations or interpretations of the Com-
mission thereunder;
(4) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer (this re-
striction is not applicable to the Acadian Emerging Markets Portfo-
lio);
(5) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof) (this restriction is not applicable to the Acadian Emerging
Markets Portfolio);
(6) borrow money, except (i) from banks and as a temporary measure for
extraordinary or emergency purposes or (ii) except in connection with
reverse repurchase agreements provided that (i) and (ii) in combina-
tion do not exceed 33 1/3% of the Portfolio's total assets (including
the amount borrowed) less liabilities (exclusive of borrowings);
(7) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of a Portfolio's
total assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities or instruments issued by U.S. banks
when a Portfolio adopts a temporary defensive position;
(8) underwrite the securities of other issuer; and
(9) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into options, futures or repurchase transactions.
AS A MATTER OF NON-FUNDAMENTAL POLICY, EACH PORTFOLIO WILL NOT:
(a) invest in stock or bond futures and/or options on futures unless (i)
not more than 5% of the Portfolio's assets are required as deposit to
secure obligations under such futures and/or options on futures con-
tracts provided, however, that in the case of an option that is in-
the-money at the time of purchase, the in-the-money amount may be ex-
cluded in computing such 5% and (ii) not more than 20% of the Portfo-
lio's assets are invested in stock or bond futures and options;
(b) purchase on margin or sell short except as specified in (a) above;
18
<PAGE>
(c) purchase additional securities when borrowings exceed 5% of total
gross assets;
(d) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(e) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(f) invest more than an aggregate of 15% of the assets of the Portfolio,
determined at the time of investment, in securities subject to legal
or contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;
(g) invest for the purpose of exercising control over management of any
company;
(h) (with respect to the Acadian Emerging Markets Portfolio) purchase the
securities of any issuer (other than obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities) if, as a
result, with respect to 50% of its total assets, more than 5% of the
value of its total assets would be invested in the securities of any
single issuer, or it would hold more than 10% of the outstanding vot-
ing securities of such issuer, or with respect to the remaining 50%
of its total assets, more than 25% of the value of its total assets
would be invested in the securities of any single issuer; and
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec
Age: 47 Corporation and Cyber Scientific, Inc.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
WILLIAM A. HUMENUK Director of the Fund; Partner in the
4000 Bell Atlantic Tower Philadelphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square
Boston, MA 02111 Investors Corporation since 1988; Director
Age: 52 and Chief Executive Officer of H.T.
Investors, Inc., formerly a subsidiary of
Dewey Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President of
Age: 45 Operations, Development and Control of
Fidelity Investments in 1995; Treasurer of
the Fidelity Group of Mutual Funds from
1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice
211 Congress Street President of UAM Fund Services, Inc.,
Boston, MA 02110 former Manager of Fund Administration and
Age: 32 Compliance of Chase Global Fund Services
Company from 1995 to 1996; formerly Senior
Manager of Delloitte & Touche LLP from 1985
to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
20
<PAGE>
As of December , 1996, the Directors and officers of the Fund owned less
than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and the UAM Funds
Trust and reimbursement for travel and other expenses incurred while attending
Board meetings. Directors who are also officers or affiliated persons receive
no remuneration for their service as Directors. The Fund's officers and em-
ployees are paid by either the Adviser, United Asset Management Corporation
("UAM"), the Administrator or CGFSC and receive no compensation from the Fund.
The following table shows aggregate compensation paid to each of the Fund's
unaffiliated Directors by the Fund and total compensation paid by the Fund,
UAM Funds Trust and AEW Commercial Mortgage Securities Fund, Inc. (collec-
tively the "Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Former Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord 5% or more of the shares of a Portfolio:
Acadian Emerging Markets Portfolio: UNISYS, Attn: Gary Biscoll, Township
Line & Union Meeting Road, P.O. Box 500, Blue Bell, PA, 61%; RJR Nabisco Inc.,
Defined Benefit Master Trust, 301 North Main Street, Winston Salem, NC, 11.9%;
Wachovia Bank of N.C., Trustee for US Air Inc., 301 N. Main Street, Winston-
Salem, NC, 5.8%* and Charles Schwab & Co. Inc., FBO Customers-Reinvest Ac-
count, Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA, 5.5%*.
21
<PAGE>
Acadian International Equity Portfolio: Bankers Trust Company, Trustee, FBO
Premark International Master Pension Trust, 34 Exchange Pl 4th Floor, Jersey
City, NJ, 83.3%*; Bankers Trust Company, Trustee, FBO Tupperware Corp. Base
Retirement Trust, 34 Exchange Place, 4th Floor, Jersey City, NJ, 5.8%*; Ellard
& Co., PO Box 3199, C/O Fiduciary Trust Co. Intl., Church Street Station, New
York, NY, 5.5%*.
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Acadian Asset Management, Inc. (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional in-
vestment management. Since its first acquisition in August 1983, UAM has ac-
quired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
PHILOSOPHY AND STYLE
The Adviser's investment philosophy follows a rigorous, proven approach
which it calls Enhanced Value Investing. The Adviser believes that over the
long term, empirical evidence shows that value investing results in superior
returns. The Adviser enhances the efficacy of time-proven fundamental value
measures by incorporating a number of growth-related factors, such as price
momentum and trends in analysts' earnings estimates, to target undervalued
companies that also have strong prospects for future outperformance. The Ad-
viser's approach is implemented via a highly disciplined and structured proc-
ess, which utilizes proprietary sophisticated technology and a multi-factor
model for investment decision-making.
22
<PAGE>
The Adviser maintains 25 years of proprietary data on over 16,000 securities
and 40 countries. From over a decade of detailed statistical analysis of this
data, the Adviser has isolated the investment factors it believes are most
likely to lead to superior investment returns. In the Adviser's unique proc-
ess, these factors are weighted and combined on a market-by-market basis to
identify the most attractive securities in each market.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: USAir, Inc., E.I. DuPont de
Nemours Co., Inc., Fluor Corporation, RJR Nabisco and SEI Investment Manage-
ment.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, the Portfolio pays the Adviser an annual fee, in monthly
installments, calculated by applying the following annual percentage rates to
the Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Acadian Emerging Markets Portfolio..................................... 1.00%
Acadian International Equity Portfolio................................. 0.75%
</TABLE>
for the first $50 million in average daily net assets, 0.65%
for the next $50 million of average daily net assets, 0.50% for
the next $100 million average daily net assets and 0.40% of the
average daily net assets in excess of over $200 million.
For the fiscal year ended October 31, 1994, neither Portfolio paid an advi-
sory fee. During this period, the Adviser voluntarily waived advisory fees of
$47,000 for the Acadian Emerging Markets Portfolio and $17,000 for the Acadian
International Equity Portfolio. For the fiscal years ended October 31, 1995,
the Acadian Emerging Markets Portfolio and Acadian International Equity Port-
folio paid advisory fees of approximately $112,000 and $0, respectively. Dur-
ing this period, the Adviser voluntarily waived advisory fees of approximately
$74,000 for the Acadian Emerging Markets Portfolio and $18,000 for the Acadian
International Equity Portfolio. For the fiscal year ended October 31, 1996,
the Acadian Emerging Markets and International Equity Portfolios paid advisory
fees of $551,585 and $0, respectively. During the same period, the Adviser
voluntarily waived advisory fees of $0 and $90,328 for the Emerging Markets
and International Equity Portfolios, respectively.
23
<PAGE>
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, the Portfolios may pay higher commission rates than the lowest
rate available when the Adviser believes it is reasonable to do so in light of
the value of the research, statistical, and pricing services provided by the
broker effecting the transaction. It is not the Fund's practice to allocate
brokerage or principal business on the basis of sales of shares which may be
made through broker-dealer firms. However, the Adviser may place portfolio or-
ders with qualified broker-dealers who recommend the Fund's Portfolios or who
act as agents in the purchase of shares of the Portfolios for their clients.
During the fiscal years ended October 31, 1994, 1995 and 1996, the entire Fund
paid brokerage commissions of approximately $2,402,000, $2,983,000 and
$2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, CGFSC or its predecessor, Mutual Funds Service Company, pro-
vided certain administrative services to the Fund under an Administration
Agreement between the Fund and U.S. Trust Company of New York. During the fis-
cal years ended October 31, 1994, 1995 and 1996, administrative services fees
paid to the Administrator by the Acadian Emerging Markets and the Acadian In-
ternational Equity Portfolios totaled $41,000, $71,000 and $105,671, and
$53,000, $77,000, and $93,183, respectively. Of the fees paid in the fiscal
year ended October 31, 1996, Acadian Emerging Markets Portfolio paid $83,905
to CGFSC and $21,766 to UAMFSI, and Acadian International Equity Portfolio
paid $87,678 to CGFSC and $5,505 to UAMFSI.
24
<PAGE>
the Acadian Emerging Markets and International Equity Portfolios, respective-
ly. The services provided by the Administrator and the basis of the fees pay-
able to the Administrator are described in the Portfolio's Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
Each Portfolio may from time to time quote various performance figures to
illustrate past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used to compute or express performance
follows.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5 and 10 year periods
that would equate an initial hypothetical $1,000 investment to its ending re-
deemable value. The calculation assumes that all dividends and distributions
are reinvested when paid. The quotation assumes the amount was completely re-
deemed at the end of each 1, 5 and 10 year period and the deduction of all ap-
plicable Fund expenses on an annual basis. The average annual total rates of
returns for the Acadian Portfolios from inception and for the one year period
ended on the date of the Financial Statements included herein, are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
THROUGH YEAR
ONE YEAR ENDED
ENDED OCTOBER 31,
OCTOBER 31, 1996 1996 INCEPTION DATE
---------------- --------------- --------------
<S> <C> <C> <C>
Acadian International Equity
Portfolio................... 14.13% 9.48% 3/29/93
Acadian Emerging Markets
Portfolio................... 8.72% 6.22% 6/17/93
</TABLE>
These figures were calculated according to the following formula:
P (1 + T)/n/ = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
25
<PAGE>
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index --re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(h) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(i) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
26
<PAGE>
(j) The Salomon-Russell Broad Market Index (BMI) -- measures the perfor-
mance of approximately 4,500 institutionally investable equity securi-
ties in 23 worldwide local markets whose combined total available mar-
ket capitalization exceeds $106 million. The BMI is split into two ma-
jor components. The Primary Market Index defines the large stock uni-
verse, representing the top 80% of the available capital of the BMI in
each country. The Extended Market Index represents the remaining 20%
of the available capital that defines the small stock universe.
(k) International Finance Corporation Indices (IFC) -- measure the perfor-
mance of 800 stocks in over 20 emerging equity markets.
(l) Morgan Stanley Capital International Emerging Market Indices -- repre-
sent the local industry composition in emerging market countries. The
indices aim to cover 60% of the available total market capitalization
of each local market and currently include returns on 13 emerging eq-
uity markets.
(m) The Morgan Stanley Capital International Europe 13 Index -- is an un-
managed index composed of the securities listed on the stock exchanges
of the following countries: Australia, Belgium, Denmark, Finland,
France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Swit-
zerland and the United Kingdom.
(n) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(o) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(p) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger Invest-
ment Companies Service -- publications that rate fund performance over
specified time periods.
(q) Cosumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(r) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(s) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.
27
<PAGE>
(t) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. In addition, there can be no assur-
ance that the Fund will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series ("Portfolios") or classes of
common stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains. (See discussion under "Dividends, Capital Gains Dis-
tributions and Taxes" in the Prospectus.) The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of such Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectus.
28
<PAGE>
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the Portfolios of the Fund at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholder in writing at least three days
prior to the record date that either the Income Option (income dividends in
cash and capital gains distributions in additional shares at net asset value)
or the Cash Option (both income dividends and capital gains distributions in
cash) has been elected. An account statement is sent to shareholders whenever
an income dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived with
respect to its business of investing in such securities or currencies. In ad-
dition, gains realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of the Portfolio's an-
nual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements for the Acadian Portfolios for the fiscal year
ended October 31, 1996 and the Financial Highlights for the respective periods
presented, which appear in the Portfolios' 1996 Annual Reports to Sharehold-
ers, and the reports thereon of Price Waterhouse LLP, independent accountants,
also appearing therein, are attached to this SAI.
29
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (86.1%)
- ------------------------------------------------------------------------------
ARGENTINA (5.5%)
Astra Cia Argentina de Petro........................ 178,280 $ 320,955
Banco de Galicia y Buenos Aires S.A., Class B....... 70,069 322,369
*Bansud S.A., Class B................................ 4,201 42,017
Capex S.A., Class A................................. 8,500 61,635
Central Puerto S.A., Class B........................ 78,000 228,187
Cia Naviera Perez Companc, Class B.................. 108,761 690,743
Citicorp Equity Investments S.A., Class B........... 19,635 63,824
*Indupa S.A. ........................................ 142,100 75,751
*Ipako Industrias Petroquimicas Argentina S.A. ...... 26,100 93,975
Juan Minetti S.A. .................................. 23,902 71,717
Molinos Rio de la Plata S.A., Class B............... 56,583 178,265
Siderca S.A., Class A............................... 232,900 368,041
Telecom Argentina S.A., Class B..................... 23,100 87,216
Telefonica de Argentina, Class B.................... 183,900 428,556
Transportadora de Gas del Sur S.A., Class B......... 138,200 324,822
YPF S.A., Class D................................... 22,100 506,171
-----------
3,864,244
- ------------------------------------------------------------------------------
BRAZIL (5.7%)
*Albarus S.A. ....................................... 212,000 183,666
Alparagatas S.A. ................................... 980,000 58,191
Banco Itau S.A. .................................... 98,000 38,063
Brahma.............................................. 305,172 188,634
Brasilit S.A. ...................................... 229,250 368,210
Cia Acos Especiais--Acesita......................... 34,335,000 70,187
Cia Antarctica Paulista--Industria.................. 1,400 121,561
Cia Petroquimica Do Sul............................. 6,600,000 350,141
Cia Siderurgica Nacional............................ 13,300,000 330,137
Cia Vidraria Santa Marina........................... 37,000 121,737
Cigarros Souza Cruz................................. 11,000 66,173
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
BRAZIL--(CONTINUED)
Eletrobras.......................................... 2,000,000 $ 621,045
*Light Participacoes S.A. ........................... 1,015,000 159,764
Light Servicos Electricas........................... 1,000,000 330,965
Mineracao da Trindade-Samitri....................... 4,305,000 134,099
*Santista Alimentos S.A. ............................ 137,000 278,721
*Serrana S.A. ....................................... 131,000 116,042
Telebras............................................ 1,511,794 92,123
*Telecomunicacoes do Rio de Janeiro S.A. ............ 600,000 58,114
White Martins S.A. ................................. 203,300,000 314,658
-----------
4,002,231
- -------------------------------------------------------------------------------
CHINA (5.9%)
Guangdong Electric Power Development Co., Ltd.,
Class B........................................... 202,000 139,775
*Jilin Chemical Industrial Co., Ltd., Class H........ 1,500,000 199,827
*Maanshan Iron & Steel Co., Class H.................. 3,380,000 603,283
Shanghai Dajiang Group Co., Ltd., Class B........... 180,890 72,356
Shanghai Dazhong Taxi Co., Class B.................. 173,455 105,808
*Shanghai Haixing Shipping Co., Class H.............. 6,900,000 508,685
Shanghai Jinqiao Export Processing Zone Development
Co., Ltd., Class B................................ 281,000 103,970
Shanghai Petrochemical Co., Ltd., Class H........... 2,850,000 764,871
*Shanghai Shangling Electric Appliances Co., Ltd.,
Class B........................................... 284,000 98,832
*Shanghai Tyre & Rubber Co., Ltd., Class B........... 500,000 121,000
Shanghai Waigaoqiao Free Trade Zone Development Co.,
Ltd., Class B..................................... 353,360 127,210
*Shanghai Yaohua Pilkington Glass Co., Ltd., Class
B................................................. 313,000 149,614
Shenzhen China Bicycle Co., Ltd., Class B........... 624,000 156,571
*Tsingtao Brewing Co., Ltd., Class H................. 992,000 356,040
Yizheng Chemical Fibre Co., Ltd., Class B........... 2,566,000 594,065
-----------
4,101,907
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
GREECE (5.3%)
Alpha Investment S.A. ............................... 1,600 $ 21,155
Commercial Bank of Greece S.A. ...................... 16,440 447,528
Credit Bank of Athens................................ 17,990 1,149,617
Elais Olegiaous Co. ................................. 1,000 29,471
Ergo Bank S.A. ...................................... 13,100 769,114
Hellas Can Packaging Manufacturers................... 1,000 18,183
Hellenic Bottling Co. S.A. .......................... 15,000 483,057
Hellenic Technodomiki................................ 1,000 14,715
Heracles General Cement Co. S.A. .................... 4,700 59,279
Intracom S.A. ....................................... 9,400 240,869
Ionian Bank.......................................... 2,616 41,243
National Bank of Greece.............................. 4,400 279,324
Strintzis Lines...................................... 3,600 13,970
Titan Cement Co. .................................... 1,600 90,674
-----------
3,658,199
- -------------------------------------------------------------------------------
HONG KONG (0.9%)
*Qingling Motors Co., Class H......................... 1,510,000 634,725
- -------------------------------------------------------------------------------
HUNGARY (1.2%)
*Danubius Hotels Rt................................... 5,300 108,205
EGIS Rt.............................................. 5,900 364,214
*Fotex Rt Budapest.................................... 33,000 21,684
Gedeon Richter Ltd. GDS.............................. 2,700 145,125
*Pick Szeged Rt GDR................................... 2,100 94,677
Primagaz Rt.......................................... 2,475 106,797
-----------
840,702
- -------------------------------------------------------------------------------
INDONESIA (3.2%)
Argha Karya Prima Industry (Foreign)................. 27,500 42,816
Astra International (Foreign)........................ 43,200 89,990
Bank Dagang Nasional (Foreign)....................... 182,000 128,981
Barito Pacific Timber (Foreign)...................... 349,000 202,362
Dharmaal Intiland (Foreign).......................... 41,500 52,137
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
INDONESIA--(CONTINUED)
Gadjah Tunggal (Foreign)............................. 174,000 $ 74,734
Hanjaya Mandala Sampoerna (Foreign).................. 26,250 244,094
Indah Kiat Pulp & Paper Co. (Foreign)................ 353,735 277,275
Indosat (Foreign).................................... 15,000 45,420
Inti Indorayon Utama (Foreign)....................... 69,000 62,236
Kalbe Farma (Foreign)................................ 22,000 25,985
Mayora Indah Co. (Foreign)........................... 40,560 16,550
Pabrik Kertas Tjiwi Kimia (Foreign).................. 216,712 223,390
Polysindo Eka Perkasa (Foreign)...................... 108,000 57,983
Putra Surya Perkasa (Foreign)........................ 515,500 492,639
SMART Corp. (Foreign)................................ 48,000 32,986
Tempo Scan Pacific (Foreign)......................... 54,000 89,296
United Tractors (Foreign)............................ 20,500 38,082
-----------
2,196,956
- -------------------------------------------------------------------------------
KOREA (7.7%)
Commercial Bank of Korea............................. 31,000 267,112
Central Investment & Finance......................... 3,613 60,501
Cheil Industrial, Inc. .............................. 14,500 218,204
Daewoo Corp. ........................................ 27,100 230,218
Dongbu Steel Co. .................................... 3,960 63,437
Hyundai Engineering & Construction Co. .............. 5,000 145,631
*Hanjin Shipping Co., Ltd. ........................... 4,000 90,777
*Hanjin Transportation Co. ........................... 2,060 45,000
Korea Exchange Bank.................................. 20,000 196,845
Korea Express (The) Co. ............................. 7,000 215,777
Korea Long Term Credit Bank.......................... 11,000 237,621
Keum Kang Development Industries Co. ................ 14,400 242,913
Korea Eelectric Power Corp. ......................... 18,000 530,825
Korea Kumho Petrochemical Co. ....................... 16,000 138,835
LG Electronics....................................... 15,700 259,126
LG International Corp. .............................. 20,000 200,485
Mando Machinery Corp. ............................... 2,100 95,061
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
KOREA--(CONTINUED)
*Samsung Corp. ....................................... 16,000 $ 231,068
Samsung Display Devices Co. ......................... 4,000 252,427
Samsung Electro-Mechanics Co. ....................... 9,000 233,738
*Samsung Electronics.................................. 3,700 260,886
Samsung Electronics (New)............................ 512 35,107
*Samsung Heavy Industries............................. 746 9,144
Shinhan Investment & Finance......................... 12,495 239,589
Shinsegae Department Store Co. ...................... 4,000 213,592
Ssangyong Cement Co., Ltd. .......................... 12,000 222,816
Ssangyong Oil Refining Co., Ltd. .................... 3,300 74,090
Tai Han Electric Wire Co. ........................... 6,700 112,209
Tongyang Investment & Finance........................ 2,813 39,935
*Yuhan Corp. ......................................... 1,227 68,497
*Yuhan Corp. (New).................................... 122 6,233
Yukong Ltd. ......................................... 5,405 126,597
-----------
5,364,296
- -------------------------------------------------------------------------------
MALAYSIA (11.6%)
Bandar Raya Developments Bhd. ....................... 60,000 116,390
Berjaya Group Bhd. .................................. 288,000 204,086
Boustead Holdings Bhd. .............................. 132,000 276,960
Cement Industries of Malaysia Bhd. .................. 27,000 84,976
Commerce Asset Holding Bhd. ......................... 60,000 391,924
Datuk Keramat Holdings Bhd. ......................... 171,000 284,323
Dunlop Estates Bhd. ................................. 105,000 181,235
Edaran Otomobil Nasional Bhd. ....................... 45,000 420,428
Golden Hope Plantations Bhd. ........................ 173,000 294,497
Guinness Anchor Bhd. ................................ 87,000 223,872
Guthrie Ropel Bhd. .................................. 79,000 146,991
Highlands & Lowlands Bhd. ........................... 160,000 278,702
Ho Hup Construction Co. Bhd. ........................ 44,000 122,803
IOI Properties Bhd. ................................. 67,000 222,803
Kian Joo Can Factory Bhd. ........................... 49,000 267,696
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MALAYSIA--(CONTINUED)
Kuala Lumpur Kepong Bhd. ............................ 51,000 $ 128,207
Kulim (Malaysia) Bhd. ............................... 116,000 257,165
LARUT Consolidated Bhd. ............................. 96,000 142,138
Lion Land Bhd. ...................................... 69,000 69,109
MBF Capital Bhd. .................................... 287,000 395,392
Malaysian Airline System Bhd. ....................... 97,000 243,844
Multi-Purpose Holdings Bhd. ......................... 193,000 330,071
Negara Properties (Malaysia) Bhd. ................... 36,000 128,979
Oriental Holdings Bhd. .............................. 84,000 571,971
Perlis Plantations Bhd. ............................. 28,750 82,517
Perusahaan Otomobil Nasional Bhd. ................... 66,000 418,052
Petronas Dagangan Bhd. .............................. 101,000 297,882
Pilecon Engineering Bhd. ............................ 53,000 71,338
Shangri-La Hotels Malaysia Bhd. ..................... 89,000 87,379
Sime Darby Bhd. ..................................... 141,000 499,584
Southern Bank Bhd. .................................. 67,000 216,172
Sungei Way Holdings Bhd. ............................ 33,000 188,124
Telekom Malaysia Bhd. ............................... 26,000 229,533
Tenaga Nasional Bhd. ................................ 49,000 195,921
-----------
8,071,064
- -------------------------------------------------------------------------------
MEXICO (9.5%)
Apasco S.A. de C.V., Class A......................... 51,000 311,596
*Controladora Comercial Mexicana S.A. de C.V., Class
B.................................................. 358,000 308,898
*Carso Global Telecom, Class A........................ 80,000 194,115
Cemex S.A., Class B.................................. 13,837 50,034
Cemex S.A., Class CPO................................ 210,000 714,838
*Cifra S.A. de C.V., Class B.......................... 202,700 259,314
*Cifra S.A. de C.V., Class C.......................... 220,000 282,544
Coca-Cola Femsa S.A., Class L........................ 64,000 150,185
*Empresas ICA Sociedad Controladora................... 34,800 457,781
Fomenta Economico Mexicano S.A. de C.V., Class B..... 101,800 307,177
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MEXICO--(CONTINUED)
Grupo Carso S.A. de C.V., Series A1................. 80,000 $ 360,100
Grupo Casa Autrey S.A. de C.V....................... 110,000 206,010
Grupo Celanese S.A., Class B1....................... 200,000 294,264
Grupo Financiero Inbursa S.A. de C.V., Class A...... 27,791 90,096
Grupo Industrial Bimbo S.A. de C.V., Class A........ 22,000 109,177
Grupo Industrial Maseca, Class B.................... 239,000 290,853
*Grupo Mexico S.A., Class B.......................... 48,000 129,875
*Grupo Televisa S.A., Class CPO...................... 30,600 400,623
Industrias Penoles S.A.............................. 78,000 310,249
Telefonos de Mexico S.A. de C.V., Class L........... 885,300 1,342,300
Transportacion Maritima Mexicana S.A. de C.V., Class
L................................................. 8,000 55,561
-----------
6,625,590
- -------------------------------------------------------------------------------
PHILIPPINES (2.1%)
First Philippine Holdings Corp., Class B............ 33,960 68,593
JG Summit Holding, Inc. ............................ 414,700 115,370
Manila Electric Co. ................................ 97,342 715,968
Petron Corp. ....................................... 806,500 236,663
Philippine Long Distance Telephone Co. ............. 4,600 276,105
SM Prime Holdings, Inc. ............................ 149,800 31,970
San Miguel Corp., Class B........................... 2,600 9,414
-----------
1,454,083
- -------------------------------------------------------------------------------
PORTUGAL (3.6%)
Banco Comercial Portugues S.A. ..................... 17,767 220,636
Banco de Fomento e Exterior......................... 17,800 300,971
Banco Espirito Santo e Comercial de Lisboa.......... 18,840 331,239
Banco Portugues de Investimento (Registered)........ 8,951 106,593
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ------------------------------------------------------------------------------
PORTUGAL--(CONTINUED)
Banco Totta & Acores, Class B (Registered).......... 4,690 $ 85,186
Cimpor Cimentos de Portugal S.A. ................... 1,900 39,950
Corticeira Amorim S.A. ............................. 16,000 165,752
Credito Predial Portugues........................... 9,800 100,434
*Empresa Fabril de Maquinas Electricicas............. 3,600 39,553
Estabelecimentos Jeronimo Martins & Filho SGPS
S.A. ............................................. 3,800 346,719
Mondelo Continente SGPS S.A. ....................... 3,200 99,430
Portugal Telecom S.A. (Registered).................. 11,842 308,047
Sonae Industria e Investimento...................... 12,000 351,843
-----------
2,496,353
- ------------------------------------------------------------------------------
SOUTH AFRICA (9.9%)
Allied Electronics Corp., Ltd. ..................... 40,600 58,012
Anglo-American Gold Investment Co., Ltd. ........... 1,200 104,671
Anglovaal Industries Ltd. .......................... 19,400 93,090
Barlow Ltd. ........................................ 23,100 201,491
Driefontein Consolidated Ltd. ...................... 27,400 363,756
East Rand Gold & Uranium Co., Ltd. ................. 17,000 32,992
*Eastvaal Gold Holdings Ltd. ........................ 136,100 208,983
Edgars Stores Ltd. ................................. 2,900 79,164
Ellerine Holdings Ltd. ............................. 12,000 63,468
Free State Consolidated Gold Mines Ltd. ............ 10,800 94,434
*Harmony Gold Mining Co., Ltd. ...................... 9,500 72,937
Hartebeesfontein Gold Mining Co., Ltd. ............. 39,300 100,576
Johannesburg Consolidated........................... 34,000 398,806
Kloof Gold Mining Co., Ltd. ........................ 29,500 273,672
LibLife Strategic Investments Ltd. ................. 89,650 267,669
Liberty Life Association of Africa Ltd. ............ 9,400 257,102
Murray & Roberts Holdings Ltd. ..................... 75,500 256,819
Nedcor Ltd. ........................................ 33,900 495,234
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SOUTH AFRICA--(CONTINUED)
*Pick'n Pay Stores Ltd. .............................. 27,300 $ 28,878
*Pick'n Pay Stores Ltd., Class N...................... 54,600 51,817
Premier Group (The) Ltd. ............................ 101,090 134,097
Randfontein Estates Gold Mining Co., Ltd. ........... 25,800 128,477
Rembrandt Group Ltd. ................................ 53,800 470,420
Sappi Ltd. .......................................... 36,100 319,503
Sasol Ltd. .......................................... 83,300 1,017,045
South African Breweries Ltd. ........................ 13,400 348,646
South African Iron & Steel Industrial Corp., Ltd. ... 218,600 156,176
Standard Bank Investment Corp., Ltd. ................ 3,100 119,002
Sun International (South Africa) Ltd. ............... 251,200 225,003
Toyota South Africa Ltd. ............................ 16,700 112,188
Vaal Reefs Exploration & Mining Co., Ltd. ........... 1,100 85,626
Western Areas Gold Mining Ltd. ...................... 5,200 80,401
Western Deep Levels Ltd. ............................ 1,300 39,229
Wooltru Ltd., Class N................................ 49,300 180,839
-----------
6,920,223
- -------------------------------------------------------------------------------
SRI LANKA (0.8%)
*Asian Hotels Ltd. ................................... 25,600 4,491
*Blue Diamond Jewelry World........................... 141,900 31,741
Development Finance Corp. of Ceylon.................. 48,400 233,509
Hayleys Ltd. ........................................ 33,000 108,842
John Keells Holdings Ltd. ........................... 31,085 99,254
National Development Bank............................ 7,100 24,289
Sampath Bank Ltd. ................................... 105,000 84,737
-----------
586,863
- -------------------------------------------------------------------------------
THAILAND (7.1%)
Advanced Info Service Public Co., Ltd. (Foreign)..... 24,900 337,991
Asia Credit Co., Ltd. (Foreign)...................... 32,000 148,137
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ------------------------------------------------------------------------------
THAILAND--(CONTINUED)
*Bangkok Expressway Public Co., Ltd. (Foreign)....... 49,000 $ 53,344
Bangkok Metropolitan Bank Public Co., Ltd.
(Foreign)......................................... 71,600 36,516
Bangchak Petroleum Public Co., Ltd. (Foreign)....... 80,800 84,002
Bank of Ayudhya Ltd. (Foreign)...................... 62,250 178,276
Ch. Harnchang Public Co., Ltd. (Foreign)............ 21,400 104,943
Electricity Generating Public Co., Ltd. (Foreign)... 58,400 159,231
First Bangkok City Bank Ltd. (Foreign).............. 272,600 315,485
General Finance & Securities Co. plc (Foreign)...... 41,500 95,243
Italian-Thai Development Corp. (Foreign)............ 16,300 86,328
Krungthai Thanakit plc (Foreign).................... 14,000 42,840
Krung Thai Bank plc (Foreign)....................... 176,030 476,503
Land and House Co., Ltd. (Foreign).................. 6,900 57,387
Multi Credit Corp. (Foreign)........................ 10,800 26,269
Nava Finance & Securities Public Co., Ltd.
(Foreign)......................................... 44,100 78,287
National Finance & Securities Co., Ltd. (Foreign)... 24,900 47,133
*NTS Steel Groups Co., Ltd. (Foreign)................ 48,700 22,449
Precious Shipping plc (Foreign)..................... 26,700 53,945
PTT Exploration & Production (Foreign).............. 19,800 284,300
Robinson Department Store (Foreign)................. 50,000 83,856
Samart Corp. plc (Foreign).......................... 29,600 175,347
*Securities One Ltd. (Foreign)....................... 24,400 99,553
Shinawatra Computer Co. plc (Foreign)............... 7,300 117,991
Shinawatra Satellite Public Co., Ltd. (Foreign)..... 94,600 135,461
Siam City Bank Public Co., Ltd. (Foreign)........... 44,000 50,490
Siam City Cement Co., Ltd. (Foreign)................ 11,700 385,563
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ------------------------------------------------------------------------------
THAILAND--(CONTINUED)
Siam Commercial Bank Co., Ltd. (Foreign)............ 13,000 $ 118,321
Sitca Investment & Securities Co. (Foreign)......... 700 687
*TelecomAsia Corp. Public Co., Ltd. ................. 101,700 195,500
*Thai Telephone & Communication Public Co., Ltd. .... 84,300 138,902
Thai Airways International Ltd. .................... 161,200 284,582
Thai Petrochemical Industry Public Co., Ltd.
(Foreign)......................................... 185,200 183,456
United Communication Industry (Foreign)............. 32,200 262,755
-----------
4,921,073
- ------------------------------------------------------------------------------
TURKEY (5.5%)
Akbank TAS.......................................... 3,555,000 434,167
Aksa Akrilik Kimya Sanayii AS....................... 466,678 64,271
Alarko Holding AS................................... 769,520 135,972
Altinyildiz Mensucat Ve Konfeksiyon Fabriklari AS... 138,000 21,157
Arcelik AS.......................................... 2,626,660 259,363
Brisa Bridgestone Sabanci........................... 121,000 55,966
Cimentas AS......................................... 481,068 55,002
Cimsa Cimento Sanayi Ve Ticaret AS.................. 665,000 49,075
Cukurova Elektrik AS................................ 80,000 64,027
*Ege Biracilik Ve Malt Sanayii AS.................... 602,840 187,976
Erciyas Biracilik Ve Malt Sanayii................... 82,000 40,058
Eregli Demir Ve Celik Fabrikalari TAS............... 2,370,000 277,128
Finans Bank AS...................................... 1,546,627 28,534
Goodyear Lastikleri TAS............................. 74,000 31,920
Guney Biracilik Ve Malt Sanayii..................... 197,750 18,088
Kartonsan Kart Sanayi Ve Ticaret AS................. 210,000 19,645
Marshall Boya Ve Vernik Sanayii..................... 163,000 12,537
Migros Tirk TAS..................................... 59,400 59,888
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TURKEY--(CONTINUED)
Netas Telekomunik.................................... 646,000 $ 156,112
Otosan Otomobil Sanayii AS........................... 1,011,000 341,519
Petkim Petrokimya Holdings AS........................ 51,000 20,674
Petrol Ofisi AS...................................... 1,020,000 296,851
Tat Konserve Sanayii AS.............................. 601,999 82,907
Tofas Turk Otomobil Fabrikasi........................ 2,728,250 94,997
*Tupras Turkiye Petrol Rafinerileri AS................ 181,499 30,655
Turcas Petrolculuk AS................................ 1,497,600 107,405
*Turk Hava Yollari A.O. .............................. 675,800 165,069
*Turk Sise Ve Cam Fabrikalari......................... 693,913 69,240
Turkiye Garanti Bankasi AS........................... 5,152,500 257,062
Turkiye Tutunculer Bankasi........................... 1,000,532 9,774
Yapi Ve Kredi Bankasi AS............................. 15,431,800 400,992
-----------
3,848,031
- -------------------------------------------------------------------------------
VENEZUELA (0.6%)
Electricidad de Caracas.............................. 178,019 195,424
Manufacturas Textiles................................ 91,080 8,614
Siderurgica Venezolana Sivensa....................... 84,000 59,800
Siderurgica Venezolana Sivensa ADR................... 1,528 5,196
Sudamtex de Venezuela, Class B....................... 157,542 20,258
Venezolana de Cementos............................... 43,017 117,851
Venezolana de Pulp................................... 9,355 9,346
-----------
416,489
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $59,898,675)................ 60,003,029
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (12.6%)
- -------------------------------------------------------------------------------
BRAZIL (12.5%)
Aracruz Celulose S.A., Class B....................... 191,700 $ 302,301
Banco Bradesco....................................... 74,097,003 631,841
Banco Itau........................................... 1,118,000 484,289
Bombril S.A. ........................................ 15,900,000 309,549
Brahma............................................... 830,909 513,606
Cevel Alimentos S.A. ................................ 20,000,000 187,871
Cia Acos Especiais Itabira........................... 19,740,000 41,313
Cia Brasil Petroleo Ipiranga......................... 26,700,000 356,329
Cia Brasileira de Frigorificos....................... 272,000 127,090
Cia Brasileira de Petroleo Ipiranga.................. 24,200,000 282,447
Cia Cimento Portland Itau............................ 1,100,000 289,107
Cia Energetica de Minas Gerais....................... 15,600,000 496,564
*Cia Siderurgica Paulista--Cosipa, Class B............ 138,000 104,780
Cia Siderurgica Tubarao, Class B..................... 12,300,000 185,584
Cia Vale do Rio Doce................................. 19,960 413,850
Copene Petroquimica do Nordeste S.A., Class A........ 490,000 187,691
Eletrobras, Class B.................................. 945,602 306,518
Fertilizantes Fosfatados............................. 69,300,000 373,045
IKPC--Industrias Klabin de Papel E Celulose S.A...... 201,000 199,572
*Iochpe Maxion S.A. .................................. 310,000 29,874
Itausa Investimentos Itau S.A. ...................... 800,000 630,780
Lojas Americanas S.A. ............................... 14,800,000 232,668
Mineracao da Trindade--Samitri....................... 2,730,000 74,515
Petrobras............................................ 1,358,666 175,900
Petrobras Distribuidora S.A. ........................ 11,250,000 192,191
Refinaria Petroleo Ipiranga.......................... 16,800,000 114,475
Ripasa S.A. ......................................... 264,000 87,375
Sadia Concordia S.A. ................................ 215,000 144,408
Siderurgica Riograndense S.A. ....................... 12,995,000 201,003
Telebras............................................. 3,680,060 273,327
Telepar.............................................. 150,000 68,480
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
BRAZIL--(CONTINUED)
Telesp S.A. .......................................... 3,309,559 $ 605,663
Uniao de Industrias Pertoquimicas S.A., Class B....... 191,875 78,446
-----------
8,702,452
- --------------------------------------------------------------------------------
KOREA (0.1%)
LG Chemical Ltd. ..................................... 5,300 39,235
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $8,060,621)............... 8,741,687
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- --------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS (0.0%)
- --------------------------------------------------------------------------------
BRAZIL (0.0%)
*Siderurgica Riograndense S.A., expiring 11/19/96...... 5,841,902 5,061
- --------------------------------------------------------------------------------
INDONESIA (0.0%)
*Gadjah Tunggal, expiring 11/18/96..................... 174,000 --
- --------------------------------------------------------------------------------
KOREA (0.0%)
*Yukong Ltd., expiring 11/1/96......................... 314 88
- --------------------------------------------------------------------------------
TOTAL RIGHTS (COST $0)................................. 5,149
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.6%)
Chase Securities, Inc., 5.58% dated 10/31/96, due
11/1/96, to be repurchased at $3,171,492,
collateralized by $3,065,122, of various U.S.
Treasury Notes 5.875%-7.75%, due 3/31/99-11/30/99,
valued at $3,171,007 (COST $3,171,000)............. $3,171,000 $ 3,171,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.3%) (COST $71,130,296) (A)..... 71,920,865
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
(-3.3%)............................................. (2,271,570)
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $69,649,295
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
ADRAmerican Depositary Receipt
GDRGlobal Depositary Receipt
GDSGlobal Depositary Shares
(a) The cost for federal income tax purposes was $71,182,726. At October
31, 1996, net unrealized appreciation for all securities based on tax
cost was $738,139. This consisted of aggregate gross unrealized
appreciation for all securities of $9,276,483 and aggregate gross
unrealized depreciation for all securities of $8,538,344.
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
At October 31, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF NET MARKET
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Agriculture............................................... 1.6% $ 1,134,052
Automotive................................................ 3.7 2,553,245
Banks..................................................... 9.9 6,885,334
Basic Resources........................................... 0.2 114,475
Beverages, Food & Tobacco................................. 6.3 4,421,369
Building Materials........................................ 1.7 1,221,101
Building Related.......................................... 0.3 187,871
Capital Equipment......................................... 0.5 375,788
Chemicals................................................. 5.0 3,519,507
Computers................................................. 0.2 117,991
Construction.............................................. 4.3 3,009,471
Consumer Durables......................................... 0.4 249,554
Electronics............................................... 1.9 1,312,724
Energy.................................................... 5.9 4,132,279
Entertainment & Leisure................................... 0.3 225,003
Financial Services........................................ 9.0 6,264,277
Forest Products & Paper................................... 0.8 589,248
Holding Company........................................... 7.1 4,915,502
Home Furnishings & Appliances............................. 0.5 358,195
Industrial................................................ 0.2 104,943
Insurance................................................. 0.4 257,102
Iron and Steel............................................ 1.4 956,995
Lodging & Restaurants..................................... 0.3 200,076
Machinery................................................. 0.1 39,018
Manufacturing............................................. 2.0 1,427,368
Metals.................................................... 2.3 1,606,090
Mining.................................................... 2.3 1,585,754
Multi-Industry............................................ 2.2 1,502,415
Oil & Gas................................................. 1.3 920,696
Paper & Packaging......................................... 1.6 1,131,940
Pharmaceuticals........................................... 1.3 879,374
Real Estate............................................... 2.0 1,402,593
Repurchase Agreement...................................... 4.6 3,171,000
Retail.................................................... 3.9 2,689,456
Services.................................................. 0.5 380,808
Telecommunications........................................ 8.4 5,823,743
Textiles & Apparel........................................ 0.5 381,873
Transportation............................................ 2.7 1,901,357
Utilities................................................. 5.7 3,971,278
- --------------------------------------------------------------------------------
Total Investments........................................ 103.3% $71,920,865
Other Assets and Liabilities (Net)........................ (3.3) (2,271,570)
- --------------------------------------------------------------------------------
Net Assets............................................... 100.0% $69,649,295
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Value (Cost $71,130,296).......................... $71,920,865
Foreign Currency, at Value (Cost $808,146)........................ 785,497
Cash.............................................................. 395
Receivable for Investments Sold................................... 447,863
Dividends Receivable.............................................. 104,469
Receivable for Portfolio Shares Sold.............................. 32,000
Receivable for Withholding Tax Reclaim............................ 936
Deferred Organization Costs....................................... 903
Other Assets...................................................... 10,763
- -------------------------------------------------------------------------------
Total Assets..................................................... 73,303,691
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................. 3,413,810
Payable for Custodian Fees........................................ 138,274
Payable for Investment Advisory Fees.............................. 58,212
Payable for Administrative Fees................................... 10,436
Payable for Directors' Fees....................................... 796
Other Liabilities................................................. 32,868
- -------------------------------------------------------------------------------
Total Liabilities................................................ 3,654,396
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $69,649,295
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $68,120,890
Undistributed Net Investment Income............................... 606,127
Accumulated Net Realized Gain..................................... 164,959
Unrealized Appreciation........................................... 757,319
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $69,649,295
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)..................................................... 5,744,377
Net Asset Value, Offering and Redemption Price Per Share.......... $ 12.12
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
1996
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends........................................................ $1,702,668
Interest......................................................... 133,567
Less Foreign Taxes Withheld...................................... (136,827)
- -------------------------------------------------------------------------------
Total Income.................................................... 1,699,408
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................. 551,585
Custodian Fees--Note D........................................... 258,571
Administrative Fees--Note C...................................... 105,671
Registration and Filing Fees..................................... 22,913
Printing Fees.................................................... 16,016
Audit Fees....................................................... 14,444
Legal Fees....................................................... 6,016
Directors' Fees--Note G.......................................... 3,410
Amortization of Organizational Costs............................. 560
Other Expenses................................................... 10,990
- -------------------------------------------------------------------------------
Total Expenses.................................................. 990,176
Expense Offset--Note A........................................... (1,328)
- -------------------------------------------------------------------------------
Net Expenses.................................................... 988,848
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................. 710,560
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments...................................................... 164,959
Foreign Exchange Transactions.................................... (102,554)
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS.................................................... 62,405
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments...................................................... 2,007,215
Foreign Exchange Translations.................................... (2,451)
- -------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION.......... 2,004,764
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN EXCHANGE TRANSACTIONS......... 2,067,169
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $2,777,729
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 710,560 $ 159,810
Net Realized Gain..................................... 62,405 98,762
Net Change in Unrealized Appreciation/Depreciation.... 2,004,764 (2,706,617)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations......................................... 2,777,729 (2,448,045)
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (60,888) --
Net Realized Gain..................................... (182,665) --
- ----------------------------------------------------------------------------------
Total Distributions.................................. (243,553) --
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 36,059,283 31,670,024
--In Lieu of Cash Distributions..................... 241,843 --
Redeemed.............................................. (3,130,062) (836,113)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 33,171,064 30,833,911
- ----------------------------------------------------------------------------------
Total Increase........................................ 35,705,240 28,385,866
Net Assets:
Beginning of Period................................... 33,944,055 5,558,189
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $606,127 and $46,082, respectively)....... $69,649,295 $33,944,055
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 2,951,393 2,691,601
In Lieu of Cash Distributions....................... 22,372 --
Shares Redeemed..................................... (251,153) (66,722)
- ----------------------------------------------------------------------------------
2,722,612 2,624,879
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 31, JUNE 17, 1993**
-------------------------- TO OCTOBER 31,
1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 11.23 $ 14.00 $11.34 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).... 0.13 0.05 (0.03) (0.01)
Net Realized and Unrealized Gain
(Loss)........................ 0.84 (2.82) 2.74 1.35
- -------------------------------------------------------------------------------
Total From Investment
Operations................... 0.97 (2.77) 2.71 1.34
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.02) -- -- --
Net Realized Gain............... (0.06) -- (0.05) --
- -------------------------------------------------------------------------------
Total Distributions............ (0.08) -- (0.05) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 12.12 $ 11.23 $14.00 $11.34
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN..................... 8.72% (19.79)%+ 23.97%+ 13.40%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................... $69,649 $33,944 $5,558 $3,927
Ratio of Expenses to Average Net
Assets......................... 1.79% 1.78% 2.07% 2.43%*
Ratio of Net Investment Income
(Loss) to Average Net Assets... 1.29% 0.86% (0.25)% (0.37)%*
Portfolio Turnover Rate.......... 11% 21% 9% 2%
Average Commission Rate #........ $0.0004 N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the Adviser
Per Share...................... N/A $ 0.02 $ 0.12 $ 0.04
Ratio of Expenses to Average Net
Assets Including Expense
Offsets........................ 1.79% 1.77% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The Acadian
Emerging Markets Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc.,
is a diversified, open-end management investment company. At October 31, 1996,
the UAM Funds were composed of forty active portfolios. The financial state-
ments of the remaining portfolios are presented separately. The objective of
the Acadian Emerging Markets Portfolio is to seek long-term capital apprecia-
tion by investing primarily in common stocks of emerging country issuers.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: Securities listed on a United States securities
exchange for which market quotations are readily available are valued at
the last quoted sales price as of the close of the exchange on the day the
valuation is made or, if no sale occurred on such day, at the bid price on
such day. Securities listed on a foreign exchange are valued at their clos-
ing price. Price information on listed securities is taken from the ex-
change where the security is primarily traded. Over-the-counter and un-
listed securities are valued not exceeding the current asked prices nor
less than the current bid prices. Short-term investments that have remain-
ing maturities of sixty days or less at time of purchase are valued at am-
ortized 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 Direc-
tors.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements. The Port-
folio may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on either income or gains earned or repatri-
ated. The Portfolio accrues such taxes when the related income is earned.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of the
underlying securities, the value of which exceeds the principal amount of
F-25
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the repurchase transaction, including accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the col-
lateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
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 on the date of valuation. The Portfolio does not isolate that por-
tion 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. These gains and losses are included in
net realized and unrealized gain and loss on investments on the statement
of operations. Net realized and unrealized gains and losses on foreign
currency transactions represent net foreign exchange gains or losses from
forward foreign currency exchange contracts, disposition of foreign cur-
rencies, 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 Port-
folio's books and the U.S. dollar equivalent amounts actually received or
paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolio may enter
into forward foreign currency exchange contracts to protect the value of
securities held and related receivables and payables against changes in
future foreign exchange rates. A forward currency contract is an agreement
between two parties to buy and sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in cur-
rency exchange rates. The contract is marked-to-market daily using the
current 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
F-26
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 lim-
ited to the amount of unrealized gain on the contracts, if any, at the
date of default. Risks may also arise from the unanticipated movements in
the value of a foreign currency relative to the U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income annually. 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. These dif-
ferences are primarily due to differing book and tax treatments for for-
eign currency transactions and deferred organization costs.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $89,627 to decrease undistributed
net investment income and $92,336 to increase accumulated net realized
gain, with a decrease to paid in capital of $2,739.
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
7. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded
as soon as the Portfolio is informed of the ex-dividend date. Interest in-
come is recognized on the accrual basis. Most expenses of the UAM Funds
can be directly attributed to a particular portfolio. Expenses which can-
not 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 manage-
ment investment company, based on their relative net assets. Custodian
fees for the Portfolio have been increased to include expense offsets for
custodian balance credits.
F-27
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 serv-
ices to the Portfolio at a fee calculated at an annual rate of 1.00% of average
daily net assets. The Adviser has voluntarily agreed to waive a portion of its
advisory fees and to assume expenses, if necessary, in order to keep the Port-
folio's total annual operating expenses, after the effect of expense offset ar-
rangements, from exceeding 2.50% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.06% of average daily net assets of the Portfolio. Also effec-
tive April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain services,
including but not limited to, administration, fund accounting, dividend dis-
bursing and transfer agent services. Pursuant to the Mutual Funds Service
Agreement, the Administrator pays CGFSC a monthly fee. For the period April 15,
1996 to October 31, 1996, UAM Fund Services, Inc. earned $68,282 from the Port-
folio as Administrator of which $46,516 was paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net
F-28
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
assets in excess of $1 billion but less than $3 billion; plus 0.06% of the
combined aggregate net assets in excess of $3 billion. The fees were allocated
among the portfolios of the UAM Funds and AEW on the basis of their relative
net assets and were subject to a graduated minimum fee schedule per portfolio
which rose from $2,000 per month, upon inception of a portfolio, to $70,000
annually after two years. For the period November 1, 1995 to April 15, 1996,
CGFSC earned $37,389 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$96,937, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
The Portfolio retains a redemption fee of 1.00% on redemptions of capital
shares held for less than 90 days in the portfolio. For the year ended October
31, 1996, there were no redemption fees.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $38,684,701 and sales of $5,422,238 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases or sales of long-term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. OTHER: At October 31, 1996, 73.1% of total shares outstanding were held
by 2 record shareholders owning more than 10% of the aggregate total shares
outstanding.
At October 31, 1996, the net assets of the Portfolio was substantially com-
posed of foreign denominated securities and/or currency. Changes in currency
ex-
F-29
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
change rates will affect the value of and investment income from such securi-
ties and currency.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated trans-
actions as a result of, among other factors, the possibly lower level of gov-
ernmental supervision and regulation of foreign securities markets and the pos-
sibility of political or economic instability.
F-30
<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 assets and liabilities, includ-
ing the portfolio of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Acadian Emerging Markets Portfo-
lio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October 31,
1996, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial high-
lights (hereafter referred to as "financial statements") are the responsibil-
ity 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 reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements, assessing the ac-
counting 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, 1996 by cor-
respondence with the custodians and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, pro-
vide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
Foreign taxes accrued during the year ended October 31, 1996 amounting to
$137,000 are expected to be passed through to the shareholders as foreign tax
credits on Form 1099-DIV for the year ending December 31, 1996 which share-
holders of this Portfolio will receive in late January 1997. In addition, for
the year ended October 31, 1996, gross income derived from sources within for-
eign countries amounted to $1,702,667 for the Portfolio.
F-31
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.6%)
- --------------------------------------------------------------------------------
AUSTRALIA (0.9%)
Westpac Banking Corp. ..................................... 25,600 $ 146,074
- --------------------------------------------------------------------------------
BELGIUM (0.2%)
Cockerill Sambre........................................... 9,100 36,482
- --------------------------------------------------------------------------------
CANADA (2.2%)
Bank of Nova Scotia........................................ 600 18,908
Canadian Imperial Bank of Commerce......................... 800 33,236
Metro-Richeliee, Inc., Class A............................. 1,325 18,827
Onex Corp. ................................................ 7,800 87,268
*Stelco, Inc., Class A...................................... 14,000 81,972
Trilon Financial Corp., Class A............................ 30,300 140,121
-----------
380,332
- --------------------------------------------------------------------------------
FRANCE (10.3%)
Assurances Generales de France............................. 4,650 137,220
Banque Nationale de Paris.................................. 5,400 202,149
Bollore Technologies S.A. ................................. 150 16,232
Cardif S.A. ............................................... 12 1,644
Cie Financiere de CIC et de L'Union Europeenne............. 300 19,373
Compagnie Generale D'Industrie et de Participations........ 637 142,353
Credit Local de France..................................... 50 4,303
Credit National............................................ 1,400 73,970
De Dietrich et Compagnie S.A. ............................. 550 22,925
Eridania Beghin-Say S.A. .................................. 900 143,360
Gaumont S.A. .............................................. 650 51,909
GTM ENTREPOSE S.A. ........................................ 900 42,709
Labinal S.A. .............................................. 250 39,871
Marine-Wendel S.A. ........................................ 500 45,125
Michelin, Class B.......................................... 3,850 185,712
Parisienne de Reescompte................................... 440 34,958
Pernod Ricard.............................................. 2,900 156,628
Saint Louis................................................ 450 114,213
Societe Financiere Interbail............................... 1,750 76,024
Sommer-Allibert Industrie AG............................... 4,050 112,540
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FRANCE--(CONTINUED)
Union des Assurances Federales............................ 650 $ 73,138
Vallourec................................................. 550 30,717
Worms et Compagnie........................................ 500 25,634
-----------
1,752,707
- --------------------------------------------------------------------------------
GERMANY (3.0%)
BASF AG................................................... 3,500 111,926
Deutsche Pfandbrief & Hypothekenbank AG................... 3,000 122,894
Otto Reichelt AG.......................................... 1,850 28,725
Papierwerke Waldhof-Aschaffenburg AG...................... 800 113,644
*Ruetgers AG............................................... 250 40,965
Vereins-und Westbank AG................................... 150 34,490
Viag AG................................................... 84 30,609
Wuensche AG............................................... 300 25,470
-----------
508,723
- --------------------------------------------------------------------------------
HONG KONG (3.0%)
Cathay Pacific Airways Ltd. .............................. 108,000 169,018
Kumagai Gumi Ltd. ........................................ 133,000 122,994
Lai Sun Garment (International) Ltd. ..................... 32,000 48,010
Peregrine Investment Holdings Ltd. ....................... 70,000 112,718
Semi-Tech (Global) Ltd. ................................. 34,000 60,685
-----------
513,425
- --------------------------------------------------------------------------------
ITALY (1.7%)
Autostrade S.p.A. ........................................ 91,500 135,562
Comau Finanziaria S.p.A. ................................. 33,700 39,920
Telecom Italia S.p.A. .................................... 62,000 118,248
-----------
293,730
- --------------------------------------------------------------------------------
JAPAN (36.6%)
Aoki International Co., Ltd. ............................. 2,000 37,281
Asahi Denka Kogyo KK...................................... 5,000 40,710
Bank of Okinawa Ltd. ..................................... 1,000 36,050
Chiyoda Fire & Marine Insurance Co., Ltd. ............... 14,000 72,259
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Chugoku Electric Power Co., Ltd. ........................... 2,000 $ 40,271
Cosmo Oil Co., Ltd. ........................................ 30,000 162,490
Dai-Tokyo Fire & Marine Insurance........................... 6,000 37,510
Daiichi Pharmaceutical Co., Ltd. ........................... 9,000 129,781
Daikyo, Inc................................................. 24,000 149,406
Dainippon Ink & Chemicals, Inc.............................. 24,000 102,770
Daio Paper Corp............................................. 8,000 83,004
Daiwa House Industry........................................ 12,000 166,711
Daiwa Kosho Lease Co., Ltd.................................. 12,000 109,734
Dia Kensetsu Co., Ltd....................................... 1,000 11,255
Dowa Fire & Marine Insurance Co............................. 10,000 49,503
Fuji Fire & Marine Insurance................................ 15,000 68,188
Fuji Oil.................................................... 1,000 7,606
Fuji Photo Film Co., Ltd.................................... 9,000 258,771
Fujikura Rubber............................................. 2,000 11,519
Fujita Corp................................................. 32,000 118,737
Hiroshima Bank.............................................. 9,000 48,668
Hitachi Ltd................................................. 33,000 293,063
Hitachi Maxell.............................................. 3,000 59,351
Hokkaido Bank............................................... 35,000 96,017
Hokkaido Takushoku Bank..................................... 20,000 46,953
Honda Motor Co., Ltd........................................ 9,000 215,247
Idec Izumi.................................................. 3,000 26,273
Itochu Fuel Corp............................................ 10,000 76,497
Jaccs....................................................... 8,000 63,589
Kamei....................................................... 4,000 44,315
Kita-Nippon Bank............................................ 1,000 46,602
Koa Fire & Marine Insurance Co. ............................ 5,000 29,324
Kyudenko Co., Ltd........................................... 6,000 69,111
Lion Corp................................................... 22,000 112,002
Marubeni Corp............................................... 1,000 4,634
Matsumura-Gumi.............................................. 13,000 61,039
Matsushita Electric Industrial Co., Ltd..................... 13,000 208,037
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Matsushita Electric Works................................... 17,000 $ 164,425
Mitsubishi Electric Corp.................................... 6,000 34,767
Mitsubishi Oil.............................................. 20,000 147,542
Nichiei (Fudosan)........................................... 10,000 28,049
Nichimen Corp............................................... 32,000 129,711
Nintendo Corp., Ltd......................................... 500 32,006
Nippon Meat Packers, Inc.................................... 12,000 157,214
Nippon Metal Industry....................................... 9,000 32,841
Nippon Oil Co., Ltd......................................... 27,000 154,313
Nippon Shinpan Co........................................... 24,000 145,397
Nissan Fire & Marine Insurance.............................. 6,000 37,721
Nissho Iwai Corp............................................ 1,000 10,288
Orient Corp................................................. 29,000 178,238
Osaka Stadium............................................... 8,000 64,715
Seino Transportation Co., Ltd............................... 11,000 152,818
Seiyo Food Systems.......................................... 4,000 37,985
Sekisui Chemical Co......................................... 15,000 167,502
Sekisui House Ltd........................................... 16,000 168,821
Shionogi & Co............................................... 10,000 77,816
Shiseido Co., Ltd........................................... 16,000 187,110
Sumitomo Marine & Fire...................................... 22,000 157,848
Sumitomo Realty & Development............................... 24,000 174,730
Suntelephone Co., Ltd....................................... 2,000 13,383
Tokyo Construction Co....................................... 25,000 96,280
Toyo Engineering............................................ 8,000 45,299
Toyota Tsusho Corp.......................................... 8,000 46,495
Uchida Yoko................................................. 7,000 39,391
Yamaichi Securities Co...................................... 8,000 44,596
Yamanouchi Pharmaceutical Co................................ 8,000 162,489
Yamatake-Honeywell Co., Ltd................................. 10,000 167,941
-----------
6,252,009
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MALAYSIA (1.7%)
Bandar Raya Developments Bhd................................ 7,000 $ 13,579
MBF Capital Bhd............................................. 13,000 17,910
Multi-Purpose Holdings Bhd.................................. 43,000 73,539
Oriental Holdings Bhd....................................... 14,000 95,329
Perlis Plantations Bhd...................................... 28,750 82,516
-----------
282,873
- --------------------------------------------------------------------------------
NETHERLANDS (5.0%)
Aegon N.V................................................... 3,501 178,052
Boskalis Westminster N.V.................................... 4,987 101,392
Hollandsche Beton Groep N.V................................. 1,000 185,574
International-Muller N.V.................................... 3,600 86,770
Koninklijke Van Ommeren N.V................................. 4,200 174,495
Koninklijke Volker Stevin N.V............................... 600 55,088
Wegener N.V................................................. 800 66,945
-----------
848,316
- --------------------------------------------------------------------------------
NEW ZEALAND (0.3%)
Lion Nathan Ltd............................................. 21,100 54,465
- --------------------------------------------------------------------------------
NORWAY (0.6%)
Den Norske Bank A.S......................................... 33,100 110,029
- --------------------------------------------------------------------------------
SINGAPORE (1.3%)
Hotel Properties Ltd........................................ 34,000 52,148
Singapore Land Ltd.......................................... 13,000 72,002
Wing Tai Holdings Ltd....................................... 40,000 98,274
-----------
222,424
- --------------------------------------------------------------------------------
SPAIN (4.2%)
Banco Bilbao Vizcaya S.A. (Registered)...................... 4,600 223,634
Electra de Viesgo S.A....................................... 4,200 103,740
Europistas Concesionaria Espanola S.A....................... 1,582 13,459
Iberdrola S.A............................................... 20,300 215,687
Tabacalera S.A., Class A.................................... 4,200 153,799
-----------
710,319
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SWEDEN (0.6%)
SSAB Svenkst Stal AB, Class B............................... 6,000 $ 87,270
Stena Line, Class B......................................... 3,125 14,041
-----------
101,311
- --------------------------------------------------------------------------------
SWITZERLAND (1.7%)
Aare-Tessin AG (Registered)................................. 50 33,275
Baer Holding Ag (Bearer).................................... 20 21,058
Baloise Holdings Ltd........................................ 10 20,916
Bucher Holding AG, Class B.................................. 50 36,365
Compagnie Financiere Richemont AG, Class A.................. 60 91,508
CS Holding AG (Registered).................................. 860 86,020
-----------
289,142
- --------------------------------------------------------------------------------
UNITED KINGDOM (19.3%)
APV plc..................................................... 44,300 54,064
Anglian Water plc........................................... 17,300 153,843
B.A.T. Industries plc....................................... 31,500 218,355
Bemrose Corp. plc........................................... 7,200 47,742
Bristol Water Holding plc................................... 1,100 23,045
Britannic Assurance plc..................................... 4,600 54,829
British Airways plc......................................... 24,200 218,156
Cowie Group plc............................................. 21,700 126,764
General Accident plc........................................ 16,000 190,709
Guardian Royal Exchange plc................................. 10,900 44,696
HSBC Holdings plc........................................... 16,500 338,028
Heywood Williams Group plc.................................. 9,300 37,076
Hogg Robinson plc........................................... 7,600 32,957
Hyder plc................................................... 3,600 41,474
Invesco plc................................................. 23,700 89,663
Kwik Fit Holdings plc....................................... 5,436 19,725
National Grid Group plc..................................... 13,527 39,620
National Home Loans Holdings plc............................ 7,800 12,819
Northern Electric plc....................................... 8,400 86,590
Nothern Foods plc........................................... 62,500 202,384
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UNITED KINGDOM--(CONTINUED)
Premier Oil plc.......................................... 265,900 $ 142,783
RJB Mining plc........................................... 2,000 17,883
Severn Trent plc......................................... 18,500 186,039
Southern Electric plc.................................... 6,300 65,968
Sun Alliance Group plc................................... 35,645 243,608
Thames Water plc......................................... 17,700 159,705
Unigate plc.............................................. 25,400 178,137
United Utilities plc..................................... 17,900 166,024
Yorkshire Water plc...................................... 11,300 113,635
----------
3,306,321
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $15,485,494)...................................... 15,808,682
- -------------------------------------------------------------------------------
PREFERRED STOCKS (0.3%)
- -------------------------------------------------------------------------------
GERMANY (0.3%)
Villeroy & Boch AG (COST $74,864)........................ 450 49,801
<CAPTION>
NO. OF
WARRANTS
- -------------------------------------------------------------------------------
WARRANTS (0.0%)
- -------------------------------------------------------------------------------
<S> <C> <C>
HONG KONG (0.0%)
*Peregrine Investment Holdings Ltd.
(expires 11/1/96) (COST $0)............................. 7,000 1,313
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.6%)
Chase Securities, Inc., 5.58% dated 10/31/96,
due 11/1/96, to be repurchased at $797,124,
collateralized by $770,389 of various U.S. Treasury
Notes, 5.875-7.75%, due 3/31/99-11/30/99, valued at
$797,002 (COST $797,000)............................... $797,000 $ 797,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.5%)
(COST $16,357,358) (A).................................. 16,656,796
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.5%)....................... 422,303
- -------------------------------------------------------------------------------
NET ASSETS (100%)......................................... $17,079,099
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
(a) The cost for federal income tax purposes was $16,366,077. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$290,719. This consisted of aggregate gross unrealized appreciation for all
securities of $1,416,112 and aggregate gross unrealized depreciation for
all securities of $1,125,393.
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION: Under the terms of for-
ward foreign currency exchange contracts open at October 31, 1996, the Portfo-
lio is obligated to deliver or is to receive foreign currency in exchange for
U.S. dollars as indicated below:
<TABLE>
<CAPTION>
IN NET
CURRENCY SETTLEMENT EXCHANGE UNREALIZED
TO DELIVER VALUE DATE FOR VALUE GAIN (LOSS)
---------- ---------- ---------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
JPY 143,566,700 $1,276,451 1/17/97 $ 1,296,021 $1,296,021 $ 19,570
$ 1,286,544 1,286,544 1/17/97 JPY 143,566,700 1,276,451 (10,093)
---------- ---------- --------
$2,562,995 $2,572,472 $ 9,477
========== ========== ========
</TABLE>
- -----------
JPY--Japanese Yen
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
At October 31, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF
NET MARKET
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Automotive................................................. 2.3% $ 388,315
Banks...................................................... 7.9 1,342,652
Beverages, Food & Tobacco.................................. 6.0 1,030,864
Capital Equipment.......................................... 0.6 109,980
Chemicals.................................................. 4.3 725,995
Construction............................................... 5.9 1,014,711
Consumer Cyclical.......................................... 0.2 40,965
Consumer Durables.......................................... 5.0 847,443
Consumer Non-Durables...................................... 0.9 151,821
Consumer Staples........................................... 1.9 328,405
Electronics................................................ 5.0 856,528
Energy..................................................... 1.5 251,283
Entertainment & Leisure.................................... 0.7 116,624
Financial Services......................................... 9.1 1,558,729
Holding Company............................................ 4.5 768,261
Home Furnishings & Appliances.............................. 1.0 168,821
Industrial................................................. 2.4 415,240
Insurance.................................................. 7.1 1,219,110
Iron and Steel............................................. 0.5 81,972
Lodging & Restaurants...................................... 0.3 52,148
Manufacturing.............................................. 0.6 103,002
Metals..................................................... 0.7 120,111
Mining..................................................... 0.1 17,883
Oil and Gas................................................ 3.1 536,082
Paper & Packaging.......................................... 1.2 196,647
Pharmaceuticals............................................ 2.2 370,087
Real Estate................................................ 3.4 584,016
Repurchase Agreement....................................... 4.7 797,000
Services................................................... 1.6 277,036
Technology................................................. 1.0 178,137
Telecommunications......................................... 0.8 131,630
Textiles & Apparel......................................... 0.2 37,281
Transportation............................................. 4.3 728,528
Utilities.................................................. 6.5 1,109,489
- --------------------------------------------------------------------------------
Total Investments......................................... 97.5% $16,656,796
Other Assets and Liabilities (Net)......................... 2.5 422,303
- --------------------------------------------------------------------------------
Net Assets................................................ 100.0% $17,079,099
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Value (Cost $16,357,358).......................... $16,656,796
Foreign Currency, at Value (Cost $408,893)........................ 407,238
Cash.............................................................. 155
Dividends Receivable.............................................. 29,253
Receivable due from Investment Adviser............................ 12,616
Foreign Withholding Tax Reclaim Receivable........................ 12,343
Net Unrealized Gain on Forward Foreign Currency Exchange
Contract........................................................ 9,477
Deferred Organization Costs....................................... 782
Interest Receivable............................................... 124
Other Assets...................................................... 566
- -------------------------------------------------------------------------------
Total Assets..................................................... 17,129,350
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Custodian Fees........................................ 12,575
Payable for Administrative Fees................................... 8,389
Payable for Directors' Fees....................................... 650
Other Liabilities................................................. 28,637
- -------------------------------------------------------------------------------
Total Liabilities................................................ 50,251
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $17,079,099
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $15,885,229
Undistributed Net Investment Income............................... 351,096
Accumulated Net Realized Gain..................................... 535,496
Unrealized Appreciation........................................... 307,278
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $17,079,099
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value)
(Authorized 25,000,000)......................................... 1,319,893
Net Asset Value, Offering and Redemption Price Per Share.......... $ 12.94
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 393,901
Interest................................................. 10,956
Less: Foreign Taxes Withheld............................. (52,553)
- ---------------------------------------------------------------------------------
Total Income............................................ 352,304
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee............................................... $ 90,328
Less: Fees Waived....................................... (90,328) --
--------
Administrative Service Fees--Note C...................... 93,183
Registration and Filing Fees............................. 22,569
Custodian Fees--Note D................................... 35,388
Audit Fees............................................... 13,353
Printing Fees............................................ 12,973
Directors' Fees--Note G.................................. 2,615
Legal Fees............................................... 1,868
Amortization of Organizational Costs..................... 560
Other Expenses........................................... 2,104
Expenses Assumed by the Investment Adviser--Note B....... (57,063)
- ---------------------------------------------------------------------------------
Total Expenses.......................................... 127,550
Expense Offset--Note A................................... (923)
- ---------------------------------------------------------------------------------
Net Expenses............................................ 126,627
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... 225,677
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON:
Investments.............................................. 552,272
Foreign Exchange Transactions............................ 109,650
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN
EXCHANGE TRANSACTIONS................................... 661,922
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments.............................................. 124,008
Foreign Exchange Translations............................ 6,939
- ---------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION.. 130,947
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS............................................ 792,869
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $1,018,546
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss).......................... $ 225,677 $ (2,665)
Net Realized Gain..................................... 661,922 42,392
Net Change in Unrealized Appreciation/Depreciation.... 130,947 (152,772)
- ---------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations......................................... 1,018,546 (113,045)
- ---------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain..................................... (45,051) (50,627)
- ---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 15,377,297 161,129
--In Lieu of Cash Distributions..................... 45,051 50,627
Redeemed.............................................. (1,791,361) (489)
- ---------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 13,630,987 211,267
- ---------------------------------------------------------------------------------
Total Increase........................................ 14,604,482 47,595
Net Assets:
Beginning of Period................................... 2,474,617 2,427,022
- ---------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $351,096 and $0, respectively)............ $17,079,099 $2,474,617
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 1,243,285 13,801
In Lieu of Cash Distributions........................ 3,824 4,500
Shares Redeemed...................................... (141,721) (40)
- ---------------------------------------------------------------------------------
1,105,388 18,261
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MARCH 29,
YEARS ENDED OCTOBER 31, 1993** TO
--------------------------- OCTOBER 31,
1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERI-
OD................................ $ 11.54 $ 12.37 $ 11.77 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... 0.17 (0.01) (0.04) (0.04)
Net Realized and Unrealized
Gain (Loss)...................... 1.44 (0.56) 0.95 1.81
- -------------------------------------------------------------------------------
Total From Investment Operations.. 1.61 (0.57) 0.91 1.77
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Realized Gain.................. (0.21) (0.26) (0.31) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...... $ 12.94 $ 11.54 $ 12.37 $11.77
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+....................... 14.13% (4.58)% 8.02% 17.70%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)....................... $ 17,079 $ 2,475 $ 2,427 $2,264
Ratio of Expenses to Average
Net Assets........................ 1.06% 2.54% 2.50% 2.50%*
Ratio of Net Investment Income
(Loss) to Average Net Assets...... 1.87% (0.11)% (0.38)% (0.76)%*
Portfolio Turnover Rate............. 80% 76% 56% 44%
Average Commission Rate #........... $0.0043 N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per Share.. $ 0.11 $ 0.46 $ 0.21 $ 0.14
Ratio of Expenses to Average Net
Assets Including Expense Offsets.. 1.05% 2.50% N/A N/A
- -------------------------------------------------------------------------------
</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.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are regis-
tered under the Investment Company Act of 1940, as amended. The Acadian Inter-
national Equity Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is
a diversified, open-end management investment company. At October 31, 1996, the
UAM Funds were composed of forty active portfolios. The financial statements of
the remaining portfolios are presented separately. The objective of the Acadian
International Equity Portfolio is to provide maximum long-term total return
consistent with reasonable risk to principal that is superior over the long
term to the performance of the Benchmark Index (Morgan Stanley Capital Interna-
tional Index for Europe, Australia and the Far East or "EAFE") by investing in
a diversified portfolio of equity securities of primarily non-United States is-
suers.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting pol-
icies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require man-
agement to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results may differ from those
estimates.
1. SECURITY VALUATION: Securities listed on a United States securities
exchange for which market quotations are readily available are valued at
the last quoted sales price as of the close of the exchange on the day the
valuation is made or, if no sale occurred on such day, at the bid price on
such day. Securities listed on a foreign exchange are valued at their
closing price. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and un-
listed securities are valued not exceeding the current asked prices nor
less than the current bid prices. Short-term investments that have remain-
ing maturities of sixty days or less at time of purchase are valued at am-
ortized 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 Di-
rectors.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements. The
Portfolio may be subject to taxes imposed by countries in which it in-
vests. Such taxes are generally based on either income or gains earned or
repatriated. The Portfolio accrues such taxes when the related income is
earned.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
F-18
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
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 on the date of valuation. The Portfolio does not isolate that por-
tion 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. These gains and losses are included in
net realized and unrealized gain and loss on investments on the statement
of operations. Net realized and unrealized gains and losses on foreign
currency transactions represent net foreign exchange gains or losses from
forward foreign currency exchange contracts, disposition of foreign cur-
rencies, 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 Port-
folio's books and the U.S. dollar equivalent amounts actually received or
paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolio may enter
into forward foreign currency exchange contracts to protect the value of
securities held and related receivables and payables against changes in
future foreign exchange rates. A forward currency contract is an agreement
between two parties to buy and sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in cur-
rency exchange rates. The contract is marked-to-market daily using the
current 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
F-19
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 lim-
ited to the amount of unrealized gain on the contracts, if any, at the
date of default. Risks may also arise from the unanticipated movements in
the value of a foreign currency relative to the U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income annually. 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. These dif-
ferences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments, foreign cur-
rency transactions and in-kind transactions.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $125,419 to increase undistrib-
uted net investment income and $124,859 to decrease accumulated net real-
ized gain, with a decrease to paid in capital of $560.
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
7. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded
as soon as the Portfolio is informed of the ex-dividend date. Interest in-
come is recognized on the accrual basis. Most expenses of the UAM Funds
can be directly attributed to a particular portfolio. Expenses which can-
not 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 manage-
ment investment company, based on their relative net assets. Custodian
fees for the Portfolio have been increased to include expense offsets for
custodian balance credits.
F-20
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 serv-
ices 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 of average daily net
assets and 0.40% of the average daily net assets in excess of $200 million. Ef-
fective 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 nec-
essary, in order to keep the Portfolio's total annual operating expenses, after
the effect of expense offset arrangements, from exceeding 1.00% of average
daily net assets. Prior to January 1, 1996, the Adviser had voluntarily agreed
to waive a portion of its advisory fees and to assume expenses, if necessary,
in order to keep the Portfolio's total annual operating expenses, after the ef-
fect of expense offset arrangements, from exceeding 2.50% of average daily net
assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.06% of average daily net assets of the Portfolio. Also effec-
tive April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain services,
including but not limited to, administration, fund accounting, dividend dis-
bursing and transfer agent services. Pursuant to the Mutual Funds Service
Agreement, the Administrator pays CGFSC a monthly fee. For the period April 15,
1996 to October 31, 1996, UAM Fund Services, Inc. earned $56,097 from the Port-
folio as Administrator of which $50,592 was paid to CGFSC for their services.
F-21
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Prior to April 15, 1996, CGFSC served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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 mil-
lion of the combined aggregate net assets; plus 0.12% of the next $800 million
of the combined aggregate net assets; plus 0.08% of the combined aggregate net
assets in excess of $1 billion but less than $3 billion; plus 0.06% of the
combined aggregate net assets in excess of $3 billion. The fees were allocated
among the portfolios of the UAM Funds and AEW on the basis of their relative
net assets and were subject to a graduated minimum fee schedule per portfolio
which rose from $2,000 per month, upon inception of a portfolio, to $70,000
annually after two years. For the period November 1, 1995 to April 15, 1996,
CGFSC earned $37,086 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$9,202, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
The Portfolio retains a redemption fee of 1.00% on redemptions of capital
shares held for less than 90 days in the Portfolio. For the year ended October
31, 1996, there were no redemption fees.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $21,445,893 and sales of $8,695,432 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases or sales of long-term U.S. Government securities. Purchases include
in-kind transactions of securities with a value of $13,538,344, including
unrealized appreciation of $405,537.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
F-22
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating Portfolio based on its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolio had no borrowings under the agreement.
I. OTHER: At October 31, 1996, 83.3% of total shares outstanding were held by
1 record shareholder owning more than 10% of the aggregate total shares out-
standing.
At October 31, 1996, the net assets of the Portfolio was substantially com-
posed of foreign denominated securities and/or currency. Changes in currency
exchange rates will affect the value of and investment income from such securi-
ties and currency.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated trans-
actions as a result of, among other factors, the possibly lower level of gov-
ernmental supervision and regulation of foreign securities markets and the pos-
sibility of political or economic instability.
F-23
<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 assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all mate-
rial respects, the financial position of Acadian International Equity Portfolio
(the "Portfolio"), a Portfolio of the UAM Funds, Inc. at October 31, 1996, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted ac-
counting principles. These financial statements and financial highlights (here-
after 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 fi-
nancial 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, 1996 by correspondence with the cus-
todians 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 9, 1996
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FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Foreign taxes accrued during the fiscal year ended October 31, 1996 for the
Acadian International Equity Portfolio, amounting to $53,000 are expected to be
passed through to the shareholders as foreign tax credits on Form 1099 Dividend
for the year ending December 31, 1996, which shareholders of the Acadian Inter-
national Equity Portfolio will receive in late January, 1997.
Acadian International Equity Portfolio hereby designates $45,000 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
federal income tax return. In addition, for the year ended October 31, 1996,
gross income derived from sources within foreign countries amounted to $393,901
for the Portfolio.
F-24
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR CORPORATE BONDS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating cate-
gories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier
3 indicates that the issue ranks at the lower end of the rating category.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instrumentalities which have been established or sponsored by the United
States Government.
A-2
<PAGE>
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association, are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make "indefi-
nite and unlimited" drawings on the Treasury, if needed, to service its debt.
Debt from certain other agencies and instrumentalities, including the Federal
Home Loan Bank and Federal National Mortgage Association, is not guaranteed by
the United States, but those institutions are protected by the discretionary
authority of the U.S. Treasury to purchase certain amounts of their securities
to assist the institution in meeting its debt obligations. Finally, other
agencies and instrumentalities, such as the Farm Credit System and the Federal
Home Loan Mortgage Corporation, are federally chartered institutions under
government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and The Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by
A-3
<PAGE>
the borrower) at face value, plus accrued interest, at any time. In connection
with the Portfolios' investment in variable amount master demand notes, the
Adviser's investment management staff will monitor, on an ongoing basis, the
earning power, cash flow and other liquidity ratios of the issuer and the bor-
rower's ability to pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assignment by Moody's. Among the fac-
tors considered by Moody's in assigning ratings are the following: (1) evalua-
tion of the management of the issuer; (2) economic evaluation of the issuer's
industry or industries and the appraisal of speculative-type risks which may
be inherent in certain areas; (3) evaluation of the issuer's products in rela-
tion to completion and customer acceptance; (4) liquidity; (5) amount and
quality of long term debt; (6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by the management of issuer of obliga-
tions which may be present or may arise as a result of public interest ques-
tions and preparations to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolios are also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, ex-
A-4
<PAGE>
port, transfer or storage of goods. The borrower is liable for payment as well
as the bank which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Most acceptances have maturities of six months or
less and are traded in the secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between vari-
ous currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation or confiscatory taxation, po-
litical or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Fund's Portfolios. However,
these foreign withholding taxes are not expected to have a significant impact.
A-5
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
C & B PORTFOLIOS
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
C & B Portfolios dated January 3, 1997. To obtain a Prospectus, please call
the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 7
Shareholder Services....................................................... 8
Investment Limitations..................................................... 10
Management of the Fund..................................................... 11
Investment Adviser......................................................... 14
Portfolio Transactions..................................................... 15
Administrative Services.................................................... 16
Performance Calculations................................................... 17
General Information........................................................ 20
Financial Statements....................................................... 22
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the C & B Equity, C & B Balanced, C & B Equity Portfolio for Taxable Investors
and C & B Mid Cap Equity Portfolios (the "Portfolios") as set forth in the C &
B Portfolios' Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which any include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other
2
<PAGE>
currencies, (ii) in the case of U.S. banks, it is a member of the Federal De-
posit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio;
(2) Commercial paper rates A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FUTURES CONTRACTS
The Portfolios may enter into futures contracts, options, and options on
futures contracts for the purpose of remaining fully invested and reducing
transactions costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at
a specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are
traded on national futures exchanges. Futures exchanges and trading are regu-
lated under the Commodity Exchange Act by the Commodity Futures Trading Com-
mission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
3
<PAGE>
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures market primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect secu-
rities it owns against price declines or purchase contracts to protect against
an increase in the price of securities it intends to purchase. As evidence of
this hedging interest, each Portfolio expects that approximately 75% of its
futures contract purchases will be "completed;" that is, equivalent amounts of
related securities will have been purchased or are being purchased by the
Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While a Portfolio will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts
4
<PAGE>
exceeds 5% of the market value of its total assets. In addition, a Portfolio
will not enter into futures contracts to the extent that its outstanding obli-
gations to purchase securities under these contracts would exceed 20% of its
total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specified time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to main-
tain its required margin. In such situations, if the Portfolio has insuffi-
cient cash, it may have to sell Portfolio securities to meet daily margin re-
quirements at a time when it may be disadvantageous to do so. In addition, the
Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures posi-
tions also could have an adverse impact on the Portfolio's ability to effec-
tively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the Ad-
viser does not believe that the Portfolios are subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is
also possible that the Portfolio could lose money on futures contracts and
also experience a decline in value of Portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of
a broker with whom the Portfolio has an open position in a futures contract or
related option.
5
<PAGE>
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions a Portfolio has identified as hedging transactions,
the Portfolio is required for Federal income tax purposes to recognize as in-
come for each taxable year its net unrealized gains and losses on regulated
futures contracts as of the end of the year, as well as those actually real-
ized during the year. In most cases, any gain or loss recognized with respect
to a futures contract is considered to be 60% long-term capital gain or loss
and 40% short-term capital gain or loss, without regard to the holding period
of the contract. Furthermore, sales of futures contracts which are intended to
hedge against a change in the value of securities held by the Portfolio may
affect the holding period of such securities and, consequently, the nature of
the gain or loss on such securities upon disposition.
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income, for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must
be limited to less than 30% of a Portfolio's annual gross income. It is antic-
ipated that any net gain realized from the closing out of futures contracts
will be considered a gain from the sale of securities and therefore will be
qualifying income for purposes of the 90% requirement. In order to avoid real-
izing excessive gains on securities held for less than three months, a Portfo-
lio may be required to defer the closing out of futures contracts beyond the
time when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on futures contracts, which have been open for less than
three months as of the end of a Portfolio's fiscal year and which are recog-
nized for tax purposes, will not be considered gains on securities held for
less than three months for the purposes of the 30% test.
The Portfolios will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized
6
<PAGE>
gains at the end of the Portfolio's fiscal year) on futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Portfolio's other investments and shareholders will be advised on the na-
ture of the payments.
PURCHASE OF SHARES
Shares of the C & B Portfolios may be purchased without a sales commission,
at the net asset value per share next determined after an order is received in
proper form by the Fund and payment is received by the Fund's Custodian. The
minimum initial investment required is $2,500 with certain exceptions as may
be determined from time to time by the officers of the Fund. Other investment
minimums are: initial IRA investment, $500; initial spousal IRA investment,
$250; minimum additional investment for all accounts, $100. An order received
in proper form prior to the close of the New York Stock Exchange ("Exchange")
will be executed at the price computed on the date of receipt; and an order
received not in proper form or after the close of the Exchange will be exe-
cuted at the price computed on the next day the Exchange is open after proper
receipt. The Exchange will be closed on the following days: Presidents' Day,
February 17, 1997; Good Friday, March 28, 1997; Memorial Day, May 26, 1997;
Independence Day, July 4, 1997; Labor Day, September 1, 1997; Thanksgiving
Day, November 27, 1997; Christmas Day, December 25, 1997; and New Year's Day,
January 1, 1998.
The Portfolios reserve the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interest of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
The Portfolios may suspend redemption privileges or postpone the day of pay-
ment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment
7
<PAGE>
securities or in cash, as the Directors may deem advisable; however, payment
will be made wholly in cash unless the Directors believe that economic or mar-
ket conditions exist which would make such a practice detrimental to the best
interests of the Fund. If redemptions are paid in investment securities, such
securities will be valued as set forth in the Prospectus under "Valuation of
Shares" and a redeeming shareholder would normally incur brokerage expenses if
these securities were converted to cash.
No charge is made by any Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES -- To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account. Sig-
nature guarantees are required in connection with (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) and/or
registered address; and (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible guar-
antor institutions include banks, brokers, dealers, credit unions, national se-
curities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Administrator. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the Portfolios' Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each C & B Portfolio may be exchanged for In-
stitutional Class Shares of other C & B Portfolios. In addition, Institutional
8
<PAGE>
Class Shares of each C & B Portfolio may be exchanged for any other Institu-
tional Class Shares of a Portfolio included in the UAM Funds which is com-
prised of the Fund and UAM Funds Trust. (See the list of Portfolios of the UAM
Funds -- Institutional Class Shares in the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM
Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O.
Box 2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are qualified for sale in the shareholder's state
of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the C & B Portfolio to be purchased.
You may obtain a Prospectus for the Portfolio(s) you are interested in by
calling the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. (Eastern Time) will be processed as of the close of busi-
ness on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be respon-
sible for the authenticity of the exchange instructions received by telephone.
Exchanges may also be subject to limitations as to amounts or frequency, and
to other restrictions established by the Board of Directors to assure that
such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
by making a written request to the Fund. The request should clearly identify
the account and number of shares to be transferred, and include the signature
of all registered owners and all stock certificates, if any, which are subject
to the transfer. The signature on the letter of request, the stock certifi-
cates or any stock power must be guaranteed in the same manner as described
under "Redemption of Shares." As in the case of redemptions, the written re-
quest must be received in good order before any transfer can be made.
9
<PAGE>
INVESTMENT LIMITATIONS
The Portfolios are subject to the following restrictions which are fundamen-
tal policies and may not be changed without the approval of the lesser of: (1)
at least 67% of the voting securities of the Portfolio present at a meeting if
the holders of more than 50% of the outstanding voting securities of the Port-
folio are present or represented by proxy, or (2) more than 50% of the out-
standing voting securities of the Portfolio. Each Portfolio will not:
(1) invest in commodities except that each Portfolio may invest in
futures contracts and options to the extent that not more than 5% of
a Portfolio's assets are required as deposit to secure obligations
under futures contracts;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, subject to the limitation
described in (10) below) which are publicly distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent
with the 1940 Act or the rules and regulations or interpretations of
the Commission thereunder;
(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into options, futures or repurchase transactions;
(5) purchase on margin or sell short except as specified in (1) above;
(6) purchase more than 10% of any class of the outstanding voting securi-
ties of any issuer;
(7) with respect to 75% of its assets, purchase securities of any issuer
(except obligations of the United States Government and its instru-
mentalities) if as a result more than 5% of the Portfolio's total as-
sets, at the time of purchase, would be invested in the securities of
such issuer;
(8) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(9) borrow money, except from banks and as a temporary measure for ex-
traordinary or emergency purposes and then, in no event, in excess of
10% of the Portfolio's gross assets valued at the lower of market or
cost, and a Portfolio may not purchase additional securities when
borrowings exceed 5% of total gross assets;
10
<PAGE>
(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(11) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% of the net assets of the Portfolio, determined at the
time of investment, in securities subject to legal or contractual re-
strictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;
(12) invest for the purpose of exercising control over management of any
company;
(13) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) continuous opera-
tions consisting of less than three years;
(14) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of the Portfo-
lio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no limi-
tation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when such Portfolio adopts a temporary defensive
position; and
(15) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec
Age: 47 Corporation and Cyber Scientific, Inc.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
WILLIAM A. HUMENUK Director of the Fund; Partner in the
4000 Bell Atlantic Tower Philadelphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square
Boston, MA 02111 Investors Corporation since 1988; Director
Age: 52 and Chief Executive Officer of H.T.
Investors, Inc., formerly a subsidiary of
Dewey Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President of
Age: 45 Operations, Development and Control of
Fidelity Investments in 1995; Treasurer of
the Fidelity Group of Mutual Funds from
1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice
211 Congress Street President of UAM Fund Services, Inc.;
Boston, MA 02110 former Manager of Fund Administration and
Age: 32 Compliance of Chase Global Fund Services
Company from 1995 to 1996; Deloitte &
Touche LLP from 1985 to 1995, formerly
Senior Manager.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
12
<PAGE>
As of December 31, 1996, the Directors and officers of the Fund owned less
than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
or the Administrator and receive no compensation from the Fund. The following
table shows aggregate compensation paid to each of the Fund's unaffiliated Di-
rectors by the Fund and total compensation paid by the Fund, UAM Funds Trust
and AEW Commercial Mortgage Securities Fund, Inc. (collectively the "Fund Com-
plex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr., .. $25,463 0 0 $30,500
Director
J. Edward Day, ......... $25,463 0 0 $30,500
Former Director
Philip D. English, ..... $25,463 0 0 $30,500
Director
William A. Humenuk, .... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of a Portfolio, as noted.
C & B Equity Portfolio: First Union Bank, Trustee, Cadmus Communication
Corp. Pension Plan, 401 S. Tryon, Charlotte, NC 28288, 11.3%*, Trussal & Co.
FBO Auto Club of MI & Auto Club of ISN, P.O. Box 771072, Detroit, MI 48277,
9.3%*, Commonwealth Energy System, One Main Street, Cambridge, MA 02142,
8.0%*, Nationsbank FBO Davis Polk & Wardwell Profit Sharing Plan, P.O. Box
831575, Dallas, TX 75283, 7.5%* and Hudson Valley District Council of Carpen-
ters Pension Fund, R.D. 8, Box 327, Middletown, NY 10940, 6.3%*.
C & B Balanced Portfolio: UFCW Local 56 & Food Industry Employers Money Pur-
chase Pension Trust, c/o Corestates Bank, P.O. Box 7829, Philadelphia, PA,
26%; The Chase Manhattan Bank, N.A., Trustee, Charles J. Prizer Money Purchase
Pension Plan, FBO Charles J. Prizer, 4325 Gulf of Mexico Drive,
13
<PAGE>
Longboat Key, FL, 13.9%*, Baptist Health System, Inc., D/B/A Coosa Valley Bap-
tist Medical Center, 315 West Hickory Street, Sylacauga, AL, 13%, Stanley B.
Tulin, c/o Coopers & Lybrand, 717 Spring Mill Rd., Villanova, PA 19085, 5.4%
and St. Andrews Church, Memorial Endowment Fund, P.O. Box 1287, Edgartown, MA
02539, 5.2%.
As of December 6, 1996, C & B owned one share of the Taxable Equity and Mid
Cap Equity Portfolios representing 100% of each Portfolio's shares issued.
The persons or organizations owning 25% or more of the outstanding shares of
a Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have
the ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Cooke & Bieler, Inc. (the "Adviser") is a wholly-owned subsidiary of UAM, a
holding company incorporated in Delaware in December 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment man-
agement. Since its first acquisition in August 1983, UAM has acquired or orga-
nized approximately 45 such wholly-owned affiliated firms (the "UAM Affiliated
Firms"). UAM believes that permitting UAM Affiliated Firms to retain control
over their investment advisory decisions is necessary to allow them to con-
tinue to provide investment management services that are intended to meet the
particular needs of their respective clients. Accordingly, after acquisition
by UAM, UAM Affiliated Firms continue to operate under their own firm name,
with their own leadership and individual investment philosophy and approach.
Each UAM Affiliated Firm manages its own business independently on a day-to-
day basis. Investment strategies employed and securities selected by UAM Af-
filiated Firms are separately chosen by each of them.
PHILOSOPHY AND STYLE
The Adviser bases its philosophy and process on selecting high quality, risk
averse stocks. An emphasis on value is designed to protect assets in down mar-
kets. The stock selection process is geared towards finding companies with
high quality earnings which are sustainable in a wide range of economic envi-
ronments. Key criteria include companies with strong balance sheets, a proven
management team and low debt. On the fixed income side, the Adviser is a con-
servative, quality-oriented bond manager.
14
<PAGE>
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included Baptist Health System, Mayo
Foundation and Princeton University.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, each C & B Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to both the C & B Portfolios' average net assets for the month:
<TABLE>
<CAPTION>
RATE
-----
<S> <C>
C & B Equity Portfolio................................................ 0.625%
C & B Balanced Portfolio.............................................. 0.625%
C & B Equity Portfolio for Taxable Investors.......................... 0.625%
C & B Mid Cap Equity Portfolio........................................ 0.625%
</TABLE>
For the periods ended October 31, 1994, 1995 and 1996, the C & B Equity
Portfolio paid advisory fees of approximately $1,285,000, $1,418,000 and
$1,345,533, respectively, to the Adviser.
For the periods ended October 31, 1994, 1995 and 1996, the C & B Balanced
Portfolio paid advisory fees of approximately $220,000, $182,000 and $77,383
respectively, to the Adviser. During these periods, the Adviser voluntarily
waived advisory fees of approximately $2,000, $9,000 and $66,224, respective-
ly.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Fund's C & B Portfolios and directs the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to al-
locate brokerage or principal business on the basis of sales of shares which
may be made through broker-dealer firms. However, the Adviser may place port-
folio orders with qualified broker-dealers who recommend the Fund's Portfolios
or who act as agents in the purchase of shares of the Portfolios for their
clients. During the fiscal years ended, October 31, 1994,
15
<PAGE>
1995 and 1996, the entire Fund paid brokerage commissions of approximately
$2,402,000, $2,983,000 and $2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc. ("UAMFSI"),
a wholly owned subsidiary of UAM, and the Fund. The Fund's Directors also ap-
proved a Mutual Fund Services Agreement between UAMFSI and Chase Global Funds
Services Company ("CGFSC"). The services provided by UAMFSI and CGFSC and the
basis of the fees payable by the Fund under the Fund Administration Agreement
are described in the Portfolios' Prospectus. Prior to April 15, 1996, CGFSC or
its predecessor, Mutual Funds Service Company, provided certain administrative
services to the Fund under an Administration Agreement between the Fund and
U.S. Trust Company of New York.
During the fiscal year ended October 31, 1993, the C & B Equity and C & B
Balanced Portfolios paid administrative services fees of $214,866 and $61,189,
respectively, to the Administrator. The basis of the fees paid to the Adminis-
trator for the 1993 fiscal year was as follows: the Fund paid a monthly fee
for its services which on an annualized basis equaled 0.16 of 1% of the first
$200 million of the aggregate net assets of the Fund; plus 0.12 of 1% of the
next $800 million of the aggregate net assets of the Fund; plus 0.06 of 1% of
the aggregate net assets in excess of $1 billion. The fees were allocated
among the Portfolios on the basis of their relative assets and were subject to
a graduated minimum fee schedule per Portfolio, which rose from $1,000 per
month upon inception of a Portfolio to $50,000 annually after two years. Dur-
ing the fiscal years ended October 31, 1994, October 31, 1995 and October 31,
1996 the C & B Equity and C & B Balanced Portfolios paid administrative serv-
ices fees of approximately: $242,000, $264,000 and $271,427; and $69,000,
$79,000 and $84,334; respectively, to the Administrator. Of these amounts, for
the fiscal year ended October 31, 1996, C & B Balanced Portfolio paid $77,007
to Chase and $7,327 to UAMFSI and C & B Equity Portfolio paid $230,298 to
Chase and $41,129 to UAMFSI. The services provided by the
16
<PAGE>
Administrator and the basis of the fees payable to the Administrator are de-
scribed in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to illus-
trate the Fund's past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by the Fund be accompanied by certain standardized performance information
computed as required by the Commission. Current yield and average annual com-
pounded total return quotations used by the Fund are based on the standardized
methods of computing performance mandated by the Commission. An explanation of
those and other methods used by the Fund to compute or express performance
follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5 and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis.
The average annual total rates of return for the C & B Equity and C & B Bal-
anced Portfolios from inception and for the one and five year period ended on
the date of the Financial Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR FIVE YEARS THROUGH YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 1996 DATE
----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
C & B Equity Portfolio....... 21.99% 12.45% 13.58% 5/15/90
C & B Balanced Portfolio..... 14.70% 10.04% 11.06% 12/29/89
</TABLE>
These figures were calculated according to the following formula:
P (1 + T)/n/ = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
17
<PAGE>
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the per-
formance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
18
<PAGE>
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency issues
and mortgage passthrough securities.
(k) Lehman Brothers Government/Corporate Index -- is a combination of the
Government and Corporate Bond Indices. The Government Index includes
public obligations of the U.S. Treasury, issues of Government agen-
cies, and corporate debt backed by the U.S. Government. The Corporate
Bond Index includes fixed-rate nonconvertible corporate debt. Also in-
cluded are Yankee Bonds and nonconvertible debt issued by or guaran-
teed by foreign or international governments and agencies. All issues
are investment grade (BBB) or higher, with maturities of at least one
year and an 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 re-
moved. All returns are market value weighted inclusive of accrued in-
come.
(l) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(o) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(p) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, 65% Standard & Poor's
500 Stock Index and 35% Salomon Brothers High Grade Bond Index, and
60% Standard & Poor's 500 Stock Index and 40% Lehman Brothers
Government/Corporate Index.
19
<PAGE>
(q) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- publi-
cations that rate fund performance over specified time periods.
(t) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates -- historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(v) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill,
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its futures. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other aver-
ages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
changed to "UAM Funds, Inc." The Fund's principal executive office is located
at One International Place, Boston, MA 02110; however, all investor correspon-
dence should be directed to the Fund at UAM Funds Service Center, c/o Chase
Global
20
<PAGE>
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's Arti-
cles of Incorporation authorize the Directors to issue 3,000,000,000 shares of
common stock, $.001 par value. The Board of Directors has the power to desig-
nate one or more series (Portfolios) or classes of common stock and to clas-
sify or reclassify any unissued shares with respect to such Portfolios, with-
out further action by shareholders. Currently, the Fund is offering shares of
30 Portfolios.
The shares of each Portfolio of the Fund, when issued and paid for as pro-
vided for in the Prospectus, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative vot-
ing rights, which means that the holders of more than 50% of the shares voting
for the election of Directors can elect 100% of the Directors if they choose
to do so. A shareholder is entitled to one vote for each full share held (and
a fractional vote for each fractional share held), then standing in his or her
name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Prospectus). The amounts of any income dividends or
capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of that Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of that Portfolio at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
21
<PAGE>
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the C & B Equity and C & B Balanced Portfolios
and the Financial Highlights for the respective periods presented, which ap-
pear in the C & B Equity and Balanced Portfolios' 1996 Annual Reports to
Shareholders, and the reports thereon of Price Waterhouse LLP, independent ac-
countants, also appearing therein, are attached to this SAI.
22
<PAGE>
C & B EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.9%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (5.1%)
Boeing Co................................................ 21,600 $ 2,060,100
Raytheon Co. ............................................ 132,000 6,501,000
------------
8,561,100
- -------------------------------------------------------------------------------
AUTOMOTIVE (6.9%)
Cooper Tire & Rubber Co.................................. 105,600 2,072,400
Eaton Corp............................................... 60,000 3,585,000
Genuine Parts Co......................................... 136,000 5,950,000
------------
11,607,400
- -------------------------------------------------------------------------------
BANKS (1.6%)
Wachovia Corp............................................ 51,700 2,778,875
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.3%)
McCormick & Co., Inc..................................... 89,700 2,164,012
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (6.9%)
Donnelley (R.R.) & Sons Co............................... 73,500 2,232,563
McGraw-Hill Cos., Inc.................................... 99,100 4,645,312
Readers Digest Association, Inc., Class A
(Non-Voting)........................................... 133,000 4,738,125
------------
11,616,000
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (5.9%)
Cooper Industries, Inc................................... 64,000 2,576,000
Dover Corp............................................... 146,000 7,500,750
------------
10,076,750
- -------------------------------------------------------------------------------
CHEMICALS (2.1%)
Eastman Chemical Co...................................... 66,500 3,507,875
- -------------------------------------------------------------------------------
CONSTRUCTION (3.1%)
Sherwin-Williams Co...................................... 106,000 5,313,250
- -------------------------------------------------------------------------------
CONSUMER DURABLES (6.2%)
Corning, Inc............................................. 144,000 5,580,000
Rubbermaid, Inc. ........................................ 105,000 2,441,250
Service Corp. International.............................. 84,800 2,416,800
------------
10,438,050
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
C & B EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (6.3%)
Avon Products, Inc........................................ 85,000 $ 4,611,250
Hasbro, Inc............................................... 103,000 4,004,125
International Flavors & Fragrances, Inc................... 50,000 2,068,750
------------
10,684,125
- --------------------------------------------------------------------------------
ELECTRONICS (4.3%)
AMP, Inc.................................................. 50,000 1,693,750
Grainger (W.W.), Inc. .................................... 36,700 2,720,388
Motorola, Inc............................................. 60,600 2,787,600
------------
7,201,738
- --------------------------------------------------------------------------------
ENERGY (10.7%)
Burlington Resources, Inc. ............................... 92,800 4,674,800
Exxon Corp. .............................................. 69,000 6,115,125
Royal Dutch Petroleum Co. ................................ 44,000 7,276,500
------------
18,066,425
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (14.4%)
EXEL Ltd.................................................. 119,000 4,522,000
MBIA, Inc................................................. 54,000 4,785,750
Marsh & McLennan Cos., Inc................................ 74,000 7,705,250
State Street Boston Corp.................................. 117,000 7,414,875
------------
24,427,875
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.5%)
Whitman Corp.............................................. 177,000 4,292,250
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (7.1%)
International Business Machines Corp...................... 39,300 5,069,700
Pitney Bowes, Inc......................................... 76,600 4,280,025
Xerox Corp................................................ 58,000 2,689,750
------------
12,039,475
- --------------------------------------------------------------------------------
PAPER & PACKAGING (3.0%)
Union Camp Corp........................................... 103,000 5,021,250
- --------------------------------------------------------------------------------
PHARMACEUTICALS (7.5%)
Bristol-Myers Squibb Co................................... 47,800 5,054,850
Schering-Plough Corp...................................... 119,500 7,648,000
------------
12,702,850
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $125,908,110) 160,499,300
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
C & B EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.4%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.4%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $9,055,403,
collateralized by $8,751,691 of various
U.S. Treasury Notes, 5.875%-7.75%, due from
3/31/99-11/30/99, valued at $9,054,021
(COST $9,054,000)................................. $9,054,000 $ 9,054,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $134,962,110) (A)............................ 169,553,300
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)................. (508,958)
- ------------------------------------------------------------------------------
NET ASSETS (100%).................................... $169,044,342
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
(a) The cost for federal income tax purposes was $135,217,033. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$34,336,267. This consisted of aggregate gross unrealized appreciation for
all securities of $37,496,591 and aggregate gross unrealized depreciation
for all securities of $3,160,324.
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................. $134,962,110
============
Investments, at Value............................................ $169,553,300
Receivable for Investments Sold.................................. 589,907
Dividends Receivable............................................. 266,010
Interest Receivable.............................................. 1,403
Other Assets..................................................... 7,113
- -------------------------------------------------------------------------------
Total Assets.................................................... 170,417,733
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................ 1,178,130
Payable for Investment Advisory Fees............................. 90,565
Payable to Custodian............................................. 39,472
Payable for Administrative Fees.................................. 20,331
Payable for Custodian Fees....................................... 14,827
Payable for Directors' Fees...................................... 1,195
Other Liabilities................................................ 28,871
- -------------------------------------------------------------------------------
Total Liabilities............................................... 1,373,391
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $169,044,342
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $ 94,855,106
Undistributed Net Investment Income.............................. 350,040
Accumulated Net Realized Gain.................................... 39,248,006
Unrealized Appreciation.......................................... 34,591,190
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $169,044,342
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value)
(Authorized 25,000,000)........................................ 9,449,210
Net Asset Value, Offering and Redemption Price Per Share......... $ 17.89
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- ----------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends........................................................... $ 5,229,845
Interest............................................................ 641,064
- ----------------------------------------------------------------------------------
Total Income....................................................... 5,870,909
- ----------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B.................................... 1,345,533
Administrative Fees--Note C......................................... 271,427
Registration and Filing Fees........................................ 18,263
Custodian Fees--Note D.............................................. 19,325
Legal Fees.......................................................... 16,904
Audit Fees.......................................................... 15,729
Insurance........................................................... 12,520
Printing Fees....................................................... 12,282
Directors' Fees--Note G............................................. 6,995
Other Expenses...................................................... 14,137
- ----------------------------------------------------------------------------------
Total Expenses..................................................... 1,733,115
Expense Offset--Note A.............................................. (1,595)
- ----------------------------------------------------------------------------------
Net Expenses....................................................... 1,731,520
- ----------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................ 4,139,389
- ----------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS..................................... 45,211,776
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS..................................................... (3,731,843)
- ----------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.............................................. 41,479,933
- ----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $45,619,322
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 4,139,389 $ 5,342,519
Net Realized Gain.................................. 45,211,776 14,986,130
Net Change in Unrealized
Appreciation/Depreciation........................ (3,731,843) 25,575,432
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations................................. 45,619,322 45,904,081
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (4,276,922) (5,400,549)
Net Realized Gain.................................. (11,481,231) --
- --------------------------------------------------------------------------------
Total Distributions............................... (15,758,153) (5,400,549)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 16,594,738 36,110,998
--In Lieu of Cash Distributions.............. 14,951,054 4,790,791
Redeemed........................................... (138,175,569) (44,529,500)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share
Transactions ................................... (106,629,777) (3,627,711)
- --------------------------------------------------------------------------------
Total Increase (Decrease).......................... (76,768,608) 36,875,821
Net Assets:
Beginning of Period................................ 245,812,950 208,937,129
- --------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $350,040 and $487,573, re-
spectively)...................................... $169,044,342 $245,812,950
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued.................................... 987,019 2,478,715
In Lieu of Cash Distributions.................... 944,442 333,851
Shares Redeemed.................................. (8,159,088) (3,047,394)
- --------------------------------------------------------------------------------
(6,227,627) (234,828)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<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,
------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 15.68 $ 13.13 $ 13.06 $ 13.29 $ 12.33
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income...... 0.36 0.34 0.31 0.28 0.29
Net Realized and Unrealized
Gain..................... 2.94 2.55 0.28 0.24 1.02
- -------------------------------------------------------------------------------
Total From Investment
Operations.............. 3.30 2.89 0.59 0.52 1.31
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income...... (0.35) (0.34) (0.30) (0.26) (0.30)
Net Realized Gain.......... (0.74) -- (0.18) (0.49) (0.05)
In Excess of Net Realized
Gain..................... -- -- (0.04) -- --
- -------------------------------------------------------------------------------
Total Distributions....... (1.09) (0.34) (0.52) (0.75) (0.35)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................... $ 17.89 $ 15.68 $ 13.13 $ 13.06 $ 13.29
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN................ 21.99% 22.28% 4.67% 4.05% 10.68%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)............... $169,044 $245,813 $208,937 $209,153 $112,763
Ratio of Expenses to Average
Net Assets................ 0.81% 0.79% 0.82% 0.82% 0.83%
Ratio of Net Investment
Income to Average Net
Assets.................... 1.92% 2.35% 2.39% 2.28% 2.27%
Portfolio Turnover Rate..... 29% 42% 46% 21% 45%
Average Commission
Rate #.................... $ 0.0508 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets Including
Expense Offsets........... 0.80% 0.78% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The C & B Equity
Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a diversified,
open-end management investment company. At October 31, 1996, the UAM Funds
were composed of forty active portfolios. The financial statements of the re-
maining portfolios are presented separately. The objective of the Portfolio is
to provide maximum long-term total return with minimal risk to principal by
investing in common stocks which have a consistency and predictability in
their earnings growth.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: 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 valua-
tion is made or, if no sale occurred on such day, at the mean of the bid
and asked prices. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and un-
listed securities are valued not exceeding the current asked prices nor
less than the current bid prices. Short-term investments that have remain-
ing maturities of sixty days or less at time of purchase are valued at am-
ortized 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 Di-
rectors.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the
F-10
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
event of default on the obligation to repurchase, the Portfolio has the
right to liquidate the collateral and apply the proceeds in satisfaction
of the obligation. In the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral or
proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income 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. These dif-
ferences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments and in-kind
transactions.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $5,050,615 to decrease accumu-
lated net realized gain, with an increase to paid in capital of
$5,050,615.
Current year permanent book-tax differences are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the financial highlights.
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. Ex-
penses which cannot be directly attributed are apportioned among the port-
folios 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
F-11
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
investment company, based on their relative net assets. Custodian fees for
the Portfolio have been increased to include expense offsets for custodian
balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Cooke & Bieler, Inc. (the "Adviser"), a wholly-owned subsidiary of United As-
set Management Corporation ("UAM"), provides investment advisory services to
the Portfolio at a fee calculated at an annual rate of 0.625% of average daily
net assets. The Adviser has voluntarily agreed to waive a portion of its advi-
sory fees and to assume expenses, if necessary, in order to keep the Portfo-
lio's total annual operating expenses, after the effect of expense offset ar-
rangements, from exceeding 1.00% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.04% of average daily net assets of the
Portfolio. Also effective April 15, 1996, the Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the period April 15, 1996 to October 31, 1996, UAM Fund Services,
Inc. earned $143,906 from the Portfolio as Administrator of which $102,776 was
paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees,
F-12
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 mil-
lion of the combined aggregate net assets; plus 0.08% of the combined aggre-
gate net assets in excess of $1 billion but less than $3 billion; plus 0.06%
of the combined aggregate net assets in excess of $3 billion. The fees were
allocated among the portfolios of the UAM Funds and AEW on the basis of their
relative net assets and were subject to a graduated minimum fee schedule per
portfolio which rose from $2,000 per month, upon inception of a portfolio, to
$70,000 annually after two years. For the period November 1, 1995 to April 15,
1996, CGFSC earned $127,521 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$10,599, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $59,975,837 and sales of $173,242,732 of investment securi-
ties other than long-term U.S. Government and short-term securities. The Port-
folio sales figure includes $21,284,900 of in-kind transactions which resulted
in a realized gain of $5,102,871. There were no purchases or sales of long-
term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to partici-
pate in a $100 million unsecured line of credit with several banks. Borrowings
will be made solely to temporarily finance the repurchase of Capital shares.
Interest is
F-13
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 its average daily unused por-
tion of the line of credit. During the year ended October 31, 1996 the Portfo-
lio had no borrowings under the agreement.
F-14
<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 assets and liabilities, in-
cluding the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of the C&B Equity Portfolio (the
"Portfolio"), a Portfolio of the UAM Funds, Inc. at October 31, 1996, and the
results of its operations, the changes in its net assets and the financial
highlights for the 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 reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements, assessing the ac-
counting 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, 1996 by cor-
respondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, pro-
vide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The C&B Equity Portfolio hereby designates $11,481,000 as a long-term capi-
tal gain dividend for the purpose of the dividend paid deduction on its Fed-
eral income tax return. For the year ended October 31, 1996, the percentage of
dividends paid that qualify for the 70% dividend received deduction for corpo-
rate shareholders is 100.0%.
F-15
<PAGE>
C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (55.2%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.2%)
Boeing Co................................................... 2,100 $ 200,287
Raytheon Co................................................. 10,400 512,200
-----------
712,487
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.0%)
Cooper Tire & Rubber Co..................................... 8,500 166,812
Eaton Corp. ................................................ 4,500 268,875
Genuine Parts Co............................................ 10,900 476,875
-----------
912,562
- --------------------------------------------------------------------------------
BANKS (1.0%)
Wachovia Corp............................................... 4,100 220,375
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (3.9%)
Donnelley (R.R.) & Sons Co. ................................ 5,300 160,987
McGraw-Hill Cos., Inc. ..................................... 7,400 346,875
Readers Digest Association, Inc., Class A
(Non-Voting).............................................. 10,500 374,063
-----------
881,925
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (3.5%)
Cooper Industries, Inc. .................................... 4,800 193,200
Dover Corp.................................................. 11,500 590,812
-----------
784,012
- --------------------------------------------------------------------------------
CHEMICALS (1.2%)
Eastman Chemical Co......................................... 5,000 263,750
- --------------------------------------------------------------------------------
CONSTRUCTION (2.0%)
Sherwin-Williams Co. ....................................... 9,000 451,125
- --------------------------------------------------------------------------------
CONSUMER DURABLES (3.8%)
Corning, Inc. .............................................. 11,600 449,500
Rubbermaid, Inc. ........................................... 9,000 209,250
Service Corp. International................................. 7,200 205,200
-----------
863,950
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-3
<PAGE>
C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.9%)
Avon Products, Inc. ........................................ 7,000 $ 379,750
Hasbro, Inc. ............................................... 8,700 338,213
International Flavors & Fragrances, Inc. ................... 4,000 165,500
-----------
883,463
- --------------------------------------------------------------------------------
ELECTRONICS (2.4%)
AMP, Inc. .................................................. 4,000 135,500
Grainger (W.W.), Inc. ...................................... 2,900 214,963
Motorola, Inc. ............................................. 4,400 202,400
-----------
552,863
- --------------------------------------------------------------------------------
ENERGY (6.2%)
Burlington Resources, Inc................................... 7,700 387,887
Exxon Corp.................................................. 5,000 443,125
Royal Dutch Petroleum Co.................................... 3,500 578,813
-----------
1,409,825
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (8.4%)
EXEL Ltd. .................................................. 9,300 353,400
Marsh & McLennan Cos., Inc. ................................ 4,400 389,950
MBIA, Inc. ................................................. 6,000 624,750
State Street Boston Corp.................................... 8,500 538,688
-----------
1,906,788
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (1.5%)
Whitman Corp. .............................................. 13,600 329,800
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (4.2%)
International Business Machines Corp. ...................... 3,200 412,800
Pitney Bowes, Inc. ......................................... 6,500 363,188
Xerox Corp.................................................. 4,000 185,500
-----------
961,488
- --------------------------------------------------------------------------------
PAPER & PACKAGING (1.8%)
Union Camp Corp. ........................................... 8,400 409,500
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-4
<PAGE>
C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
PHARMACEUTICALS (4.2%)
Bristol-Myers Squibb Co. .............................. 3,300 $ 348,975
Schering-Plough Corp................................... 9,500 608,000
-----------
956,975
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $9,584,476)..................................... 12,500,888
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (17.6%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.2%)
Boeing Co.
6.35%, 6/15/03........................................ $ 500,000 493,920
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (6.8%)
Coca Cola Co.
7.875%, 9/15/98....................................... 1,000,000 1,033,060
Philip Morris Cos., Inc.
8.75%, 6/15/97........................................ 500,000 508,415
-----------
1,541,475
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.8%)
Clorox Co.
8.80%, 7/15/01........................................ 1,000,000 1,090,860
- -------------------------------------------------------------------------------
ENERGY (1.1%)
Amoco, Canada
7.25%, 12/1/02........................................ 250,000 257,940
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.7%)
Chevron Profit Sharing Savings Plan Trust Fund
7.28%, 1/1/97......................................... 600,000 601,386
- -------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $3,847,506)..................................... 3,985,581
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
SECURITIES (23.2%)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(7.0%)
7.50%, 2/11/02....................................... 1,500,000 1,578,045
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-5
<PAGE>
C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (4.3%)
8.25%, 5/15/05........................................ $ 500,000 $ 542,265
7.50%, 11/15/16....................................... 400,000 423,376
-----------
965,641
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (11.9%)
8.125%, 2/15/98....................................... 1,000,000 1,026,560
7.00%, 4/15/99........................................ 1,000,000 1,059,060
7.50%, 11/15/01....................................... 600,000 618,096
-----------
2,703,716
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(COST $5,057,340)..................................... 5,247,402
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.1%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.1%)
Chase Securities, Inc., 5.58%, dated 10/31/96,
due 11/1/96, to be repurchased at $703,109,
collateralized by $679,527 various
U.S. Treasury Notes, 5.875%-7.75%, due
from 3/31/99-11/30/99,
valued at $703,002 (COST $703,000) .................. 703,000 703,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.1%)
(COST $19,192,322) (A)................................ 22,436,871
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
(0.9%)................................................ 191,770
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $22,628,641
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
(a) The cost for federal income tax purposes was $19,237,285. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$3,199,586. This consisted of aggregate gross unrealized appreciation for
all securities of $3,461,698 and aggregate gross unrealized depreciation
for all securities of $262,112.
The accompanying notes are an integral part of the financial statements.
FINA-6
<PAGE>
C & B BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost.............................................. $19,192,322
===========
Investments, at Value............................................. $22,436,871
Cash.............................................................. 669
Interest Receivable............................................... 192,531
Receivable for Investments Sold................................... 87,801
Dividends Receivable.............................................. 20,995
Other Assets...................................................... 753
- -------------------------------------------------------------------------------
Total Assets..................................................... 22,739,620
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................. 68,100
Payable for Administrative Fees................................... 7,474
Payable for Investment Advisory Fees.............................. 4,619
Payable for Custodian Fees........................................ 3,236
Payable for Directors' Fees....................................... 666
Other Liabilities................................................. 26,884
- -------------------------------------------------------------------------------
Total Liabilities................................................ 110,979
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $22,628,641
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $17,406,043
Undistributed Net Investment Income............................... 102,528
Accumulated Net Realized Gain..................................... 1,875,521
Unrealized Appreciation........................................... 3,244,549
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $22,628,641
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value)
(Authorized 25,000,000)......................................... 1,748,347
Net Asset Value, Offering and Redemption Price Per Share.......... $ 12.94
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-7
<PAGE>
C & B BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................. $ 705,173
Dividends................................................ 331,421
- --------------------------------------------------------------------------------
Total Income............................................ 1,036,594
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.............................................. $143,607
Less: Fees Waived....................................... (66,224) 77,383
--------
Administrative Fees--Note C.............................. 84,334
Registration and Filing Fees............................. 22,151
Audit Fees............................................... 14,662
Printing Fees............................................ 13,908
Custodian Fees--Note D................................... 8,601
Directors' Fees--Note G.................................. 2,845
Other Expenses........................................... 5,697
- --------------------------------------------------------------------------------
Total Expenses.......................................... 229,581
Expense Offset--Note A................................... (148)
- --------------------------------------------------------------------------------
Net Expenses............................................ 229,433
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... 807,161
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.......................... 1,918,101
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON INVESTMENTS................ 435,301
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS................................... 2,353,402
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. $3,160,563
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-8
<PAGE>
C & B BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 807,161 $ 1,162,224
Net Realized Gain..................................... 1,918,101 2,588,583
Net Change in Unrealized
Appreciation/Depreciation............................. 435,301 1,387,264
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations.................................... 3,160,563 5,138,071
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (804,110) (1,204,368)
Net Realized Gain..................................... (2,579,017) (642,513)
- ----------------------------------------------------------------------------------
Total Distributions.................................. (3,383,127) (1,846,881)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 328,108 1,074,934
--In Lieu of Cash Distributions................. 3,033,780 1,548,186
Redeemed.............................................. (4,657,088) (13,844,471)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share
Transactions.................................... (1,295,200) (11,221,351)
- ----------------------------------------------------------------------------------
Total Decrease........................................ (1,517,764) (7,930,161)
Net Assets:
Beginning of Period................................... 24,146,405 32,076,566
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $102,528 and
$93,128, respectively).............................. $22,628,641 $24,146,405
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 26,277 87,856
In Lieu of Cash Distributions....................... 251,778 130,537
Shares Redeemed..................................... (368,527) (1,083,523)
- ----------------------------------------------------------------------------------
(90,472) (865,130)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-9
<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,
----------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 13.13 $ 11.86 $ 12.68 $ 12.57 $ 11.88
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income........ 0.45 0.52 0.48 0.45 0.46
Net Realized and Unrealized
Gain (Loss)................ 1.29 1.51 (0.39) 0.40 0.79
- -------------------------------------------------------------------------------
Total From Investment
Operations................ 1.74 2.03 0.09 0.85 1.25
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........ (0.45) (0.52) (0.47) (0.44) (0.46)
Net Realized Gain............ (1.48) (0.24) (0.44) (0.30) (0.10)
- -------------------------------------------------------------------------------
Total Distributions......... (1.93) (0.76) (0.91) (0.74) (0.56)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 12.94 $ 13.13 $ 11.86 $ 12.68 $ 12.57
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN.................. 14.70%+ 17.83%+ 0.74%+ 7.01% 10.72%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $22,629 $24,146 $32,077 $42,974 $35,326
Ratio of Expenses to Average
Net Assets.................. 1.00% 1.00% 1.00% 0.90% 0.91%
Ratio of Net Investment Income
to Average Net Assets....... 3.51% 3.80% 3.84% 3.65% 3.78%
Portfolio Turnover Rate....... 21% 22% 24% 22% 12%
Average Commission Rate #..... $0.0511 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share........... $ 0.037 $ 0.004 $ 0.001 N/A N/A
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... 1.00% 1.00% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is re-
quired to disclose the average commission rate per share it paid for portfo-
lio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
FINA-10
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The C & B Bal-
anced Portfolio (the "Portfolio"), a portfolio of UAM Funds Inc., is a diver-
sified, open-end management investment company. At October 31, 1996, the UAM
Funds were composed of forty active portfolios. The financial statements of
the remaining portfolios are presented separately. The objective of the Port-
folio is to provide maximum long-term total return with minimal risk to prin-
cipal by investing in a combined portfolio of common stocks which have a con-
sistency and predictability in their earnings growth and investment grade
fixed income securities.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: 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 valua-
tion is made or, if no sale occurred on such day, at the mean of the bid
and asked prices. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and un-
listed equity securities are valued not exceeding the current asked prices
nor less than the current bid 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 secu-
rities, quotations from dealers, market transactions in comparable securi-
ties 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 quota-
tions are readily available is determined in good faith at fair value us-
ing methods determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
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<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income 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. These dif-
ferences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $6,349 to increase undistributed
net investment income and $6,349 to decrease accumulated net realized
gain.
Current year permanent book-tax differences are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the financial highlights.
5. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date. Interest income is recognized on the accrual basis. Discounts and
premiums on securities purchased are amortized using the effective yield
basis over their respective lives. Most expenses of the UAM Funds can be
directly attributed to a
FINA-12
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
particular portfolio. Expenses which cannot be directly attributed are ap-
portioned among the portfolios of the UAM Funds based on their relative
net assets. Additionally, certain expenses are apportioned among the port-
folios 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 in-
creased to include expense offsets for custodian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Cooke & Bieler, Inc. (the "Adviser"), a wholly-owned subsidiary of United As-
set Management Corporation ("UAM"), provides investment advisory services to
the Portfolio at a fee calculated at an annual rate of 0.625% of average daily
net assets. The Adviser has voluntarily agreed to waive a portion of its advi-
sory fees and to assume expenses, if necessary, in order to keep the Portfo-
lio's total annual operating expenses, after the effect of expense offset ar-
rangements, from exceeding 1.00% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.06% of average daily net assets of the
Portfolio. Also effective April 15, 1996, the Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the period April 15, 1996 to October 31, 1996, UAM Fund
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<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Services, Inc. earned $48,131 from the Portfolio as Administrator of which
$40,804 was paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees,
computed daily and payable monthly, based on the combined aggregate average
daily net assets of the UAM Funds and AEW, as follows: 0.20% of the first $200
million of the combined aggregate net assets; plus 0.12% of the next $800
million of the combined aggregate net assets; plus 0.08% of the combined
aggregate net assets in excess of $1 billion but less than $3 billion; plus
0.06% of the combined aggregate net assets in excess of $3 billion. The fees
were allocated among the portfolios of the UAM Funds and AEW on the basis of
their relative net assets and were subject to a graduated minimum fee schedule
per portfolio which rose from $2,000 per month, upon inception of a portfolio,
to $70,000 annually after two years. For the period November 1, 1995 to April
15, 1996 , CGFSC earned $36,203 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$2,401, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $4,170,134 and sales of $7,688,861 of investment securities
other than long-term U.S. Government and short-term securities. Purchases of
long-term U.S. Government securities were $540,938. There were no sales of
long-term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated
person, receives $2,000 per meeting attended, which is allocated
proportionally among the active portfolios of UAM Funds and AEW, plus a
quarterly retainer of $150 for each active portfolio of the UAM Funds and AEW,
and reimbursement of expenses incurred in attending Board meetings.
FINA-14
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
Capital 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 its
average daily unused portion of the line of credit. During the year ended
October 31, 1996, the Portfolio had no borrowings under the agreement.
I. OTHER: At October 31, 1996, 53.9% of total shares outstanding were held
by three record shareholders owning more than 10% of the aggregate total
shares outstanding.
FINA-15
<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 assets and liabilities, in-
cluding the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of C&B Balanced Portfolio (the
"Portfolio"), a Portfolio of the UAM Funds, Inc., at October 31, 1996, and the
results of its operations, the changes in its net assets and the financial
highlights for the 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 reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements, assessing the ac-
counting 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, 1996 by cor-
respondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, pro-
vide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The C&B Balanced Portfolio hereby designates $2,178,000 as a long-term capi-
tal gain dividend for the purpose of the dividend paid deduction on its Fed-
eral income tax return. For the year ended October 31, 1996, the percentage of
dividends paid that qualify for the 70% dividend received deduction for corpo-
rate shareholders is 35.7%.
FINA-16
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating cate-
gories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier
3 indicates that the issue ranks at the lower end of the rating category.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
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<PAGE>
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of res-
idential mortgage loans. These securities are designed to provide monthly pay-
ments of interest and principal to the investor. The mortgagor's monthly pay-
ments to
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his/her lending institution are "passed-through" to investors such as the C &
B Balanced Portfolio. Most issuers or poolers provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or poolers are supported by various forms of cred-
it, collateral, guarantees or insurance, including individual loan, title,
pool and hazard insurance purchased by the issuer. There can be no assurance
that the private issuers can meet their obligations under the policies. Mort-
gage-backed securities issued by private issuers, whether or not such securi-
ties are subject to guarantees, may entail greater risk. If there is no guar-
antee provided by the issuer, mortgage-backed securities purchased by the C &
B Balanced Portfolio will be rated investment grade by Moody's or S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participations in loans. The major-
ity of these loans are made to purchasers of 1-4 family homes. The terms and
characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate, fixed-
term mortgages, the C & B Balanced Portfolio may purchase pools of variable
rate mortgages (VRM), growing equity mortgages (GEM), graduated payment mort-
gages (GPM) and other types where the principal and interest payment proce-
dures vary. VRM's are mortgages which reset the mortgage's interest rate on
pools of VRM's. GPM and GEM pools maintain constant interest with varying lev-
els of principal repayment over the life of the mortgage. These different in-
terest and principal payment procedures should not impact a Portfolio's net
asset value since the prices at which these securities are valued each day
will reflect the payment procedures.
All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit stan-
dards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through pri-
vate mortgage insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of the un-
derlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors in-
cluding the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume the prepayments
will result in a 12-year average life. Pools of mortgages with other maturi-
ties or different characteristics will have varying assumptions for average
life.
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<PAGE>
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life as-
sumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yields
of the Portfolios. The compounding effect from reinvestment of monthly pay-
ments received by a Portfolio will increase its yield to shareholders, com-
pared to bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates. In-
stead, these securities provide a monthly payment which consists of both in-
terest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their residential
mortgage loans, net of any fees paid to the issuer or guarantor of such secu-
rities. Additional payments are caused by repayments resulting from the sale
of the underlying residential property, refinancing or foreclosure net of fees
or costs which may be incurred. Some mortgage-backed securities are described
as "modified pass-through." These securities entitle the holders to receive
all interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make the
payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage Cor-
poration (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the avail-
ability of mortgage credit for residential housing. Its stock is owned by the
twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfo-
lio. FHLMC guarantees the timely payment of interest and ultimate collection
of principal.
The Federal National Mortgage Association (FNMA) is a Government sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller/servicers which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.
The principal Government guarantor of mortgage-backed securities is the Gov-
ernment National Mortgage Association (GNMA). GNMA is a wholly-owned
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<PAGE>
U.S. Government corporation within the Department of Housing and Urban Devel-
opment. GNMA is authorized to guarantee, with the full faith and credit of the
U.S. Government, the timely payment of principal and interest on securities
issued by approved institutions and backed by pools of FHA-insured or VA-guar-
anteed mortgages.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Pools created
by such non-governmental issuers generally offer a higher rate of interest
than Government and Government-related pools because there are no direct or
indirect Government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by vari-
ous forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers and mortgage poolers. There
can be no assurance that the private insurers can meet their obligations under
the policies. Mortgage-backed securities purchased for the C & B Balanced
Portfolio will, however, be rated of investment grade quality by Moody's or
S&P.
The C & B Balanced Portfolio expects that Governmental or private entities
may create mortgage loan pools offering pass-through investments in addition
to those described above. The mortgages underlying these securities may be al-
ternative mortgage instruments, that is mortgage instruments whose principal
or interest payment may vary or whose terms to maturity may be shorter than
previously customary. As new types of mortgage-backed securities are developed
and offered to investors, the Portfolios will, consistent with their invest-
ment objective and policies, consider making investments in such new types of
securities.
III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and
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<PAGE>
credit of the United States include the Export-Import Bank, Farmers Home Ad-
ministration, Federal Financing Bank, and others. Certain agencies and instru-
mentalities, such as the Government National Mortgage Association are, in ef-
fect, backed by the full faith and credit of the United States through provi-
sions in their charters that they may make "indefinite and unlimited" drawings
on the Treasury, if needed to service its debt. Debt from certain other agen-
cies and instrumentalities, including the Federal Home Loan Bank and Federal
National Mortgage Association, is not guaranteed by the United States, but
those institutions are protected by the discretionary authority of the U.S.
Treasury to purchase certain amounts of their securities to assist the insti-
tution in meeting its debt obligations. Finally, other agencies and instrumen-
talities, such as the Farm Credit System and the Federal Home Loan Mortgage
Corporation, are federally chartered institutions under Government supervi-
sion, but their debt securities are backed only by the credit worthiness of
those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and The Tennessee Valley Authority.
IV. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with the Portfolios'
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance
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<PAGE>
made for unusual circumstances; (5) typically, the issuer's industry is well
established, and the issuer has a strong position within the industry; and (6)
the reliability and quality of management are unquestioned. Relative strength
or weakness of the above factors determine whether the issuer's commercial pa-
per is A-1, A-2 or A-3. The rating Prime-1 is the highest commercial paper
rating assignment by Moody's. Among the factors considered by Moody's in as-
signing ratings are the following: (1) evaluation of the management of the is-
suer; (2) economic evaluation of the issuer's industry or industries and the
appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to completion and customer
acceptance; (4) liquidity; (5) amount and quality of long term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of issuer of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such obliga-
tions.
V. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolios are also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment as well as the bank which uncondi-
tionally guarantees to pay the draft at its face amount on the maturity date.
Most acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
VI. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected fa-
vorably or unfavor-
A-7
<PAGE>
ably by changes in currency rates and in exchange control regulations, and may
incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financing reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation or confiscatory taxation, po-
litical or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recovered portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.
A-8
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
DSI PORTFOLIOS
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
DSI Portfolios Institutional Class Shares dated January 2, 1997 and the Pro-
spectus relating to the DSI Disciplined Value Portfolio Institutional Service
Class Shares (the "Service Class Shares") dated January 3, 1997. To obtain a
Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Shareholder Services....................................................... 15
Investment Limitations..................................................... 16
Management of the Fund..................................................... 18
Investment Adviser......................................................... 21
Service and Distribution Plans............................................. 23
Portfolio Transactions..................................................... 26
Administrative Services.................................................... 26
Performance Calculations................................................... 27
General Information........................................................ 32
Appendix -- Description of Securities and Ratings.......................... A-1
Financial Statements.......................................................
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the DSI Disciplined Value, DSI Limited Maturity Bond, DSI Balanced and DSI
Money Market Portfolios (the "Portfolios") as set forth in the DSI Portfolios'
Prospectuses:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
nor less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
2
<PAGE>
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the DSI Limited Maturity Bond and DSI
Balanced Portfolios may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
Portfolios may incur costs in connection with conversions between various cur-
rencies. The Portfolios will conduct their foreign currency exchange transac-
tions either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the con-
tract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A for-
ward contract generally has no deposit requirement, and no commissions are
charged at any stage for such trades.
The Portfolios may enter into forward foreign currency exchange contracts in
several circumstances. When a Portfolio enters into a contract for the pur-
chase or sale of a security denominated in a foreign currency, or when a Port-
folio anticipates
3
<PAGE>
the receipt in a foreign currency of dividends or interest payments on a secu-
rity which it holds, the Portfolio may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or inter-
est payment, as the case may be. By entering into a forward contract for a
fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Portfolio will be able
to protect itself against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the subject foreign currency dur-
ing the period between the date on which the security is purchased or sold, or
on which the dividend or interest payment is declared, and the date on which
such payments are made or received.
Additionally, when a Portfolio anticipates that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it
may enter into a forward contract for a fixed amount of dollars, to sell the
amount of foreign currency approximating the value of some or all of such
Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities in-
volved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the
value of these securities between the date on which the forward contract is
entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. From time to time, each Port-
folio may enter into forward contracts to protect the value of portfolio secu-
rities and enhance Portfolio performance. The Portfolios will not enter into
such forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate such Portfolio to deliver an
amount of foreign currency in excess of the value of such portfolio securities
or other assets denominated in that currency.
Under normal circumstances, consideration of the prospect for currency pari-
ties will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward con-
tracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. Except when a Portfolio enters into a for-
ward contract for the purchase or sale of a security denominated in a foreign
currency, which requires no segregation, a forward contract which obligates
the Portfolio to buy or sell currency will generally require the Fund's Custo-
dian to hold an amount of that currency or liquid securities denominated in
that currency equal to the Portfolio's obligations, or to segregate liquid
high grade assets equal to the amount of the Portfolio's obligation. If the
value of the segregated assets declines, additional liquid high grade assets
will be segregated on a daily basis so that the value of the segregated assets
will be equal to the amount of such Portfolio's commitments with respect to
such contracts.
4
<PAGE>
The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio
may either sell the portfolio security and make delivery of the foreign cur-
rency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with
the same currency trader obligating it to purchase, on the same maturity date,
the same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Portfolio
is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters
into an offsetting contract for the purchase of the foreign currency, such
Portfolio will realize a gain to the extent that the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to pur-
chase. Should forward prices increase, such Portfolio would suffer a loss to
the extent that the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
Each of the Portfolios' dealings in forward foreign currency exchange con-
tracts will be limited to the transactions described above. Of course, the
Portfolios are not required to enter into such transactions with regard to
their foreign currency-denominated securities. It also should be realized that
this method of protecting the value of portfolio securities against a decline
in the value of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange which one
can achieve at some future point in time. Additionally, although such con-
tracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any potential gain which
might result should the value of such currency increase.
FUTURES CONTRACTS
Each Portfolio (except the DSI Money Market Portfolio) may enter into
futures contracts, options, and options on futures contracts for the purpose
of remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures
5
<PAGE>
contracts which are standardized as to maturity date and underlying financial
instrument are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of the
futures transactions constitute bonafide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect secu-
rities it owns against price declines or purchase contracts to protect against
an increase in the price of securities it intends to pur-
6
<PAGE>
chase. As evidence of this hedging interest, each Portfolio expects that ap-
proximately 75% of its futures contract purchases will be "completed;" that
is, equivalent amounts of related securities will have been purchased or are
being purchased by the Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While a Portfolio will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts exceeds 5% of the market value of its total assets. In addition, a
Portfolio will not enter into futures contracts to the extent that its out-
standing obligations to purchase securities under these contracts would exceed
20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to main-
tain its required margin. In such situations, if the Portfolio has insuffi-
cient cash, it may have to sell Portfolio securities to meet daily margin re-
quirements at a time when it may be disadvantageous to do so. In addition, the
Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures posi-
tions also could have an adverse impact on the Portfolio's ability to effec-
tively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the
7
<PAGE>
futures strategies of each Portfolio are engaged in only for hedging purposes,
the Adviser does not believe that the Portfolios are subject to the risks of
loss frequently associated with futures transactions. A Portfolio would pre-
sumably have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the Portfolio securities being hedged. It is
also possible that the Portfolio could lose money on futures contracts and
also experience a decline in value of Portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of
a broker with whom the Portfolio has an open position in a futures contract or
related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
OPTIONS
The Portfolios (except the DSI Money Market Portfolio) may purchase and sell
put and call options on futures contracts for hedging purposes. Investments in
options involve some of the same considerations that are involved in connec-
tion with investments in futures contracts (e.g., the existence of a liquid
secondary market). In addition, the purchase of an option also entails the
risk that changes in the value of the underlying security or contract will not
be fully reflected in the value of the option purchased. Depending on the
pricing of the option compared to either the futures contract on which it is
based or the price of the securities being hedged, an option may or may not be
less risky than ownership of the futures contract or such securities. In gen-
eral, the market prices of options can be expected to be more volatile than
the market prices on the underlying futures contract or securities.
WRITING COVERED OPTIONS
The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on
the securities alone. By writing covered call options, each Portfolio gives up
the opportunity, while the option is in effect, to profit from any price in-
crease in the underlying
8
<PAGE>
security above the option exercise price. In addition, each Portfolio's abil-
ity to sell the underlying security will be limited while the option is in ef-
fect unless the Portfolio effects a closing purchase transaction. A closing
purchase transaction cancels out the Portfolio's position as the writer of an
option by means of an offsetting purchase of an identical option prior to the
expiration of the option it has written. Covered call options serve as a par-
tial hedge against the price of the underlying security declining.
Each Portfolio writes only covered put options, which means that so long as
a Portfolio is obligated as the writer of the option it will, through its cus-
todian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt or equity securities denominated in
U.S. dollars or non-U.S. currencies with a securities depository with a value
equal to or greater than the exercise price of the underlying securities. By
writing a put, a Portfolio will be obligated to purchase the underlying secu-
rity at a price that may be higher than the market value of that security at
the time of exercise for as long as the option is outstanding. Each Portfolio
may engage in closing transactions in order to terminate put options that it
has written.
PURCHASING OPTIONS
The amount of any appreciation in the value of the underlying security will
be partially offset by the amount of the premium paid for the put option and
any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and profit or loss from the sale will de-
pend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs. A closing sale transaction
cancels out a Portfolio's position as the purchaser of an option by means of
an offsetting sale of an identical option prior to the expiration of the op-
tion it has purchased. In certain circumstances, a Portfolio may purchase call
options on securities held in its investment portfolio on which it has written
call options or on securities which it intends to purchase.
OPTIONS ON FOREIGN CURRENCIES
The DSI Limited Maturity Bond and DSI Balanced Portfolios may purchase and
write options on foreign currencies for hedging purposes in a manner similar
to that in which futures contracts on foreign currencies, or forward con-
tracts, will be utilized. For example, a decline in the dollar value of a for-
eign currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminution in the value of
portfolio securities, a Portfolio may purchase put options on the foreign cur-
rency. If the value of the currency does decline, the Portfolio will have the
right to sell such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio which other-
wise would have resulted.
9
<PAGE>
Conversely, where a rise in the dollar value of a currency in which securi-
ties to be acquired are denominated is projected, thereby increasing the cost
of such securities, a Portfolio may purchase call options thereon. The pur-
chase of such options could offset, at least partially, the effects of the ad-
verse movements in exchange rates. As in the case of other types of options,
however, the benefit to a Portfolio deriving from purchases of foreign cur-
rency options will be reduced by the amount of the premium and related trans-
action costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, a Portfolio could sustain losses on
transaction in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
Each Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse fluctu-
ations in exchange rates it could, instead of purchasing a put option, write a
call option on the relevant currency. If the anticipated decline occurs, the
option will most likely not be exercised, and the diminution in value of port-
folio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an antici-
pated increase in the dollar cost of securities to be acquired, a Portfolio
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Portfolio to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will con-
stitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Portfolio would be required to purchase or sell the un-
derlying currency at a loss which may not be offset by the amount of the pre-
mium. Through the writing of options on foreign currencies, a Portfolio also
may be required to forego all or a portion of the benefits which might other-
wise have been obtained from favorable movements in exchange rates.
Each Portfolio may write covered call options on foreign currencies. A call
option written on a foreign currency by a Portfolio is "covered" if the Port-
folio owns the underlying foreign currency covered by the call or has an abso-
lute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Custodian) upon conversion or exchange of other foreign cur-
rency held in its portfolio. A call option is also covered if a Portfolio has
a call on the same foreign currency and in the same principal amount as the
call written where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater than the exer-
cise price of the call written if the difference is maintained by the Portfo-
lio in cash, U.S. Government securities or other high grade liquid debt secu-
rities in a segregated account with the Custodian.
10
<PAGE>
Each Portfolio also may write call options on foreign currencies that are
not covered for cross-hedging purposes. A call option on a foreign currency is
for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which a Portfo-
lio owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, a Portfolio collateralized the option by maintaining in a seg-
regated account with the Custodian, cash or U.S. Government securities or
other high grade liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to market daily.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on con-
tract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although for-
eign currency options are also traded on certain national securities ex-
changes, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to the regulation of the Commission. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading en-
vironment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over
a period of time. Although the purchase of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corpo-
ration ("OCC"), thereby reducing the risk of counterparty default. Further-
more, a liquid secondary market in options traded on a national securities ex-
change may be more readily available than in the over-the-counter market, po-
tentially permitting a Portfolio to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market de-
scribed
11
<PAGE>
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible interven-
tion by governmental authorities and the effect of other political and eco-
nomic events. In addition, exchange-traded options of foreign currencies in-
volve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in applicable foreign coun-
tries for this purpose. As a result, the OCC may, if it determines that for-
eign governmental restrictions or taxes would prevent the orderly settlement
of foreign currency option exercises, or would result in undue burdens on the
OCC or its clearing member, impose special procedures on exercise and settle-
ment, such as technical changes in the mechanics of delivery of currency, the
fixing of dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward con-
tracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Portfo-
lio's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different exer-
cise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging transac-
tions, each Portfolio is required for Federal income tax purposes to recognize
as income for each taxable year its net unrealized gains and losses on forward
currency and regulated futures contracts as of the end of each taxable year as
well as those actually realized during the year. In most cases, any such gain
or loss recognized with respect to a regulated futures contract is considered
to be 60% long-term capital gain or loss and 40% short-term capital gain or
loss without regard to the holding period of the contract. Realized gain or
loss attributable to a foreign currency forward contract is treated as 100%
ordinary income. Furthermore, foreign currency futures contracts which are in-
tended to hedge against a change in the value of securities held by a Portfo-
lio may affect the holding period of such securities and, consequently, the
nature of the gain or loss on such securities upon disposition.
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of each Portfolio's gross income
for a taxable year must be derived from certain qualifying income, i.e., divi-
dends,
12
<PAGE>
interest, income derived from loans of securities and gains from the sale or
other disposition of stock, securities or foreign currencies, or other related
income, including gains from options, futures and forward contracts, derived
with respect to its business investing in stock, securities or currencies. Any
net gain realized from the closing out of futures contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement. Qualifica-
tion as a regulated investment company also requires that less than 30% of a
Portfolio's gross income be derived from the sale or other disposition of
stock, securities, options, futures or forward contracts (including certain
foreign currencies not directly related to the Fund's business of investing in
stock or securities) held less than three months. In order to avoid realizing
excessive gains on securities held for less than three months, a Portfolio may
be required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts which have been open for less than three months as
of the end of a Portfolio's taxable year, and which are recognized for tax
purposes, will not be considered gains on securities held for less than three
months for the purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's taxable year) on futures trans-
actions. Such distribution will be combined with distributions of capital
gains realized on a Portfolio's other investments, and shareholders will be
advised on the nature of the payment.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's Cus-
todian. The minimum initial investment required is $2,500 for the DSI Portfo-
lios Institutional Class Shares and $500,000 for the DSI Disciplined Value
Portfolio Service Class Shares with certain exceptions as may be determined
from time to time by officers of the Fund. Other Institutional Class invest-
ment minimums are: initial IRA investment, $500; initial spousal IRA invest-
ment, $250; minimum additional investment for all accounts, $100. For each of
the DSI Portfolios (except the DSI Money Market Portfolio), an order received
in proper form prior to the 4:00 p.m. close of the New York Stock Exchange
("Exchange") will be executed at the price computed on the date of receipt;
and an order received not in proper form or after the 4:00 p.m. close of the
Exchange will be executed at the price computed on the next day the Exchange
is open after proper receipt. For the DSI Money Market Portfolio, the net as-
set value is determined at 12:00 (Eastern Time). Therefore, shares purchased
in the DSI Money Market Portfolio before 12:00 noon (Eastern Time) begin earn-
ing dividends on the same business day provided Federal funds are available to
the Fund before 12:00 noon (Eastern Time) that day. The
13
<PAGE>
Exchange will be closed on the following days: Presidents' Day, February 17,
1997; Good Friday, March 28, 1997; Memorial Day, May 26, 1997; Independence
Day, July 4, 1997; Labor Day, September 1, 1997; Thanksgiving Day, November
27, 1997; Christmas Day, December 25, 1997; New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (i) to suspend the
offering of its shares, (ii) to reject purchase orders when in the judgement
of management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Direc-
tors may deem advisable; however, payment will be made wholly in cash unless
the Directors believe that economic or market conditions exist which would
make such a practice detrimental to the best interests of the Fund. If redemp-
tions are paid in investment securities, such securities will be valued as set
forth in the Prospectus under "Valuation of Shares" and a redeeming share-
holder would normally incur brokerage expenses if these securities were con-
verted to cash.
No charge is made by any Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES -- To protect your account, the Fund and Chase Global
Funds Services Company (the "CGFSC") from fraud, signature guarantees are re-
quired for certain redemptions. The purpose of signature guarantees is to ver-
ify the identity of the person who has authorized a redemption from your ac-
count. Signature guarantees are required in connection with (1) all redemp-
tions when the proceeds are to be paid to someone other than the registered
owner(s) and/or registered address; or (2) share transfer requests.
14
<PAGE>
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the DSI Portfolios' Prospectuses:
EXCHANGE PRIVILEGE
Institutional Class Shares of each DSI Portfolio may be exchanged for Insti-
tutional Class Shares of the other DSI Portfolios. In addition, Institutional
Class Shares of each DSI Portfolio may be exchanged for any other Institu-
tional Class Shares of a Portfolio included in the UAM Funds which is com-
prised of the Fund and UAM Funds Trust. (See the list of Portfolios of the UAM
Funds--Institutional Class Shares at the end of the DSI Portfolios--Institu-
tional Class Shares Prospectus.) Service Class Shares of the DSI Disciplined
Value Portfolio may be exchanged for any other Service Class Shares of a Port-
folio included in the UAM Funds which is comprised of the Fund and UAM Funds
Trust. (For those Portfolios currently offering Service Class Shares, please
call the UAM Funds Service Center.) Exchange requests should be made by call-
ing the Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Service
Center, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA
02208-2798. The exchange privilege is only available with respect to Portfo-
lios that are qualified for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
15
<PAGE>
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 12:00 noon (Eastern Time) for the DSI Money Market Portfolio, and
4:00 p.m. (Eastern Time) for the other DSI Portfolios will be processed as of
the close of business on the same day. Requests received after these times
will be processed on the next business day. Neither the Fund nor CGFSC will be
responsible for the authenticity of the exchange instructions received by tel-
ephone. Exchanges may also be subject to limitations as to amounts or fre-
quency and to other restrictions established by the Board of Directors to as-
sure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a written re-
quest to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered own-
ers and all stock certificates, if any, which are subject to the transfer. The
signature on the letter of request, the stock certificate or any stock power
must be guaranteed in the same manner as described under "Redemption of
Shares." As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
Each DSI Portfolio of the Fund is subject to the following restrictions
which are fundamental policies of the DSI Disciplined Value Portfolio, DSI
Limited Maturity Bond Portfolio and DSI Money Market Portfolio and may not be
changed without the approval of the lesser of: (1) at least 67% of the voting
securities of the Portfolio present at a meeting if the holders of more than
50% of the outstanding voting securities of the Portfolio are present or rep-
resented by proxy, or (2) more than 50% of the outstanding voting securities
of the Portfolio. Only investment limitations (1), (2), (3), (4) and (11) are
classified as fundamental policies of the DSI Balanced Portfolio. Each Portfo-
lio will not:
(1) invest in commodities except that each Portfolio may invest in
futures contracts and options to the extent that not more than 5% of
a Portfo-
16
<PAGE>
lio's assets are required as deposit to secure obligations under
futures contracts;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, subject to the limitation
described in (10) below) which are publicly distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent
with the 1940 Act or the rules and regulations or interpretations of
the Commission thereunder;
(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into options and futures (for the DSI Disciplined Value, DSI Limited
Maturity Bond and DSI Balanced Portfolios) or repurchase transac-
tions;
(5) purchase on margin or sell short except as specified in (1) above;
(6) purchase more than 10% of the outstanding voting securities of any
issuer;
(7) with respect as to 75% of its assets, purchase securities of any is-
suer (except obligations of the United States Government and its in-
strumentalities) if as the result more than 5% of the Portfolio's to-
tal assets, at the time of purchase, would be invested in the securi-
ties of such issuer;
(8) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(9) borrow money, except from banks and as a temporary measure for ex-
traordinary or emergency purposes and then, in no event, in excess of
10% (33 1/3% for the DSI Balanced Portfolio) of the Portfolio's gross
assets valued at the lower of market or cost, and a Portfolio may not
purchase additional securities when borrowings exceed 5% of total
gross assets;
(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% (33 1/3% for the DSI Balanced Portfolio) of its to-
tal assets at fair market value;
(11) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% (33 1/3% for the DSI Balanced Portfolio) of the assets
of the Portfolio, determined at the time of investment, in securities
subject to legal or contractual restrictions on resale or securities
for which there
17
<PAGE>
are no readily available markets, including repurchase agreements
having maturities of more than seven days;
(12) invest for the purpose of exercising control over management of any
company;
(13) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) continuous opera-
tions consisting of less than three years;
(14) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of the Portfo-
lio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no limi-
tation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position; and
(15) write or acquire options or interest in oil, gas or other mineral ex-
ploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
Age: 47 poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Invest-
Boston, MA 02111 ors Corporation since 1988; Director and
Age: 52 Chief Executive Officer of H.T. Investors,
Inc., formerly a subsidiary of Dewey
Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund Distribu-
Boston, MA 02110 tors, Inc.; Vice President of Operations,
Age: 45 Development and Control of Fidelity Invest-
ments in 1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street ident of UAM Fund Services, Inc.; former
Boston, MA 02110 Manager of Fund Administration and Compli-
Age: 32 ance of Chase Global Fund Services Company
from 1995 to 1996; formerly Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
As of December 31, 1996, the Directors and officers of the Fund owned less
than 1% of the Fund's outstanding shares.
19
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator or CGFSC and receive no compensation from the Fund. The fol-
lowing table shows aggregate compensation paid to each of the Fund's unaffili-
ated Directors by the Fund and total compensation paid by the Fund, UAM Funds
Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively the
"Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO TRUSTEES
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Former Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of a Portfolio, as noted.
DSI Disciplined Value Portfolio Institutional Class Shares: Bob & Co., c/o
Bank of Boston, P.O. Box 1809, Boston, MA, 42.8%*; Bob & Co., c/o Bank of Bos-
ton, P.O. Box 1809, Boston, MA, 9.9%* and Bob & Co., c/o Bank of Boston, P.O.
Box 1809, Boston, MA, 5%*.
DSI Limited Maturity Portfolio Institutional Class Shares: Bob & Co., c/o
Bank of Boston, P.O. Box 1809, Boston, MA, 55.2%*; Bob & Co., c/o Bank of Bos-
ton, P.O. Box 1809, Boston, MA, 7.5%* and Bob & Co., c/o Bank of Boston, P.O.
Box 1809, Boston, MA, 5%*.
DSI Money Market Portfolio Institutional Class Shares: First National Bank
of Boston, Custodian for Various Accounts, 150 Royall Street, Canton, MA,
20
<PAGE>
72.5%*; United Asset Management Corporation, One International Place, Boston,
MA, 15.6%; CS First Boston Corp., 55 E 52nd Street, New York, NY, 5%*.
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Dewey Square Investors Corporation (the "Adviser") is a wholly-owned subsid-
iary of UAM, a holding company incorporated in Delaware in December 1980 for
the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has ac-
quired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their own
firm name, with their own leadership and individual investment philosophy and
approach. Each UAM Affiliated Firm manages its own business independently on a
day-to-day basis. Investment strategies employed and securities selected by
UAM Affiliated Firms are separately chosen by each of them.
PHILOSOPHY AND STYLE
The Adviser's equity portfolio management approach is "value-oriented" and
makes use of a proprietary screen to rank a universe of 1,000 stocks according
to relative attractiveness. The Adviser's philosophy is derived from a belief
that low P/E, high yield portfolios will generate superior results over time.
Portfolios are built from the "bottom-up," stock-by-stock, subject to a disci-
plined diversification process which is intended to avoid becoming overly con-
centrated in any one segment of the market. The objective is to provide more
consistent and less volatile performance than other typical value managers.
The Adviser's fixed income philosophy is based on the premise that investing
for yield will produce superior results over the long term. Therefore, the
fixed income portfolio is constructed primarily of corporate bonds, mortgage
pass-throughs and other high yielding sectors of the investment grade bond
market. Modest amounts of less than investment grade issues are used for yield
and diver-
21
<PAGE>
sification. The portfolio is built with an emphasis on: higher yield relative
to the benchmark in order to provide superior investment return; investment
grade securities to provide safety of principal and stability; limited inter-
est rate anticipation to control market risk; and broad diversification by
sector and subsector to control portfolio risk.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: American Airlines, Raytheon
Corp., Bank of Boston, Guy Gannett Publishing and Reed & Barton.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, each DSI Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to each of the DSI Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
DSI Balanced Portfolio.......... .45% for the first 12 months of operation
.55% for the next 12 months of operations and
.65% thereafter
DSI Disciplined Value
Portfolio..................... .750% of the first $500 million
.650% in excess of $500 million
DSI Limited Maturity Bond
Portfolio..................... .450% of the first $500 million
.400% of the next $500 million
.350% in excess of $1 billion
DSI Money Market Portfolio...... .400% of the first $500 million
.350% in excess of $500 million
</TABLE>
For the years ended October 31, 1994, 1995 and 1996, the DSI Disciplined
Value Portfolio paid advisory fees of approximately $328,000, $362,000 and
$429,033, respectively, to the Adviser.
For the years ended October 31, 1994, 1995 and 1996, the DSI Limited Matu-
rity Bond Portfolio paid advisory fees of approximately $140,000, $132,000 and
$134,334, respectively, to the Adviser.
For the years ended October 31, 1994, 1995 and 1996, the DSI Money Market
Portfolio paid advisory fees of approximately $719,000, $393,000 and $230,533
respectively, to the Adviser. During the fiscal years ended October 31, 1995
and
22
<PAGE>
1996, the Adviser voluntarily waived advisory fees of approximately $82,000
and $283,121, respectively.
As of October 31, 1996, the DSI Balanced Portfolio had not yet commenced op-
erations.
SERVICE AND DISTRIBUTION PLANS
As stated in the DSI Disciplined Value Portfolio's Service Class Shares Pro-
spectus, UAM Fund Distributors, Inc. (the "Distributor") may enter into agree-
ments with broker-dealers and other financial institutions ("Service Agents"),
pursuant to which they will provide administrative support services to Service
Class shareholders who are their customers ("Customers") in consideration of
such Fund's payment of 0.25% (on an annualized basis) of the average daily net
asset value of the Service Class Shares held by the Service Agent for the ben-
efit of its Customers. Such services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account record for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by
shareholders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting divi-
dend and other account options and opening any necessary custody ac-
counts;
(j) providing account maintenance and accounting support for all transac-
tions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder service must constitute a permissible non-banking activity
in accordance with the then current regulations of, and interpreta-
tions thereof by, the Board of Governors of the Federal Reserve Sys-
tem, if applicable.
23
<PAGE>
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Direc-
tors. Pursuant to the Service Plan, the Board of Directors reviews, at least
quarterly, a written report of the amounts expended under each agreement with
Service Agents and the purposes for which the expenditures were made. In addi-
tion, arrangements with Service Agents must be approved annually by a majority
of the Fund's Directors, including a majority of the Directors who are not
"interested persons" of the company as defined in the 1940 Act and have no di-
rect or indirect financial interest in such arrangements.
The Board of Directors has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is
a reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an effi-
cient manner. Any material amendment to the Fund's arrangements with Service
Agents must be approved by a majority of the Fund's Board of Directors (in-
cluding a majority of the disinterested Directors). So long as the arrange-
ments with Service Agents are in effect, the selection and nomination of the
members of the Fund's Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company will be committed to the discretion of
such non-interested Directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Distribu-
tion Plan for the Service Class Shares of the Fund (the "Distribution Plan").
The Distribution Plan permits the Fund to pay for certain distribution, promo-
tional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the Dis-
tribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing adver-
tisements, sales literature and prospectuses and reports used for sales pur-
poses, compensating sales and marketing personnel, and paying distribution and
maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' aver-
age daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares, cur-
rently
24
<PAGE>
cannot exceed 0.50% of the average daily net assets represented by the Service
Class. While the current fee which will be payable under the Service Plan has
been set at 0.25%, the Plan permits a full 0.75% on all assets to be paid at
any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class
Shares will be borne by such persons without any reimbursement from such clas-
ses. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for aid in pro-
viding administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Directors of the Fund, in-
cluding a majority of the directors who are not "interested persons" (as de-
fined in the 1940 Act) of the Fund and who have no direct or indirect finan-
cial interest in the Plan or any related agreements, by vote cast in person at
a meeting duly called for the purpose of voting on the Plan and such Agree-
ments. Continuation of the Plan, the Distribution Agreement and the related
agreements must be approved annually by the Board of Directors in the same
manner, as specified above. The DSI Portfolios Service Class Shares have not
been offered prior to the date of this Statement.
Each year the Directors must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested per-
sons" or by a majority vote of the outstanding voting securities of the Class.
Any amendment materially increasing the maximum percentage payable under the
Plans must likewise be approved by a majority vote of the relevant Class' out-
standing voting securities, as well as by a majority vote of those Directors
who are not "interested persons." Also, any other material amendment to the
Plans must be approved by a majority vote of the Directors including a major-
ity of the Directors of the Fund having no interest in the Plans. In addition,
in order for the Plans to remain effective, the selection and nomination of
Directors who are not "interested persons" of the Fund must be effected by the
Directors who themselves are not "interested persons" and who have no direct
or indirect financial interest in the Plans. Persons authorized to make pay-
ments under the Plans must provide written reports at least quarterly to the
Board of Directors for their review. The NASD has adopted amendments to its
Rules of Fair Practice relating to investment company sales charges. The Fund
and the Distributor intend to operate in compliance with these rules.
25
<PAGE>
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for each of the Portfolios and directs the Adviser to use its best ef-
forts to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to al-
locate brokerage or effect principal transactions with dealers on the basis of
sales of shares which may be made through broker-dealer firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend
the Fund's Portfolios or who act as agents in the purchase of shares of the
Portfolios for their clients. During the fiscal years ended October 31, 1994,
1995 and 1996, the entire Fund paid brokerage commissions of approximately
$2,402,000, $2,983,000 and $2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc. ("UAMFSI"),
a wholly owned subsidiary of UAM, and the Fund. The Fund's Directors also ap-
proved a Mutual Fund Services Agreement between UAM Fund Services, Inc. and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, CGFSC or its predecessor, Mutual Funds Service Company, pro-
vided certain administrative services to the Fund under an Administration
Agreement between the Fund and U.S. Trust Company of New York. During the fis-
cal years ended October 31, 1994, 1995 and 1996, administrative services fees
paid to the Administrator by the DSI Disciplined Value, DSI Limited Maturity
Bond and DSI Money Market Portfolios totaled approximately $69,000, $78,000
and $99,321, $69,000, $87,000 and $92,990 and $204,000, $134,000 and $149,671,
respectively. Of the fees paid during the year ended October 31, 1996, DSI
Disciplined Value
26
<PAGE>
Portfolio paid $79,439 to CGFSC and $19,882 to UAMFSI; DSI Limited Maturity
Bond Portfolio paid $86,458 to CGFSC and $6,532 to UAMFSI; and DSI Money Mar-
ket Portfolio paid $135,324 to CGFSC and $14,347 to UAMFSI. As of October 31,
1996, the DSI Balanced Portfolio had not yet commenced operations.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to illus-
trate the past performance of each class of the Portfolios.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by each class of the Fund be accompanied by certain standardized
performance information computed as required by the Commission. Current yield
and average annual compounded total return quotations used by each class of
the Fund are based on the standardized methods of computing performance man-
dated by the Commission. An explanation of those and other methods used by
each class of the Fund to compute or express performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5, and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis. Since Service Class Shares of the DSI Disciplined Value
Portfolio bear additional service and distribution expenses, the average an-
nual total return of the Service Class Shares of a Portfolio will generally be
lower than that of the Institutional Class Shares of the same Portfolio.
The average annual total rates of return for the Institutional Class Shares
of the DSI Portfolios from inception to October 31, 1996 and for the one-year
and five-year periods ended on the date of the Financial Statements included
herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR FIVE YEARS THROUGH YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 1996 DATE
----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
DSI Disciplined Value
Portfolio................. 22.92% 14.83% 11.69% 12/12/89
DSI Limited Maturity Bond
Portfolio................. 5.34% 5.68% 6.80% 12/12/89
DSI Money Market Portfolio.. 5.26% 4.06% 4.82% 12/12/89
</TABLE>
27
<PAGE>
These figures are calculated according to the following formula:
P (1 + T)/n/ = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
Institutional Class Shares of the DSI Balanced Portfolio and Institutional
Service Class Shares of the DSI Disciplined Value Portfolio were not offered
as of October 31, 1996. Accordingly, no total return figures are available.
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ments. Since Service Class Shares of the DSI Disciplined Value Portfolio bear
additional service and distribution expenses, the yield of the Service Class
Shares of a Portfolio will generally be lower than that of the Institutional
Class Shares of the same Portfolio.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for
the period include any fees charged to all shareholders during the base peri-
od. The yield for the Institutional Class Shares of the DSI Limited Maturity
Bond Portfolio for the 30-day period ended on October 31, 1996 was 5.91%.
This figure is obtained using the following formula:
Yield = 2[( a - b + 1 )/6/ - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
CALCULATION OF YIELD (DSI MONEY MARKET PORTFOLIO)
The current yield of the DSI Money Market Portfolio is calculated daily on a
base period return for a hypothetical account having a beginning balance of
one share for a particular period of time (generally 7 days). The return is
determined by dividing the net change (exclusive of any capital changes in
such account) by
28
<PAGE>
its average net asset value for the period, and then multiplying it by 365/7
to determine the annualized current yield. The calculation of net change re-
flects the value of additional shares purchased with the dividends by the
Portfolio, including dividends on both the original share and on such addi-
tional shares. An effective yield, which reflects the effects of compounding
and represents an annualization of the current yield with all dividends rein-
vested, may also be calculated for the Portfolio by dividing the base period
return by 7, adding 1 to the quotient, raising the sum to the 365th power, and
subtracting 1 from the result.
The current and effective yield calculation for the DSI Money Market Portfo-
lio Institutional Class Shares for the 7 day base period ended October 31,
1996 are 4.98% and 5.10%, respectively.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Donoghue's Money Fund Average -- is an average of all major money mar-
ket fund yields, published weekly for 7 and 30-day yields.
(b) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(c) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(d) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(e) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(f) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund
29
<PAGE>
performance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(g) Lipper 1-5 Year Short Investment Grade Debt Funds Average -- is an av-
erage of 160 funds that invest at least 65% of assets in investment
grade debt issues (rated in top four grades with dollar-weighted aver-
age maturities of 5 year or less.
(h) Merrill Lynch 1-4.99 Year Corporate/Government Bond Index -- is an un-
managed index composed of U.S. Treasuries, agencies and corporates
with maturities from 1 to 4.99 years. Corporates are investment grade
only (rated in the top four grades).
(i) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(j) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(k) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(l) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(m) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency issues
and mortgage passthrough securities.
(n) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(o) Lehman Brothers Intermediate Government/Corporate Index -- is a combi-
nation 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. Govern-
ment issues and $25 million for others. The Government Index includes
public obligations of the U.S. Treasury, issues of Government agen-
cies, and corporate debt backed by the U.S. Government. The Corporate
Bond
30
<PAGE>
Index includes fixed-rate nonconvertible corporate debt. Also included
are Yankee Bonds and nonconvertible debt issued by or guaranteed by
foreign or international governments and agencies. Any security down-
graded during the month is held in the index until month-end and then
removed. All returns are market value weighted inclusive of accrued
income.
(p) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(q) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(r) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(s) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(t) Merrill Government/Corporate 1 to 5 Year Index -- is an unmanaged in-
dex composed of U.S. Treasuries, agencies and corporates with maturi-
ties from 1 to 4.99 years. Corporates are investment grade only (rated
in the top four grades).
(u) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(v) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(w) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- publi-
cations that rate fund performance over specified time periods.
(x) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
31
<PAGE>
(y) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates -- historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury bills
and inflation.
(z) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings and Loan League Fact Book.
(aa) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its futures. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other aver-
ages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of com-
mon stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders.
Both classes of shares of each Portfolio of the Fund, when issued and paid
for as provided for in the Prospectus, will be fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Direc-
tors if they choose to do so. A shareholder is entitled to one vote for each
full share held (and a fractional vote for each fractional share held), then
standing in his or her name on the books of the Fund. Both Institutional Class
and Service Class Shares represent an interest in the
32
<PAGE>
same assets of a Portfolio and are identical in all respects except that the
Service Class Shares bear certain expenses related to shareholder servicing
and the distribution of such shares, and have exclusive voting rights with re-
spect to matters relating to such distribution expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolios' net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Prospectuses). The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of that Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectuses, unless the shareholder elects otherwise in
writing, all dividend and capital gain distributions are automatically re-
ceived in additional shares of the Portfolios at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholders in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital
gains recognized by a Portfolio will be distributed to its investors without
need to offset (for Federal income tax purposes) such gains against any capi-
tal losses of another Portfolio.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the DSI Disciplined Value, Limited Maturity Bond
and Money Market Portfolios and the Financial Highlights for the respective
33
<PAGE>
periods presented which appear in the DSI Portfolios' 1996 Annual Report to
Shareholders, and the report thereon of Price Waterhouse LLP, independent ac-
countants, also appearing therein, are attached to this SAI.
34
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (87.0%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.0%)
General Motors Corp. ...................................... 47,000 $ 2,532,125
- --------------------------------------------------------------------------------
BASIC RESOURCES (2.3%)
IMC Global, Inc. .......................................... 38,840 1,456,500
- --------------------------------------------------------------------------------
CONSUMER DURABLES (1.3%)
General Motors Corp., Class H.............................. 15,600 832,650
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (10.2%)
J.C. Penney Co., Inc. ..................................... 46,000 2,412,981
Kmart Corp. ............................................... 35,000 341,250
Limited (The), Inc. ....................................... 47,000 863,625
Liz Claiborne, Inc. ....................................... 16,000 676,000
Philip Morris Cos., Inc. .................................. 14,650 1,356,956
*Ryan's Family Steak House, Inc. .......................... 25,000 178,125
Sears, Roebuck & Co. ...................................... 13,500 653,063
-----------
6,482,000
- --------------------------------------------------------------------------------
ENERGY (8.7%)
British Petroleum Co. plc ADR.............................. 14,564 1,873,294
Exxon Corp. ............................................... 26,600 2,357,425
Texaco, Inc. .............................................. 5,300 538,613
Union Texas Petroleum Holdings, Inc........................ 34,700 741,674
-----------
5,511,006
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (12.6%)
American Express Co. ...................................... 6,300 296,100
BankAmerica Corp. ......................................... 28,400 2,598,600
Bank of Boston Corp. ...................................... 34,000 2,176,000
Chase Manhattan Corp. ..................................... 34,500 2,958,375
-----------
8,029,075
- --------------------------------------------------------------------------------
HEALTH CARE (2.9%)
Baxter International, Inc. ................................ 33,000 1,373,625
*Tenent Healthcare Corp. .................................. 24,200 505,175
-----------
1,878,800
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INDUSTRIAL (7.8%)
Cooper Industries, Inc. ................................... 29,000 $ 1,167,250
Hercules, Inc. ............................................ 23,925 1,139,428
Imperial Chemical Industries plc ADR....................... 11,500 583,625
Lubrizol Corp. ............................................ 8,000 238,000
LucasVarity plc ADR........................................ 7,590 305,497
United Technologies Corp. ................................. 6,500 836,875
USX-US Steel Group, Inc. .................................. 13,500 367,875
*WHX Corp. ................................................ 40,000 335,000
-----------
4,973,550
- --------------------------------------------------------------------------------
INSURANCE (5.8%)
Allstate Corp. ............................................ 45,000 2,525,625
Torchmark Corp. ........................................... 23,500 1,136,849
-----------
3,662,474
- --------------------------------------------------------------------------------
MINING (1.8%)
Barrick Gold Corp. ........................................ 43,000 1,123,375
- --------------------------------------------------------------------------------
PAPER & PACKAGING (2.9%)
James River Corp. of Virginia.............................. 32,000 1,008,000
*Jefferson Smurfit Corp. .................................. 60,000 825,000
-----------
1,833,000
- --------------------------------------------------------------------------------
PHARMACEUTICALS (6.9%)
American Home Products Corp. .............................. 17,300 1,059,625
Pharmacia & Upjohn, Inc. .................................. 69,000 2,484,000
SmithKline Beecham plc ADR................................. 14,000 876,750
-----------
4,420,375
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (0.4%)
Simon DeBartolo Group, Inc. ............................... 10,200 269,024
- --------------------------------------------------------------------------------
SERVICES (0.9%)
*Information Resources, Inc. .............................. 30,000 375,000
National Service Industries, Inc. ......................... 6,300 217,350
-----------
592,350
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TECHNOLOGY (9.5%)
*Data General Corp. ..................................... 25,000 $ 371,875
*Digital Equipment Corp. ................................ 62,000 1,829,000
International Business Machines Corp. ................... 6,000 774,000
Scitex Corp. Ltd. ....................................... 28,000 276,500
*Symantec Corp. ......................................... 102,845 1,105,584
Xerox Corp. ............................................. 36,000 1,669,500
-----------
6,026,459
- -------------------------------------------------------------------------------
UTILITIES (9.0%)
AT&T Corp. .............................................. 17,400 606,825
GTE Corp. ............................................... 35,230 1,484,064
NYNEX Corp. ............................................. 55,000 2,447,500
Telefonos de Mexico S.A. ADR, Class L.................... 18,000 549,000
Texas Utilities Co. ..................................... 15,000 607,500
-----------
5,694,889
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $50,765,600)..................................... 55,317,652
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (7.1%)
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (1.1%)
RJR Nabisco Holdings, Series C, $0.6012.................. 125,000 703,125
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (1.7%)
Kmart Financing, 7.75%................................... 22,364 1,062,290
- -------------------------------------------------------------------------------
INDUSTRIAL (1.2%)
WHX Corp. Series A, 6.5%................................. 19,200 744,000
- -------------------------------------------------------------------------------
INSURANCE (3.1%)
Aetna Inc., 6.25%........................................ 28,615 2,006,627
- -------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $4,918,155)..... 4,516,042
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENT (6.0%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.0%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $3,837,595,
collateralized by $3,708,884 various U.S. Treasury
Notes, 5.875%-7.75%, due from 3/31/99-11/30/99,
valued at $3,837,009
(COST $3,837,000).................................... $3,837,000 $ 3,837,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(COST $59,520,755)(A)................................ 63,670,694
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (- 0.1%).................. (75,086)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $63,595,608
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
ADR American Depositary Receipt.
(a) The cost for federal income tax purposes was $59,628,136. At October 31,
1996, net unrealized appreciation for all securities based on tax cost
was $4,042,558. This consisted of aggregate gross unrealized
appreciation for all securities of $7,132,750 and aggregate gross
unrealized depreciation for all securities of $3,090,192.
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (41.2%)
- -------------------------------------------------------------------------------
GOVERNMENT AGENCY-BACKED (32.3%)
Federal Home Loan Mortgage Corp.:
Series 1004 G, PAC, CMO,
7.95%, 11/15/19...................................... $ 541,402 $ 552,906
Series 1049 H, CMO,
8.75%, 2/15/20....................................... 209,410 209,802
Series 1265 F, PAC, CMO,
7.00%, 10/15/17...................................... 707,296 715,026
Series 1302 PF, PAC, CMO,
7.50%, 2/15/18....................................... 500,000 510,310
Series 1332 ZA, PAC, CMO,
6.50%, 1/15/16....................................... 437,207 436,113
TBA,
7.50%, 11/15/26...................................... 884,000 877,096
Gold, Various Pools
7.50%, 11/1/25........................................ 1,034,857 1,040,518
8.00%, 12/31/26, TBA.................................. 1,052,150 1,075,160
8.50%, 11/1/24........................................ 1,648,378 1,709,401
Federal National Mortgage Association:
Series 1992--158 C, PAC(11), REMIC, CMO,
6.60%, 4/25/08....................................... 271,752 271,074
Conventional, Various Pools
7.50%, 2/1/26......................................... 1,067,990 1,069,987
9.00%, 6/1/25......................................... 677,323 716,052
9.50%, 8/1/21......................................... 594,216 641,563
----------
9,825,008
- -------------------------------------------------------------------------------
NON-GOVERNMENT AGENCY-BACKED (8.9%)
MDC Mortgage Funding Corp., Series P-4, CMO,
9.50%, 11/20/17....................................... 362,314 360,956
Merrill Lynch Mortgage Investors, Inc., Series 1994-A,
REMIC, CMO,
6.412%, 2/15/09....................................... 29,370 29,046
Merrill Lynch Trust Series 45-F, PAC, CMO,
9.10%, 9/20/14........................................ 519,615 546,245
Ryland Acceptance Corp. Series 81-B, PAC, CMO,
9.00%, 1/1/15......................................... 290,332 300,131
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
NON-GOVERNMENT AGENCY-BACKED--(CONTINUED)
Security Pacific National Bank, CMO,
8.15%, 6/15/20....................................... $ 352,888 $ 363,284
TMS Home Equity Trust, CMO,
6.55%, 9/15/21........................................ 585,000 576,330
7.55%, 6/15/20........................................ 525,000 536,703
-----------
2,712,695
- -------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $12,538,621)..... 12,537,703
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (30.4%)
- -------------------------------------------------------------------------------
CONSTRUCTION (0.8%)
U.S. Home Corp.
7.95%, 3/1/01........................................ 250,000 241,250
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (2.6%)
Philip Morris, Inc.
7.50%, 3/15/97........................................ 5,000 5,029
8.625%, 3/1/99........................................ 250,000 261,398
9.25%, 12/1/97........................................ 500,000 517,085
-----------
783,512
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (0.0%)
Time Warner, Inc.
9.125%, 1/15/13...................................... 5,000 5,448
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (8.2%)
American General Corp.
9.625%, 2/1/18....................................... 125,000 133,601
First Chicago Corp.
6.83%, 9/8/97........................................ 525,000 529,925
Phoenix Re Corp.
9.75%, 8/15/03....................................... 750,000 789,375
Salomon, Inc. FRN,
6.22%, 2/15/99....................................... 640,000 638,387
Wells Fargo & Co. FRN,
5.688%, 6/25/97...................................... 400,000 400,868
-----------
2,492,156
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (7.6%)
American Brands, Inc.
8.50%, 10/1/03.......................................... $ 15,000 $ 16,402
Crown Paper Co.
11.00%, 9/1/05.......................................... 250,000 235,000
Ford Motor Credit
7.50%, 1/15/03.......................................... 10,000 10,378
Inco Ltd.
9.875%, 6/15/19......................................... 350,000 376,670
Mobile Telecommunications Technology Corp.
13.50%, 12/15/02........................................ 250,000 253,750
News America Holdings, Inc.
8.45%, 8/1/34........................................... 250,000 273,130
Occidential Petroleum Corp.
8.50%, 9/15/04.......................................... 475,000 502,341
Phillips Petroleum
9.18%, 9/15/21.......................................... 600,000 662,628
----------
2,330,299
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.6%)
ITT Corp.
8.55%, 6/15/09.......................................... 450,000 489,415
- -------------------------------------------------------------------------------
UTILITIES (9.6%)
Canal Electric
8.85%, 9/1/06........................................... 792,000 816,916
Commonwealth Edison
8.625%, 2/22/06......................................... 500,000 516,685
Eastern Edison Co.
5.75%, 7/1/98........................................... 500,000 495,295
Midland Cogeneration Venture Series C-94
10.33%, 7/23/02......................................... 562,468 594,810
Pacific Gas & Electric
6.875%, 12/1/99......................................... 500,000 498,520
----------
2,922,226
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $9,266,854).......... 9,264,306
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (2.8%)
- ------------------------------------------------------------------------------
New York City, New York, Series B
9.50%, 6/1/09 (Prerefunded)........................... $ 490,000 $ 556,287
9.50%, 6/1/09 (Unrefunded)............................ 260,000 295,173
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $847,399)....................................... 851,460
- ------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (13.1%)
- ------------------------------------------------------------------------------
Federal Farm Credit Bank:
FRN, 5.73%, 11/18/97................................. 500,000 494,395
Federal Home Loan Bank:
7.00% to 7/3/97, then 8.00% to 7/3/06................ 500,000 507,406
Federal Home Loan Mortgage Corp.
7.50%, 7/23/07....................................... 30,000 30,077
Federal National Mortgage Association
++Principal Strip,
4/10/02............................................. 1,000,000 975,470
U.S. Treasury Bill
5.03%, 1/16/97....................................... 50,000 49,471
U.S. Treasury Bond
7.125%, 2/15/23...................................... 5,000 5,229
U.S. Treasury Notes
5.75%, 8/15/03........................................ 20,000 19,478
6.125%, 5/15/98....................................... 355,000 357,329
6.25%, 2/15/03........................................ 430,000 431,544
6.50%, 5/15/05........................................ 670,000 676,975
6.875%, 2/28/97....................................... 20,000 20,097
6.875%, 7/31/99....................................... 380,000 389,261
7.125%, 9/30/99....................................... 5,000 5,160
7.25%, 8/15/04........................................ 10,000 10,583
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST
$3,927,426)........................................... 3,972,475
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT BONDS (0.8%)
- --------------------------------------------------------------------------------
United Mexican States FRN,
7.688%, 8/6/01 (COST $248,810)....................... $ 250,000 $ 250,225
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENT (17.1%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (17.1%)
Lehman Brothers, 5.50%, dated 10/31/96, due 11/1/96, to
be repurchased at $5,195,794, collateralized by
$4,695,000 U.S. Treasury Bonds, 7.625%, due 2/15/25,
valued at $5,240,794 (COST $5,195,000)............... 5,195,000 5,195,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (105.4%)
(COST $32,024,110)(A)................................. 32,071,169
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
(-5.4%)............................................... (1,638,635)
- --------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $30,432,534
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Callable on 4/10/97. If not called, will start accruing at 7.9%.
CMO Collateralized Mortgage Obligation.
FRN Floating Rate Note. Rate disclosed is as of October 31, 1996.
PAC Planned Amortization Class.
REMIC Real Estate Mortgage Investment Conduit.
TBA Securities traded under delayed delivery commitments settling after
October 31, 1996. Income on the securities will not be earned until
settlement date.
(a) The cost for federal income tax purposes was $32,024,110. At October
31, 1996, net unrealized appreciation for all securities based on tax
cost was $47,059. This consisted of aggregate gross unrealized
appreciation for all securities of $210,942 and aggregate gross
unrealized depreciation for all securities of $163,883.
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
DSI MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (65.2%)
- -------------------------------------------------------------------------------
BANKS (1.8%)
Barnett Bank, Inc. 11/6/96........................... $ 4,000,000 $ 3,997,056
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (9.1%)
Archer Daniels 11/12/96.............................. 5,000,000 4,991,964
H.J. Heinz Co. 12/3/96............................... 5,000,000 4,976,667
PepsiCo, Inc. 11/15/96............................... 5,000,000 4,989,811
Philip Morris 11/25/96............................... 5,000,000 4,982,533
------------
19,940,975
- -------------------------------------------------------------------------------
CHEMICALS (4.5%)
Air Products & Chemicals, Inc. 11/18/96.............. 3,000,000 2,992,591
Air Products & Chemicals, Inc. 12/6/96............... 2,000,000 1,989,811
Dow Chemical 11/1/96................................. 5,000,000 5,000,000
------------
9,982,402
- -------------------------------------------------------------------------------
ELECTRONICS (2.2%)
G.E. Corp. 12/16/96.................................. 5,000,000 4,967,312
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (21.2%)
American Honda Corp. 12/2/96......................... 5,000,000 4,977,181
Cooperative Association of Tractor Dealers, Inc.
11/14/96........................................... 2,700,000 2,694,862
Cooperative Association of Tractor Dealers, Inc.
12/10/96........................................... 3,000,000 2,982,873
Countrywide Funding Corp. 11/4/96.................... 5,000,000 4,997,779
CSW Corp. 11/5/96.................................... 1,793,000 1,791,934
CSW Corp. 11/18/96................................... 2,000,000 1,994,994
CSW Corp. 11/27/96................................... 2,000,000 1,992,402
Dealer Capital Access Trust 11/1/96.................. 2,000,000 2,000,000
Dealer Capital Access Trust 12/16/96................. 4,000,000 3,973,500
Export Development 11/1/96........................... 5,000,000 5,000,000
Ford Motor Credit Corp. 12/10/96..................... 5,000,000 4,971,671
General Motors Acceptance Corp. 11/25/96............. 4,300,000 4,284,835
Pearson, Inc. 11/25/96............................... 5,000,000 4,982,467
------------
46,644,498
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
DSI MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (6.4%)
Cooper Industries 11/1/96............................ $ 5,000,000 $ 5,000,000
Harsco 11/12/96...................................... 5,000,000 4,991,872
XEROX Corp. 11/12/96................................. 4,000,000 3,993,498
------------
13,985,370
- -------------------------------------------------------------------------------
INSURANCE (9.1%)
Met Life Funding 12/2/96............................. 5,000,000 4,977,439
Providian Corp. 11/8/96.............................. 4,000,000 3,995,878
Providian Corp. 11/13/96............................. 2,000,000 1,996,500
Reliastar 11/21/96................................... 2,700,000 2,692,095
Reliastar 12/16/96................................... 2,300,000 2,284,849
USAA Capital 11/7/96................................. 4,000,000 3,996,480
------------
19,943,241
- -------------------------------------------------------------------------------
PHARMACEUTICALS (1.8%)
SmithKline Beecham Corp. 11/13/96.................... 4,000,000 3,992,933
- -------------------------------------------------------------------------------
SERVICES (2.3%)
First Data Corp. 11/13/96............................ 5,000,000 4,991,200
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.3%)
Pacific Bell 11/1/96................................. 5,000,000 5,000,000
- -------------------------------------------------------------------------------
UTILITIES (4.5%)
Jacksonville Electric, 5.3%, 11/25/96................ 5,000,000 5,000,000
Southern California Edison 12/12/96.................. 5,000,000 4,970,104
------------
9,970,104
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $143,415,091)................................. 143,415,091
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
DSI MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST+
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS (35.4%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (35.4%)
Goldman Sachs, 5.45%, dated 10/31/96, due 11/1/96, to
be repurchased at $35,985,447, collateralized by
$29,340,000 U.S. Treasury Bonds, 8.875%, due
8/15/17, valued at $36,372,431..................... $35,980,000 $ 35,980,000
Lehman Brothers, 5.50%, dated 10/31/96, due 11/01/96,
to be repurchased at $42,006,417, collateralized by
$26,250,000 U.S. Treasury Bonds, 11.75%, due
2/15/10, valued at $35,257,031 and $7,410,000 U.S.
Treasury Bonds, 6.25%, due 8/15/23, valued at
$7,034,869......................................... 42,000,000 42,000,000
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (COST $77,980,000)....... 77,980,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(COST $221,395,091)(A).............................. 221,395,091
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
(-0.6%)............................................. (1,271,059)
- --------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $220,124,032
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
(a) Aggregate cost for Federal tax and book purposes.
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
DSI PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
DSI
DSI LIMITED DSI
DISCIPLINED MATURITY MONEY
VALUE BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost..................... $59,520,755 $32,024,110 $221,395,091
=========== =========== ============
Investments, at Value.................... $63,670,694 $32,071,169 $221,395,091
Cash..................................... 793 3,670 869
Receivable for Investments Sold.......... 266,987 529,535 --
Receivable for Portfolio Shares Sold..... 6,188 -- 12,251
Dividends Receivable..................... 144,329 -- --
Interest Receivable...................... -- 368,546 23,641
Other Assets............................. 2,607 1,006 4,179
- --------------------------------------------------------------------------------
Total Assets............................ 64,091,598 32,973,926 221,436,031
- --------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased........ 409,314 2,482,325 --
Payable for Portfolio Shares Redeemed.... 1,972 -- 736,564
Payable for Investment Advisory Fees..... 40,271 11,478 24,536
Payable for Dividends.................... -- -- 494,128
Payable for Administrative Fees.......... 10,378 8,076 14,191
Payable for Custodian Fees............... 6,999 4,295 10,400
Payable for Directors' Fees.............. 771 690 972
Payable for Daily Variation on Futures
Contracts.............................. -- 6,000 --
Other Liabilities........................ 26,285 28,528 31,208
- --------------------------------------------------------------------------------
Total Liabilities....................... 495,990 2,541,392 1,311,999
- --------------------------------------------------------------------------------
NET ASSETS................................ $63,595,608 $30,432,534 $220,124,032
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSETS CONSISTS OF:
Paid in Capital.......................... $50,722,615 $31,990,585 $220,123,938
Undistributed Net Investment Income...... 136,622 216,422 --
Accumulated Net Realized Gain (Loss)..... 8,586,432 (1,702,688) 94
Unrealized Appreciation (Depreciation)... 4,149,939 (71,785) --
- --------------------------------------------------------------------------------
NET ASSETS................................ $63,595,608 $30,432,534 $220,124,032
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par
value) (Authorized 25,000,000)......... 4,894,423 3,235,896 220,123,185
Net Asset Value, Offering and Redemption
Price Per Share........................ $ 12.99 $ 9.40 $ 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
DSI PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
<TABLE>
<CAPTION>
DSI
DSI LIMITED DSI
DISCIPLINED MATURITY MONEY
VALUE BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends...................... $ 1,443,633 $ -- $ --
Interest....................... 237,454 2,251,485 7,075,299
- ---------------------------------------------------------------------------------
Total Income.................. 1,681,087 2,251,485 7,075,299
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note
B
Basic Fees.................... 429,033 134,334 $ 513,654
Less: Fees Waived............. -- -- (283,121) 230,533
---------
Administrative Fees--Note C.... 99,321 92,990 149,671
Custodian Fees--Note D......... 5,480 9,884 19,859
Directors' Fees--Note G........ 3,483 3,000 4,875
Audit Fees..................... 13,425 17,242 15,728
Printing Fees.................. 14,089 13,888 13,864
Registration and Filing Fees... 21,722 20,072 17,072
Legal Fees..................... 4,796 2,258 19,212
Other Expenses................. 8,236 4,478 17,297
- ---------------------------------------------------------------------------------
Total Expenses................ 599,585 298,146 488,111
Expense Offset--Note A......... (983) (3,105) (5,488)
- ---------------------------------------------------------------------------------
Net Expenses.................. 598,602 295,041 482,623
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME........... 1,082,485 1,956,444 6,592,676
- ---------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments.................... 8,761,000 (112,431) 94
Foreign Exchange Transactions.. -- (6,614) --
Futures Contracts.............. -- 23,643 --
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS).. 8,761,000 (95,402) 94
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION:
Investments.................... 1,488,383 (160,150) --
Futures Contracts.............. -- (118,844) --
- ---------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION..... 1,488,383 (278,994) --
- ---------------------------------------------------------------------------------
NET GAIN (LOSS)................. 10,249,383 (374,396) 94
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $11,331,868 $1,582,048 $6,592,770
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 1,082,485 $ 1,088,178
Net Realized Gain.................................... 8,761,000 4,215,445
Net Change in Unrealized Appreciation/Depreciation... 1,488,383 3,655,834
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations........................................ 11,331,868 8,959,457
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (1,010,576) (1,098,399)
Net Realized Gain.................................... (4,252,265) (4,354,683)
- ----------------------------------------------------------------------------------
Total Distributions................................. (5,262,841) (5,453,082)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular...................................... 14,182,497 6,299,691
--In Lieu of Cash Distributions.................... 5,246,377 5,429,959
Redeemed............................................. (9,840,384) (16,300,325)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions...................................... 9,588,490 (4,570,675)
- ----------------------------------------------------------------------------------
Total Increase (Decrease)........................... 15,657,517 (1,064,300)
Net Assets:
Beginning of Period................ ................. 47,938,091 49,002,391
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $136,622 and $61,462, respectively)...... $63,595,608 $ 47,938,091
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 1,139,721 584,766
In Lieu of Cash Distributions....................... 462,852 554,079
Shares Redeemed..................................... (785,773) (1,473,544)
----------- ------------
816,800 (334,699)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 1,956,444 $ 2,094,106
Net Realized Loss.................................... (95,402) (126,889)
Net Change in Unrealized Appreciation/Depreciation... (278,994) 722,466
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations........................................ 1,582,048 2,689,683
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (1,886,050) (2,011,489)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular...................................... 2,570,768 4,784,829
--In Lieu of Cash Distributions...................... 1,839,741 1,947,035
Redeemed............................................. (2,968,177) (8,335,577)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions...................................... 1,442,332 (1,603,713)
- --------------------------------------------------------------------------------
Total Increase (Decrease) .......................... 1,138,330 (925,519)
Net Assets:
Beginning of Period.................................. 29,294,204 30,219,723
- --------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $216,422 and $231,129, respectively)..... $30,432,534 $29,294,204
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 273,542 513,159
In Lieu of Cash Distributions........................ 196,929 208,957
Shares Redeemed...................................... (316,456) (885,997)
----------- -----------
154,015 (163,881)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
DSI MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income........................... $ 6,592,676 $ 6,346,705
Net Realized Gain............................... 94 1,921
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations................................... 6,592,770 6,348,626
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........................... (6,592,676) (6,346,705)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular................................. 739,833,347 604,560,181
--In Lieu of Cash Distributions................. 604,975 76,390
Redeemed........................................ (644,461,308) (592,576,545)
- -------------------------------------------------------------------------------
Net Increase from Capital Share Transactions... 95,977,014 12,060,026
- -------------------------------------------------------------------------------
Total Increase................................. 95,977,108 12,061,947
Net Assets:
Beginning of Period............................. 124,146,924 112,084,977
- -------------------------------------------------------------------------------
End of Period................................... $ 220,124,032 $ 124,146,924
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued................................... 739,833,347 604,560,182
In Lieu of Cash Distributions................... 604,974 76,390
Shares Redeemed................................. (644,461,308) (592,576,545)
------------- -------------
95,977,013 12,060,027
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<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,
-------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 11.76 $ 11.11 $ 12.72 $ 10.62 $ 10.17
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.23 0.25 0.22 0.22 0.26
Net Realized and Unrealized
Gain.......................... 2.26 1.70 0.17 2.09 0.46
- -------------------------------------------------------------------------------
Total from Investment
Operations................... 2.49 1.95 0.39 2.31 0.72
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.22) (0.25) (0.22) (0.21) (0.27)
Net Realized Gain............... (1.04) (1.05) (1.78) -- --
- -------------------------------------------------------------------------------
Total Distributions............ (1.26) (1.30) (2.00) (0.21) (0.27)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 12.99 $ 11.76 $ 11.11 $ 12.72 $ 10.62
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN..................... 22.92% 20.12% 3.48% 21.92% 7.15%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................... $63,596 $47,938 $49,002 $42,170 $37,202
Ratio of Expenses to Average Net
Assets......................... 1.04% 1.00% 1.09% 1.04% 0.99%
Ratio of Net Investment Income to
Average Net Assets ............ 1.89% 2.26% 2.02% 1.88% 2.44%
Portfolio Turnover Rate.......... 135% 121% 184% 149% 74%
Average Commission Rate#......... $0.0588 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets Including Expense
Offsets........................ 1.04% 0.99% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-24
<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,
--------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 9.51 $ 9.31 $ 9.95 $ 10.56 $ 10.40
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.......... 0.62 0.69 0.56 0.68 0.66
Net Realized and Unrealized
Gain (Loss).................. (0.13) 0.17 (0.70) (0.16) 0.35
- -------------------------------------------------------------------------------
Total from Investment
Operations.................. 0.49 0.86 (0.14) 0.52 1.01
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.......... (0.60) (0.66) (0.50) (0.70) (0.67)
Net Realized Gain.............. -- -- -- (0.43) (0.18)
- -------------------------------------------------------------------------------
Total Distributions........... (0.60) (0.66) (0.50) (1.13) (0.85)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.. $ 9.40 $ 9.51 $ 9.31 $ 9.95 $ 10.56
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN.................... 5.34% 9.58% (1.39)% 5.22% 10.03%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................... $30,433 $29,294 $30,220 $33,724 $33,206
Ratio of Expenses to Average Net
Assets........................ 1.00% 0.88% 0.88% 0.79% 0.72%
Ratio of Net Investment Income
to Average Net Assets......... 6.55% 7.12% 5.68% 6.50% 6.19%
Portfolio Turnover Rate......... 121% 126% 274% 167% 238%
- -------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets Including Expense
Offsets....................... 0.99% 0.87% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<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,
--------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<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.... 0.051 0.053 0.033 0.026 0.035
- -------------------------------------------------------------------------------
Total from Investment
Operations............ 0.051 0.053 0.033 0.026 0.035
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.... (0.051) (0.053) (0.033) (0.026) (0.035)
- -------------------------------------------------------------------------------
Total Distributions..... (0.051) (0.053) (0.033) (0.026) (0.035)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN.............. 5.26%+ 5.48%+ 3.30% 2.63% 3.66%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands)............. $220,124 $124,147 $112,085 $188,419 $182,807
Ratio of Expenses to
Average Net Assets...... 0.38% 0.50% 0.56% 0.58% 0.64%
Ratio of Net Investment
Income to Average Net
Assets.................. 5.14% 5.35% 3.07% 2.60% 3.65%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share....... $ 0.002 $ 0.001 N/A N/A N/A
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................. 0.38% 0.49% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
+ Total return would have been lower had certain expenses not been waived for
the period indicated.
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The DSI Disci-
plined Value Portfolio, DSI Limited Maturity Bond Portfolio and DSI Money Mar-
ket Portfolio (the "Portfolios"), portfolios of UAM Funds, Inc., are diversi-
fied, open-end management investment companies. At October 31, 1996, the UAM
Funds were composed of forty active portfolios. The financial statements of
the remaining portfolios are presented separately. The objectives of the Port-
folios are as follows:
DSI DISCIPLINED VALUE PORTFOLIO seeks to achieve maximum long-term total
return consistent with reasonable risk to principal through diversified
equity investments.
DSI LIMITED MATURITY BOND PORTFOLIO seeks to provide maximum total re-
turn consistent with reasonable risk to principal by investing in invest-
ment grade fixed income securities. The Portfolio will ordinarily maintain
an average weighted maturity of less than six years.
DSI MONEY MARKET PORTFOLIO seeks to provide maximum current income con-
sistent with the preservation of capital and liquidity by investing in
short term investment grade money market obligations issued or guaranteed
by financial institutions, nonfinancial institutions, and the United
States Government, as well as repurchase agreements collateralized by such
securities.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of
their financial statements. Generally accepted accounting principles may re-
quire management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.
1. SECURITY VALUATION: The DSI Money Market Portfolio values all securi-
ties utilizing the amortized cost method permitted in accordance with Rule
2a-7 under the Investment Company Act of 1940, as amended, and pursuant to
which the Portfolio must adhere to certain conditions. Securities in each
of the remaining Portfolios are valued in the following manner: Equity se-
curities 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. Price information
on listed securities is taken from the exchange where the security is pri-
marily traded. Unlisted equity securities are valued not exceeding the
current asked prices nor less
F-27
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
than the current bid prices. Fixed income securities are stated on the ba-
sis of valuations provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities, quo-
tations 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 read-
ily available is determined in good faith at fair value using methods de-
termined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as
a regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
The DSI Disciplined Value and DSI Limited Maturity Bond Portfolios may
be subject to taxes imposed by countries in which they invest. Such taxes
are generally based on either income or gains earned or repatriated. The
DSI Disciplined Value and DSI Limited Maturity Bond Portfolios accrue such
taxes when the related income is earned.
At October 31, 1996, the following Portfolio had available an
approximate capital loss carryover for Federal income tax purposes, which
will expire on the dates indicated:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------
DSI PORTFOLIO 2001 2002 2003 2004 TOTAL
------------- ------ ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Limited Maturity Bond.......... $8,000 $1,607,000 $69,000 $138,000 $1,822,000
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, each Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, each
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.
F-28
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash
balances into a joint trading account which invests in one or more
repurchase agreements. This joint repurchase agreement is covered by the
same collateral requirements as discussed above.
4. FUTURES AND OPTIONS CONTRACTS: The DSI Disciplined Value Portfolio
and the DSI Limited Maturity Bond Portfolio may use futures and options
contracts to hedge against changes in the values of securities the
Portfolios own or expect to purchase. The DSI Disciplined Value Portfolio
and the DSI Limited Maturity Bond Portfolio may also write covered options
on securities they own or in which they may invest to increase their
current returns.
The potential risk to the Portfolios is that the change in value of
futures contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options.
The Portfolio had the following futures contracts open at October 31,
1996:
DSI LIMITED MATURITY BOND PORTFOLIO
<TABLE>
<CAPTION>
NET
UNREALIZED
NUMBER OF AGGREGATE EXPIRATION APPRECIATION
CONTRACTS CONTRACTS FACE VALUE DATE (DEPRECIATION)
--------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury 10 Year
Note................... 25 $2,740,625 December 1996 $ (96,094)
U.S. Treasury 10 Year
Note................... 7 767,375 December 1996 (22,750)
---------
$(118,844)
=========
</TABLE>
5. FOREIGN CURRENCY TRANSLATION: The books and records of the DSI Disci-
plined Value Portfolio and the DSI Limited Maturity Bond Portfolio are
maintained in U.S. dollars. Investment securities and other assets and li-
abilities denominated in a foreign currency are translated into U.S. dol-
lars on the
F-29
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
date of valuation. The DSI Disciplined Value Portfolio and the DSI Limited
Maturity Bond Portfolio do not isolate that portion of realized or
unrealized gains and losses resulting from changes in the foreign exchange
rate from fluctuations arising from changes in the market prices of the
securities. These gains and losses are included in net realized and
unrealized gain and loss on investments on the statement of operations.
Net realized and unrealized gains and losses on foreign currency transac-
tions 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 in-
come and foreign withholding taxes recorded on the DSI Disciplined Value
and the DSI Limited Maturity Bond Portfolios' books and the U.S. dollar
equivalent amounts actually received or paid.
6. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The DSI Disciplined
Value and the DSI Limited Maturity Bond Portfolios may enter into forward
foreign currency exchange contracts to protect the value of securities
held and related receivables and payables against changes in future for-
eign exchange rates. A forward currency contract is an agreement between
two parties to buy and sell currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency ex-
change rates. The contract is marked-to-market daily using the current
forward rate and the change in market value is recorded by the DSI Disci-
plined Value and the DSI Limited Maturity Bond Portfolios as unrealized
gain or loss. The DSI Disciplined Value and the DSI Limited Maturity Bond
Portfolios recognize 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 lim-
ited to the amount of unrealized gain on the contracts, if any, at the
date of default. Risks may also arise from the unanticipated movements in
the value of a foreign currency relative to the U.S. dollar.
7. DISTRIBUTIONS TO SHAREHOLDERS: The DSI Money Market Portfolio will
normally distribute substantially all of its net investment income to
shareholders monthly. The DSI Disciplined value and DSI Limited Maturity
Bond Portfolios will normally distribute substantially all of their net
investment income to shareholders quarterly. Any realized net capital
gains will 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
F-30
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
may differ from generally accepted accounting principles. These differ-
ences are primarily due to differing book and tax treatments for foreign
currency transactions and the timing of the recognition of gains or losses
on investments. Permanent book and tax basis differences relating to
shareholder distributions resulted in reclassifications as follows:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED PAID
NET INVESTMENT NET REALIZED IN
DSI PORTFOLIOS INCOME GAIN CAPITAL
-------------- -------------- ------------ -------
<S> <C> <C> <C>
Disciplined Value........................ 3,251 (9,850) 6,599
Limited Maturity Bond.................... (85,101) 85,101 --
</TABLE>
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.
8. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded
as soon as the DSI Disciplined Value and the DSI Limited Maturity Bond
Portfolios are informed of the ex-dividend date. Interest income is recog-
nized on the accrual basis. Discounts and premiums on securities purchased
are amortized using the effective yield basis 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 rela-
tive net assets. Custodian fees for the Portfolio have been increased to
include expense offsets for custodian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Dewey Square Investors (the "Adviser"), a wholly-owned subsidiary of United As-
set Management Corporation ("UAM"), provides investment advisory services to
the Portfolio at a fee calculated at an annual rate of 0.75% of the first $500
million of average daily net assets and 0.65% of average daily net assets in
excess of $500 million for DSI Disciplined Value Portfolio; 0.45% of the first
$500 million of average daily net assets, 0.40% of the next $500 million of av-
erage daily net assets and 0.35% of average daily net assets in excess of $1
billion for DSI Limited Maturity Bond Portfolio; and 0.40% of the first $500
million of average
F-31
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
daily net assets and 0.35% of average daily net assets in excess of $500 mil-
lion for DSI Money Market Portfolio. In addition, the Adviser has voluntarily
agreed to cap its advisory fees for the DSI Money Market Portfolio at 0.18% of
average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.06%, 0.04% and 0.02% of average daily net assets for DSI Dis-
ciplined Value Portfolio, DSI Limited Maturity Bond Portfolio and DSI Money
Market Portfolio, respectively. Also effective April 15, 1996, the Administra-
tor has entered into a Mutual Funds Service Agreement with Chase Global Funds
Services Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under
which CGFSC agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent servic-
es. Pursuant to the Mutual Funds Service Agreement, the Administrator pays
CGFSC a monthly fee. For the period April 15, 1996 to October 31, 1996, UAM
Fund Services, Inc. earned the following amounts from the Portfolios as Admin-
istrator and paid the following portions to CGFSC:
<TABLE>
<CAPTION>
PORTION
ADMINISTRATION PAID TO
DSI PORTFOLIOS FEES CGFSC
- -------------- -------------- -------
<S> <C> <C>
Disciplined Value........................................ $62,832 $42,950
Limited Maturity Bond.................................... 49,348 42,816
Money Market............................................. 83,989 69,642
</TABLE>
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average
F-32
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 mil-
lion of the combined aggregate net assets; plus 0.08% of the combined aggre-
gate net assets in excess of $1 billion but less than $3 billion; plus 0.06%
of the combined aggregate net assets in excess of $3 billion. The fees were
allocated among the portfolios of the UAM Funds and AEW on the basis of their
relative net assets and were subject to a graduated minimum fee schedule per
portfolio which rose from $2,000 per month, upon inception of a portfolio, to
$70,000 annually after two years. For the period November 1, 1995 to April 15,
1996, CGFSC earned the following amounts from the Portfolios as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
DSI PORTFOLIOS FEES
- -------------- --------------
<S> <C>
Disciplined Value................................................ $36,489
Limited Maturity Bond............................................ 43,642
Money Market..................................................... 65,682
</TABLE>
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolios' assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolios by the Bank aggregated
the following:
<TABLE>
<CAPTION>
CUSTODIAN
DSI PORTFOLIOS FEES
- -------------- ---------
<S> <C>
Disciplined Value..................................................... $5,075
Limited Maturity Bond................................................. 3,073
Money Market.......................................................... 7,314
</TABLE>
As of October 31, 1996, all of these amounts are unpaid.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
F. PURCHASES AND SALES: For the period ended October 31, 1996, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:
<TABLE>
<CAPTION>
DSI PORTFOLIOS PURCHASES SALES
- -------------- ----------- -----------
<S> <C> <C>
Disciplined Value....................................... $77,895,756 $71,237,460
Limited Maturity Bond................................... 14,172,735 15,665,917
</TABLE>
F-33
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases and sales of long-term U.S. Government securities were $20,329,956
and $17,996,673, respectively for the DSI Limited Maturity Bond Portfolio.
There were no purchases or sales of long-term U.S. Government securities for
the DSI Disciplined Value Portfolio.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating Portfolio based on its average daily
unused portion of the line of credit. During the period ended October 31, 1996,
the Portfolios had no borrowings under the agreement.
I. OTHER. At October 31, 1996, the percentage of total shares outstanding
held by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF %
DSI PORTFOLIOS SHAREHOLDERS OWNERSHIP
- -------------- ------------ ---------
<S> <C> <C>
Disciplined Value........................................ 1 43.9%
Limited Maturity Bond.................................... 1 57.4
Money Market............................................. 2 89.5
</TABLE>
At October 31, 1996, 14% of the DSI Money Market Portfolio's shares were ben-
eficially held by a related party, UAM.
F-34
<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 assets and liabilities, in-
cluding the portfolios of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of DSI Disciplined Value Portfo-
lio, DSI Limited Maturity Bond Portfolio, and DSI Money Market Portfolio (the
"Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 1996, 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 gen-
erally accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the responsi-
bility of the Portfolios' management; our responsibility is to express an opin-
ion 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 misstate-
ment. 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, 1996 by correspondence with
the custodian and brokers and the application of alternative auditing proce-
dures where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
At October 31, 1996, the DSI Disciplined Value Portfolio hereby designates
$82,000 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, 1996, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
22.3% for the DSI Disciplined Value Portfolio.
F-35
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating cate-
gories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier
3 indicates that the issue ranks at the lower end of the rating category.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of res-
idential mortgage loans. These securities are designed to provide monthly pay-
ments of interest and principal to the investor. The mortgagor's monthly pay-
ments to his/her lending institution are "passed-through" to investors. Most
issuers or
A-2
<PAGE>
poolers provide guarantees of payments, regardless of whether or not the mort-
gagor actually makes the payment. The guarantees made by issuers or poolers
are supported by various forms of credit, collateral, guarantees or insurance,
including individual loan, title, pool and hazard insurance purchased by the
issuer. There can be no assurance that the private issuers can meet their ob-
ligations under the policies. Mortgage-backed securities issued by private is-
suers, whether or not such securities are subject to guarantees, may entail
greater risk. If there is no guarantee provided by the issuer, mortgage-backed
securities purchased will be rated investment grade by Moody's or S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participations in loans. The major-
ity of these loans are made to purchasers of 1-4 family homes. The terms and
characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate, fixed-
term mortgages, the DSI Portfolios may purchase pools of variable rate mort-
gages (VRM), growing equity mortgages (GEM), graduated payment mortgages (GPM)
and other types where the principal and interest payment procedures vary.
VRM's are mortgages which reset the mortgage's interest rate on pools of
VRM's. GPM and GEM pools maintain constant interest with varying levels of
principal repayment over the life of the mortgage. These different interest
and principal payment procedures should not impact a Portfolio's net asset
value since the prices at which these securities are valued each day will re-
flect the payment procedures.
All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit stan-
dards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through pri-
vate mortgage insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of the un-
derlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors in-
cluding the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume the prepayments
will result in a 12-year average life. Pools of mortgages with other maturi-
ties or different characteristics will have varying assumptions for average
life.
A-3
<PAGE>
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life as-
sumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yields
of the Portfolios. The compounding effect from reinvestment of monthly pay-
ments received by a Portfolio will increase its yield to shareholders, com-
pared to bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates. In-
stead, these securities provide a monthly payment which consists of both in-
terest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their residential
mortgage loans, net of any fees paid to the issuer or guarantor of such secu-
rities. Additional payments are caused by repayments resulting from the sale
of the underlying residential property, refinancing or foreclosure net of fees
or costs which may be incurred. Some mortgage-backed securities are described
as "modified pass-through." These securities entitle the holders to receive
all interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make the
payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage Cor-
poration (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the avail-
ability of mortgage credit for residential housing. Its stock is owned by the
twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfo-
lio. FHLMC guarantees the timely payment of interest and ultimate collection
of principal.
The Federal National Mortgage Association (FNMA) is a Government sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller/servicers which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.
The principal Government guarantor of mortgage-backed securities is the Gov-
ernment National Mortgage Association (GNMA). GNMA is a wholly-owned U.S. Gov-
ernment corporation within the Department of Housing and Urban Development.
A-4
<PAGE>
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued
by approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Pools created
by such non-governmental issuers generally offer a higher rate of interest
than Government and Government-related pools because there are no direct or
indirect Government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by vari-
ous forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers and mortgage poolers. There
can be no assurance that the private insurers can meet their obligations under
the policies. Mortgage-backed securities purchased for the DSI Limited Matu-
rity Bond Portfolio will, however, be rated of investment grade quality by
Moody's or S&P.
The DSI Limited Maturity Bond Portfolio expects that Governmental or private
entities may create mortgage loan pools offering pass-through investments in
addition to those described above. The mortgages underlying these securities
may be alternative mortgage instruments, that is mortgage instruments whose
principal or interest payment may vary or whose terms to maturity may be
shorter than previously customary. As new types of mortgage-backed securities
are developed and offered to investors, the Portfolios will, consistent with
their investment objective and policies, consider making investments in such
new types of securities.
III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association are, in effect, backed
A-5
<PAGE>
by the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Trea-
sury, if needed to service its debt. Debt from certain other agencies and in-
strumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, is not guaranteed by the United States, but those insti-
tutions are protected by the discretionary authority of the U.S. Treasury to
purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation,
are federally chartered institutions under Government supervision, but their
debt securities are backed only by the credit worthiness of those institu-
tions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and The Tennessee Valley Authority.
IV. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between vari-
ous currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financing reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation or confiscatory taxation, po-
litical or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recovered portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.
A-6
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
FMA SMALL COMPANY PORTFOLIO
INSTITUTIONAL CLASS SHARES
INSTITUTIONAL SERVICE CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
FMA Small Company Portfolio's Institutional Class Shares dated January 2, 1997
and the Prospectus for the FMA Small Company Portfolio Institutional Service
Class Shares (the "Service Class Shares") dated January 3, 1997. To obtain a
Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.......................................... 2
Purchase of Shares......................................................... 3
Redemption of Shares....................................................... 4
Shareholder Services....................................................... 5
Investment Limitations..................................................... 6
Management of the Fund..................................................... 8
Investment Adviser......................................................... 10
Service and Distribution Plans............................................. 11
Portfolio Transactions..................................................... 14
Administrative Services.................................................... 14
Performance Calculations................................................... 15
General Information........................................................ 19
Financial Statements....................................................... 20
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and policies of
the FMA Small Company Portfolio (the "Portfolio) as set forth in the FMA Port-
folio's Prospectuses:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less thant 100% of the value of the securities loaned, (b) the borrower
add to such collateral whenever the price of the securities loaned rises
(i.e., the borrower "marks to the market" on a daily basis), (c) the loan be
made subject to termination by the Portfolio at any time, and (d) the Portfo-
lio receives reasonable interest on the loan (which may include the Portfolio
investing any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed above.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable de-
posits maintained in a banking institution for a specified period of time
at a stated interest rate. Time deposits maturing in more than seven days
will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calender days will not exceed 10% of the total
assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
2
<PAGE>
The Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank had total assets of a least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, issued by a corporation having an outstanding unsecured
debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of
the U.S. Government and differ mainly in interest rates, maturities and
dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. These include securities
issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Ad-
ministration, Federal Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennes-
see Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
PURCHASE OF SHARES
Both classes of shares of the Portfolio may be purchased without a sales
commission, at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's Cus-
todian. The minimum initial investment required is $25,000 with certain excep-
tions as may be determined from time to time by the Officers of the Fund. An
order received in proper form prior to 4:00 p.m. Eastern Time (ET), the close
of the New York Stock Exchange ("Exchange") will be executed at the price com-
puted on the date of receipt; and an order received not in proper form or af-
ter the close of the Exchange will be executed at the price computed on the
next day the Exchange is open after proper receipt. The Exchange will be
closed on the following days: President's Day, February 17, 1997; Good Friday,
March 28, 1997; Memorial Day, May 26, 1997; Independence Day, July 4, 1997;
Labor Day, September 1, 1997; Thanksgiving Day, November 27, 1997; Christmas
Day, December 25, 1997; New Year's Day, January 1, 1998.
The Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interest of the Fund, and (3) to re-
duce or waive
3
<PAGE>
the minimum for initial and subsequent investment for certain fiduciary ac-
counts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of the Portfolio's shares.
REDEMPTION OF SHARES
The Portfolio may suspend redemption privileges or postpone the date of pay-
ment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for
the Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Direc-
tors may deem advisable; however, payment will be made wholly in cash unless
the Directors believe that economic or market conditions exist which would
make such a practice detrimental to the best interests of the Fund. If redemp-
tions are paid in investment securities, such securities will be valued as set
forth in the Prospectus under "Valuation of Shares" and a redeeming share-
holder would normally incur brokerage expenses if these securities were con-
verted to cash.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES -- To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account. Sig-
natures guarantees are required in connection with (1) all redemptions when
the proceeds are to be paid to someone other than the registered owner(s) or
registered address; and (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be
4
<PAGE>
authorized to issue signature guarantees. Signature guarantees will be ac-
cepted from any eligible guarantor institution which participates in a signa-
ture guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Serv-
ices" in the Prospectuses:
EXCHANGE PRIVILEGE
Institutional Class Shares of the Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds--Institutional Class Shares at the end of the Portfolio's Institu-
tional Service Class Shares Prospectus.) Service Class Shares of the Portfolio
may be exchanged for any other Service Class Shares of a Portfolio included in
the UAM Funds which is comprised of the Fund and UAM Funds Trust. (For those
Portfolios currently offering Service Class Shares, please see the list of
Service Class Shares at the end of the Portfolio's Service Class Shares Pro-
spectus.) Exchange requests should be made by calling the Fund (1-800-638-
7983) or by writing to UAM Funds, UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The exchange
privilege is only available with respect to Portfolios that are qualified for
sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. ET will be processed as of the close of business on the
same day. Requests received after 4:00 p.m. (ET) will be processed on the next
business day. Neither the Fund
5
<PAGE>
nor CGFSC will be responsible for the authenticity of the exchange instructions
received by telephone. Exchanges may also be subject to limitations as to
amounts or frequency and to other restrictions established by the Board of Di-
rectors to assure that such exchanges do not disadvantage the Fund and its
shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between se-
ries of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfo-
lios; you may want to consult your tax adviser for further information in this
regard. The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person by making
a written request to the Fund. The request should clearly identify the account
and number of shares to be transferred, and include the signature of all regis-
tered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemp-
tion of Shares." As in the case of redemptions, the written request must be re-
ceived in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The Portfolio is subject to the following restrictions which are fundamental
policies and may not be changed without the approval of the lesser of: (1) at
least 67% of the voting securities of the Portfolio present at a meeting if the
holders of more than 50% of the outstanding voting securities of the Portfolio
are present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of the Portfolio. The Portfolio will not:
(1) invest in commodities;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, subject to the limitation
described in (10) below) which are publicly distributed; and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent
with the 1940 Act or the rules and regulations or interpretations of
the Commission thereunder;
6
<PAGE>
(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii) enter-
ing into repurchase transactions;
(5) purchase on margin or sell short;
(6) purchase more than 10% of the outstanding voting securities of any
issuer;
(7) with respect as to 75% of its assets, purchase securities of any is-
suer (except obligations of the United States Government and its in-
strumentalities) if as the result more than 5% of the Portfolio's to-
tal assets, at the time of purchase, would be invested in the securi-
ties of such issuer;
(8) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(9) borrow money, except from banks and as a temporary measure for ex-
traordinary or emergency purposes and then, in no event, in excess of
10% of the Portfolio's gross assets valued at the lower of market or
cost, and the Portfolio may not purchase additional securities when
borrowings exceed 5% of total gross assets;
(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(11) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% of the assets of the Portfolio, determined at the time
of investment, in securities subject to legal or contractual restric-
tions on resale or securities for which there are no readily avail-
able markets, including repurchase agreements having maturities of
more than seven days;
(12) invest for the purpose of exercising control over management of any
company;
(13) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) continuous opera-
tions consisting of less than three years;
(14) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of the Portfo-
lio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no limi-
tation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position; and
(15) write or acquire options or interests in oil, gas or other min-
eral exploration or development programs.
7
<PAGE>
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years. As of December 31, 1996, the Di-
rectors and officers of the Fund owned less than 1% of the Fund's outstanding
shares.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
Age: 47 poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Invest-
Boston, MA 02111 ors Corporation since 1988; Director and
Age: 52 Chief Executive Officer of H.T. Investors,
Inc., formerly a subsidiary of Dewey
Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund Distribu-
Boston, MA 02110 tors, Inc.; Vice President of Operations,
Age: 45 Development and Control of Fidelity Invest-
ments in 1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to 1995.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street ident of UAM Fund Services, Inc.; former
Boston, MA 02110 Manager of Fund Administration and Compli-
Age: 32 ance of Chase Global Fund Services Company
from 1995 to 1996; formerly Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubenstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that
term is defined in the 1940 Act.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred in attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator or CGFSC and receive no compensation from the Fund. The fol-
lowing table shows aggregate compensation paid to each of the Fund's unaffili-
ated Directors by the Fund and total compensation paid by the Fund, UAM Funds
Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively the
"Fund Complex") in the fiscal year ended October 31, 1996.
9
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett Jr...... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Former Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of the Portfolio:
FMA Small Company Portfolio: Iron Workers Local #25, 25130 Trans X Drive,
Novi, MI, 21%; IBEW Local Union #226, Pension Fund, 4101 Southgate Drive,
Suite A, Topeka, KS, 16.2%; First Bank NA, Trustee, Grant Hospital of Chicago
P.O. Box 64010, St. Paul, MN, 9.0%*; UFCW Local 23 & Giant Eagle Pension Fund,
150 River Avenue, Suite 200, Pittsburgh, PA, 6.5%; Grant Hospital of Chicago
Capitol Fund, c/o Lasalle National Trust as Custodian, P.O. Box 1443, Chicago,
IL 5%*; Kent County Road Commission, Trustee, FBO Savings & Trust-Stock Fund,
1500 Scribner NW, Grand Rapids, MI 49504, 5%*.
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Fiduciary Management Associates, Inc. (the "Adviser") is a wholly-owned sub-
sidiary of United Asset Management Corporation ("UAM"), a holding company in-
corporated in Delaware in December 1980 for the purpose of acquiring and own-
ing firms engaged primarily in institutional investment management. Since its
first acquisition in August 1983, UAM has acquired or organized approximately
45 such wholly-owned affiliated firms (the "UAM Affiliated Firms"). UAM be-
lieves that permitting UAM Affiliated Firms to retain control over their in-
vestment advisory decisions is necessary to allow them to continue to provide
investment man-
10
<PAGE>
agement services that are intended to meet the particular needs of their re-
spective clients. Accordingly, after acquisition by UAM, UAM Affiliated Firms
continue to operate under their own firm name, with their own leadership and
individual investment philosophy and approach. Each UAM Affiliated Firm man-
ages its own business independently on a day-to-day basis. Investment strate-
gies employed and securities selected by UAM Affiliated Firms are separately
chosen by each of them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, the Portfolio pays the Adviser an annual fee, in monthly
installments, calculated by applying the following annual percentage rates to
the Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
FMA Small Company Portfolio............................................ 0.75%
</TABLE>
For the fiscal years ended October 31, 1994, 1995 and 1996, the Portfolio
paid the Adviser fees of approximately $94,000, $87,000 and $59,775, respec-
tively, for advisory services. During these periods, the Adviser voluntarily
waived advisory fees of approximately $57,000, $66,000 and $107,546, respec-
tively.
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolio's Service Class Shares Prospectus, UAM Funds Dis-
tributors, Inc. (the "Distributor") may enter into agreements with broker-
dealers and other financial institutions ("Service Agents"), pursuant to which
they will provide administrative support services to Service Class sharehold-
ers who are their customers ("Customers") in consideration of such Fund's pay-
ment of 0.15% of 1% (on an annualized basis ) of the average daily net asset
value of the Service Class Shares held by the Service Agent for the benefit of
its Customers. Such services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account records for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by
shareholders;
11
<PAGE>
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting divi-
dend and other account options and opening any necessary custody ac-
counts;
(j) providing account maintenance and accounting support for all
transactions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder service must constitute a permissible non-banking activity
in accordance with the then current regulations of, and interpreta-
tions thereof by, the Board of Governors of the Federal Reserve Sys-
tem, if applicable.
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Direc-
tors. Pursuant to the Service Plan, the Board of Directors reviews, at least
quarterly, a written report of the amounts expended under each agreement with
Service Agents and the purposes for which the expenditures were made. In addi-
tion, arrangements with Service Agents must be approved annually by a majority
of the Fund's Directors, including a majority of the Directors who are not
"interested persons" of the company as defined in the 1940 Act and have no di-
rect or indirect financial interest in such arrangements.
The Board of Directors has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is
a reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an effi-
cient manner. Any material amendment to the Fund's arrangements with Service
Agents must be approved by a majority of the Fund's Board of Directors (in-
cluding a majority of the disinterested directors). So long as the arrange-
ments with Service Agents are in effect, the selection and nomination of the
members of the Fund's Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company will be committed to the discretion of
such non-interested directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Distribu-
tion Plan for the Service Class Shares of the Fund (the "Distribution Plan").
The Distribution Plan permits the Fund to pay for certain distribution, promo-
tional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the Dis-
tribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing adver-
tisements,
12
<PAGE>
sales literature and prospectuses and reports used for sales purposes, compen-
sating sales and marketing personnel, and paying distribution and maintenance
fees to securities brokers and dealers who enter into agreements with the Dis-
tributor. In addition, the Service Class Shares may make payments directly to
other unaffiliated parties, who either aid in the distribution of their shares
or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' aver-
age daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares, cur-
rently cannot exceed 0.50% of the average daily net assets represented by the
Service Class. While the current fee which will be payable under the Service
Plan has been set at .15% the Plan permits a full 0.75% on all assets to be
paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class
Shares will be borne by such persons without any reimbursement from such clas-
ses. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from to or to firms which receive pay-
ments under the Plans. From time to time, the Distributor may pay additional
amounts form its own resources to dealers for aid in distribution or for aid
in providing administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Directors of the Fund, in-
cluding a majority of the Directors who are not "interested persons" (as de-
fined in the 1940 Act) of the Fund and who have no direct or indirect finan-
cial interest in the Plans or any related agreements, by vote cast in person
at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the re-
lated agreements must be approved annually by the Board of Directors in the
same manner, as specified above. The FMA Portfolios' Service Class Shares have
not been offered prior to the date of this Statement.
Each year the Directors must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested per-
sons" or by a majority vote of the outstanding voting securities of the Class.
Any amendment materially increasing the maximum percentage payable under the
Plans must likewise be approved by a
13
<PAGE>
majority vote of the relevant Class' outstanding voting securities, as well as
by a majority vote of those Directors who are not "interested persons." Also,
any other material amendment to the Plans must be approved by a majority vote
of the Directors including a majority of the Directors of the Fund having no
interest in the Plans. In addition, in order for the Plans to remain effec-
tive, the selection and nomination of Directors who are not "interested per-
sons" of the fund must be effected by the Directors who themselves are not
"interested persons" and who have no direct or indirect financial interest in
the Plans. Persons authorized to make payments under the Plans must provide
written reports at least quarterly to the Board of Directors for their review.
The NASD has adopted amendments to its Rules of Fair Practice relating to in-
vestment company sales charges. The Fund and the Distributor intend to operate
in compliance with these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the lowest
rate available when the Adviser believes it is reasonable to do so in light of
the value of the research, statistical, and pricing services provided by the
broker effecting the transaction. It is not the Fund's practice to allocate
brokerage or effect principal transactions with dealers on the basis of sales
of shares which may be made through broker-dealer firms. However, the Adviser
may place portfolio orders with qualified broker-dealers who recommend the
Fund's Portfolios or who act as agents in the purchase of shares of the Port-
folios for their clients. During the fiscal years ended, October 31, 1994,
1995 and 1996, the entire Fund paid brokerage commissions of approximately
$2,402,000, $2,983,000 and $2,887,884, respectively.
Some securities considered for investment by the Portfolio may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
14
<PAGE>
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, CGFSC or its predecessor, Mutual Funds Service Company, pro-
vided certain administrative services to the Fund under an Administration
Agreement between the Fund and U.S. Trust Company of New York. During the fis-
cal years ended October 31, 1994, 1995 and 1996, administrative services fees
paid to the Administrator by the Portfolio totaled approximately $66,000,
$76,000 and $80,758, respectively. Of the fees paid during the year ended Oc-
tober 31, 1996, FMA Small Company Portfolio paid $75,889 to CGFSC and $4,869
to UAMFSI. The services provided by the Administrator and the basis of the
current fees payable to the Administrator for the 1994, 1995 and 1996 fiscal
years are described in the Portfolio's Prospectuses.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures to il-
lustrate the past performance of each class of the Portfolio. Performance quo-
tations by investment companies are subject to rules adopted by the Commis-
sion, which require the use of standardized performance quotations or, alter-
natively, that every non-standardized performance quotation furnished by each
class of the Portfolio be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual compounded total return quotations used by each class of the Portfolio
are based on the standardized methods of computing performance mandated by the
Commission. An explanation of those and other methods used by each class of
the Portfolio to compute or express performance follows.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5, and 10 year periods
that would equate an initial hypothetical $1,000 investment to its ending re-
deemable value. The calculation assumes that all dividends and distributions
are reinvested when paid. The quotation assumes the amount was completely re-
deemed at the end of each 1, 5 and 10 year period and the deduction of all ap-
plicable Fund expenses on an annual basis.
Since Service Class shares of the Portfolio bear additional service and dis-
tribution expenses, the average annual total return of the Service Class
Shares of the Portfolio will generally be lower than that of the Institutional
Class Shares.
15
<PAGE>
The average annual total rates of return for the Institutional Class Shares
of the FMA Small Company Portfolio from inception and for the one year period
ended on the date of the Financial Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
FIVE YEARS THROUGH YEAR
ONE YEAR ENDED ENDED ENDED INCEPTION
OCTOBER 31, 1996 OCTOBER 31, 1996 OCTOBER 31, 1996 DATE
---------------- ---------------- ---------------- ---------
<S> <C> <C> <C> <C>
FMA Small Company
Portfolio............. 22.51% 14.55% 15.00% 7/31/91
</TABLE>
These figures are calculated according to the following formula:
P(1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
Service Class Shares of the Portfolio were not offered as of October 31,
1996. Accordingly, no total return figures are available.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices --unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
16
<PAGE>
(d) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consist of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/ agency is-
sues and mortgage passthrough securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(m) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(n) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
17
<PAGE>
(o) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(p) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(q) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(r) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- publi-
cations that rate fund performance over specified time periods.
(s) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(t) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(u) Savings and Loan Historical Interest Rates -- as published in the U.S.
Savings & Loan League Fact Book.
(v) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lio, that the averages are generally unmanaged, and that the items included in
the calculations of such averages may not be identical to the formula used by
the Fund to calculate its performance. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other aver-
ages.
18
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of com-
mon stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders. Currently, the Fund
is offering shares of 30 Portfolios.
Both classes of shares of each Portfolio of the Fund, when issued and paid
for as provided for in the Prospectus, will be fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Direc-
tors if they choose to do so. A shareholder is entitled to one vote for each
full share held (and a fractional vote for each fractional share held), then
standing in his or her name on the books of the Fund. Both Institutional Class
and Service Class Shares represent an interest in the same assets of the Port-
folio and are identical in all respects except that the Service Class Shares
bear certain expenses related to shareholder servicing and the distribution of
such shares, and have exclusive voting rights with respect to matters relating
to such distribution expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Prospectuses). The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or dis-
tribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus-
es.
19
<PAGE>
As set forth in the Prospectuses, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the Portfolio at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
FEDERAL TAXES
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities
held for less than three months must be limited to less than 30% of the Port-
folio's annual gross income.
The Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes. Shareholders will
be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the FMA Small Company Portfolio and the Finan-
cial Highlights for the respective periods presented, which appear in the
Portfolio's 1996 Annual Report to Shareholders, and the report thereon of
Price Waterhouse LLP, independent accountants, also appearing therein, are at-
tached to this SAI.
20
<PAGE>
FMA SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
COMMON STOCKS (93.2%)
- -------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE & DEFENSE (10.9%)
AAR Corp. ................................................ 20,000 $ 570,000
Aviation Sales Co. ....................................... 42,000 819,000
*Rohr, Inc. ............................................... 48,700 900,950
-----------
2,289,950
- -------------------------------------------------------------------------------
AUTOMOTIVE (5.7%)
Borg-Warner Automotive, Inc. ............................. 22,700 871,113
Walbro Corp. ............................................. 16,400 334,150
-----------
1,205,263
- -------------------------------------------------------------------------------
BANKS (9.5%)
City National Corp. ...................................... 36,700 642,250
First Hawaiian, Inc. ..................................... 28,600 883,025
First Midwest Bancorp, Inc. .............................. 14,800 469,900
-----------
1,995,175
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.1%)
Flowers Industries, Inc. ................................. 19,800 462,825
Lance Inc. ............................................... 11,100 194,250
-----------
657,075
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (9.7%)
++Eagle River Interactive, Inc. ........................... 31,000 279,000
*International Family Entertainment, Class B............... 50,000 893,750
Meredith Corp. ........................................... 16,900 849,225
-----------
2,021,975
- -------------------------------------------------------------------------------
CHEMICALS (3.5%)
Arcadian Corp. ........................................... 30,000 738,750
- -------------------------------------------------------------------------------
CONSTRUCTION (9.2%)
++Butler Manufacturing Co. ................................ 21,900 689,850
Falcon Products, Inc. .................................... 35,000 494,375
*Nortek, Inc. ............................................. 50,000 731,250
-----------
1,915,475
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (2.6%)
Alberto-Culver Co., Class A............................... 13,900 552,525
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
FMA SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (12.0%)
*Belden & Blake Corp. ..................................... 22,300 $ 574,225
*Santa Fe Energy Resources, Inc. .......................... 60,000 855,000
Trico Marine Services, Inc. .............................. 19,500 682,500
USX-Delhi Group .......................................... 30,000 393,750
-----------
2,505,475
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.8%)
++Ascent Entertainment Group............................... 20,400 377,400
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (7.0%)
Investors Financial Services Corp. ....................... 30,000 776,250
Peoples Heritage Financial Group, Inc. ................... 30,200 690,825
-----------
1,467,075
- -------------------------------------------------------------------------------
HEALTH CARE (4.1%)
*Universal Health Services, Class B........................ 34,000 850,000
- -------------------------------------------------------------------------------
INSURANCE (1.5%)
*Triad Guaranty, Inc. ..................................... 11,100 324,675
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (3.0%)
*Prime Hospitality Corp. .................................. 40,600 619,150
- -------------------------------------------------------------------------------
MANUFACTURING (6.1%)
++*Bucyrus International, Inc. ............................ 24,000 222,000
Cincinnati Milacron, Inc. ................................ 15,000 286,875
Giddings & Lewis, Inc. ................................... 22,500 258,750
Measurex Corp. ........................................... 20,000 515,000
-----------
1,282,625
- -------------------------------------------------------------------------------
METALS (3.5%)
Titanium Metals Corp. .................................... 23,900 734,925
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $16,955,333)..................... $19,537,513
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
FMA SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (6.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.8%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $1,417,220,
collateralized by $1,369,687 various U.S. Treasury
Notes, 5.875%-7.75%, due from 3/31/99-11/30/99,
valued at $1,417,003 (COST $1,417,000)............... $1,417,000 $ 1,417,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%) (COST $18,372,333) (A)...... 20,954,513
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%).................... (1,364)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $20,953,149
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
++ Security is deemed illiquid.
(a) The cost for federal income tax purposes was $18,372,333. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$2,582,180. This consisted of aggregate gross unrealized appreciation for
all securities of $3,104,770 and aggregate gross unrealized depreciation
for all securities of $522,590.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost.............................................. $18,372,333
===========
Investments, at Value............................................. $20,954,513
Cash.............................................................. 137
Dividends Receivable.............................................. 24,476
Receivable due from Investment Adviser............................ 12,683
Receivable for Portfolio Shares Sold.............................. 11,292
Other Assets...................................................... 981
- -------------------------------------------------------------------------------
Total Assets..................................................... 21,004,082
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Administrative Fees................................... 7,101
Payable for Custodian Fees........................................ 3,715
Payable for Directors' Fees....................................... 668
Other Liabilities................................................. 39,449
- -------------------------------------------------------------------------------
Total Liabilities................................................ 50,933
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $20,953,149
================================================================================
NET ASSETS CONSIST OF:
Paid in Capital................................................... $14,573,153
Undistributed Net Investment Income............................... 20,801
Accumulated Net Realized Gain..................................... 3,777,015
Unrealized Appreciation........................................... 2,582,180
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $20,953,149
================================================================================
INSTITUTIONAL CLASS SHARES
Shares issued and Outstanding ($0.001 par value) (Authorized
25,000,000)...................................................... 1,485,129
Net Asset Value, Offering and Redemption Price Per Share.......... $ 14.11
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 321,269
Interest................................................ 74,806
- ---------------------------------------------------------------------------------
Total Income........................................... 396,075
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee.............................................. $ 167,321
Less: Fees Waived...................................... (107,546) 59,775
---------
Administrative Fees--Note C............................. 80,758
Registration and Filing Fees............................ 29,362
Legal Fees.............................................. 16,629
Printing Fees........................................... 14,581
Audit Fees.............................................. 13,648
Custodian Fees--Note D.................................. 9,500
Directors' Fees--Note G................................. 2,865
Other Expenses.......................................... 3,315
- ---------------------------------------------------------------------------------
Total Expenses......................................... 230,433
Expense Offset--Note A.................................. (714)
- ---------------------------------------------------------------------------------
Net Expenses........................................... 229,719
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................... 166,356
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS......................... 3,778,061
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON IN-
VESTMENTS............................................... 448,990
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.................................. 4,227,051
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $4,393,407
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 166,356 $ 134,758
Net Realized Gain..................................... 3,778,061 2,531,887
Net Change in Unrealized Appreciation/Depreciation.... 448,990 120,949
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations.......................................... 4,393,407 2,787,594
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (158,190) (132,797)
Net Realized Gain..................................... (2,529,961) (663,733)
- ----------------------------------------------------------------------------------
Total Distributions.................................. (2,688,151) (796,530)
- ----------------------------------------------------------------------------------
CAPITAL CONTRIBUTION (NOTE B).......................... 94,505 --
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 1,198,264 1,692,230
--In Lieu of Cash Distributions................. 2,668,484 764,727
Redeemed.............................................. (5,560,199) (3,162,096)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions.......... (1,693,451) (705,139)
- ----------------------------------------------------------------------------------
Total Increase........................................ 106,310 1,285,925
Net Assets:
Beginning of Period................................... 20,846,839 19,560,914
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $20,801 and $9,809, respectively).......... $20,953,149 $20,846,839
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued...................................... 94,425 137,161
In Lieu of Cash Distributions...................... 227,881 69,423
Shares Redeemed.................................... (417,165) (239,130)
- ----------------------------------------------------------------------------------
(94,859) (32,546)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PE-
RIOD............................ $ 13.19 $ 12.13 $ 14.24 $ 10.36 $ 10.54
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).... 0.09 0.08 0.01 0.02 (0.01)
Net Realized & Unrealized Gain
(Loss)......................... 2.46 1.47 0.50 3.88 (0.14)
- -------------------------------------------------------------------------------
Total From Investment
Operations.................... 2.55 1.55 0.51 3.90 (0.15)
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........... (0.09) (0.08) -- (0.02) (0.01)
Net Realized Gain............... (1.60) (0.41) (2.62) -- (0.01)
Return of Capital............... -- -- -- -- (0.01)
- -------------------------------------------------------------------------------
Total Distributions............ (1.69) (0.49) (2.62) (0.02) (0.03)
- -------------------------------------------------------------------------------
CAPITAL CONTRIBUTION............. 0.06 -- -- -- --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 14.11 $ 13.19 $ 12.13 $ 14.24 $ 10.36
- -------------------------------------------------------------------------------
TOTAL RETURN+.................... 22.51% 13.57% 4.54% 37.65% (1.48)%
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)..................... $20,953 $20,847 $19,561 $18,569 $18,071
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.... 0.75% 0.66% 0.06% 0.14% (0.07)%
Portfolio Turnover Rate.......... 106% 170% 121% 163% 134%
Average Commission Rate #........ $0.0600 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the Adviser
Per Share....................... $ 0.06 $ 0.04 $ 0.03 $ 0.03 $ 0.003
Ratio of Expenses to Average Net
Assets Including
Expense Offsets................. 1.03 % 1.03 % N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
+ Total return would have been lower had certain fees not been waived and ex-
penses assumed by the Adviser.
# For fiscal years beginning on or after September 1, 1995, a portfolio is re-
quired to disclose the average commission rate per share it paid for portfo-
lio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are regis-
tered under the Investment Company Act of 1940, as amended. The FMA Small Com-
pany Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a diversi-
fied, open-end management investment company. At October 31, 1996, the UAM
Funds were composed of forty active portfolios. The financial statements of the
remaining portfolios are presented separately. The objective of the FMA Small
Company Portfolio is to provide maximum, long-term total return consistent with
reasonable risk to principal by investing primarily in common stocks of smaller
companies in terms of revenues and/or market capitalization.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting poli-
cies are in conformity with generally accepted accounting principles. Such pol-
icies are consistently followed by the Portfolio in the preparation of its fi-
nancial statements. Generally accepted accounting principles may require man-
agement to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results may differ from those
estimates.
1. SECURITY VALUATION: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid prices on such day. Price in-
formation on listed securities is taken from the exchange where the secu-
rity is primarily traded. Over-the-counter and unlisted securities are val-
ued not exceeding the current asked prices nor less than the current bid
prices. Short-term investments that have remaining maturities of sixty days
or less at time of purchase are valued at amortized cost, if it approxi-
mates 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 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.
3. REPURCHASE AGREEMENTS: In connection with transactions involving repur-
chase 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 col-
lateral is monitored on a daily basis to determine the adequacy of the col-
lateral. In the event of default on the obligation to repurchase, the Port-
folio 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 col-
lateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange Com-
mission, the UAM Funds may transfer their daily uninvested cash balances
into a joint trading account which invests in one or more repurchase agree-
ments. This joint repurchase agreement is covered by the same collateral
requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will be distributed annually. All distribu-
tions are recorded on ex-dividend date.
F-10
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
Permanent book and tax basis differences relating to shareholder distribu-
tions resulted in reclassifications of $2,826 to increase undistributed net
investment income with a decrease to accumulated net realized gain of
$2,826.
Current year permanent book-tax differences are not included in ending un-
distributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
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 identifica-
tion method. Dividend income is recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Most expenses of the UAM Funds
can be directly attributed to a particular portfolio. Expenses which cannot
be directly attributed are apportioned among the portfolios of the UAM
Funds based on their relative net assets. Additionally, certain expenses
are apportioned among the portfolios of the UAM Funds and AEW Commercial
Mortgage Securities Fund, Inc. ("AEW"), an affiliated closed-end management
investment company, based on their relative net assets. Custodian fees for
the Portfolio have been increased to include expense offsets for custodian
balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement, Fi-
duciary Management Associates, 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 av-
erage daily net assets. The Adviser has voluntarily agreed to waive a portion
of its advisory fees and to assume expenses, if necessary, in order to keep the
Portfolio's total annual operating expenses, after the effect of expense offset
arrangements, from exceeding 1.03% of average daily net assets. On September
11, 1996 the Portfolio received a capital contribution primarily from the Ad-
viser in the amount of $94,505 or $0.06 per share.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of .04% of average daily net assets of the Portfolio. Also effec-
tive April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain services,
including but not limited to, administration, fund ac-
F-11
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
counting, dividend disbursing and transfer agent services. Pursuant to the Mu-
tual Funds Service Agreement, the Administrator pays CGFSC a monthly fee. For
the period April 15, 1996 to October 31, 1996, UAM Fund Services, Inc. earned
$46,276 from the Portfolio as Administrator of which $41,407 was paid to CGFSC
for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net assets
in excess of $1 billion but less than $3 billion; plus 0.06% of the combined
aggregate net assets in excess of $3 billion. The fees were allocated among the
portfolios of the UAM Funds and AEW on the basis of their relative net assets
and were subject to a graduated minimum fee schedule per portfolio which rose
from $2,000 per month, upon inception of a portfolio, to $70,000 annually after
two years. For the period November 1, 1995 to April 15, 1996, CGFSC earned
$34,482 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the "Bank"),
an affiliate of CGFSC, is custodian for the Portfolio's assets held in accor-
dance with the custodian agreement. For the period July 17, 1996 to October 31,
1996, the amount charged to the Portfolio by the Bank aggregated $2,597, all of
which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio made
purchases of $22,305,870 and sales of $26,219,886 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases or sales of long-term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds and AEW, plus a quarterly retainer of $150
for each active portfolio of the UAM Funds and AEW, and reimbursement of ex-
penses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating Portfolio based on its average daily
unused portion of the line of credit. During the year ended 1996, the Portfolio
had no borrowings under the agreement.
I. OTHER: At October 31, 1996, 37.5% of total shares outstanding were held by
two record shareholders owning more than 10% of the aggregate total shares out-
standing.
F-12
<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 assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all mate-
rial respects, the financial position of FMA Small Company Portfolio (the
"Portfolio"), a Portfolio of the UAM Funds, Inc., at October 31, 1996, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted ac-
counting principles. These financial statements and financial highlights (here-
after 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 fi-
nancial 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, 1996 by correspondence with the cus-
todian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
The FMA Small Company Portfolio hereby designates $1,360,000 as a long-term
capital gain dividend for purposes of the dividend paid deduction on its fed-
eral income tax return.
For the year ended October 31, 1996, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders is 17.9%.
F-13
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of its
highest bond ratings: AAA -- judged to be the best quality; carry the smallest
degree of investment risk: AA -- judged to be of high quality by all stan-
dards; A -- possess many favorable investment attributes and are to be consid-
ered as higher medium grade obligations; BAA -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its high-
est bond ratings: AAA -- highest grade obligations; possess the ultimate de-
gree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues
only in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as safe;
BBB -- regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the lowest
which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the GNMA are, in effect,
backed by the full faith and credit of the United States through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase
A-1
<PAGE>
certain amounts of their securities to assist the institution in meeting its
debt obligations. Finally, other agencies and instrumentalities, such as the
Farm Credit System and the FHLMC, are federally chartered institutions under
Government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolios may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's in-
dustry or industries and the appraisal of speculative-type risks which may be
inherent in certain areas; (3) evaluation of the issuer's products in
A-2
<PAGE>
relation to completion and customer acceptance; (4) liquidity; (5) amount and
quality of long term debt; (6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by the management of issuer of obliga-
tions which may be present or may arise as a result of public interest ques-
tions and preparations to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolio is also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment as well as the bank which uncondi-
tionally guarantees to pay the draft at its face amount on the maturity date.
Most acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, a Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S.
A-3
<PAGE>
In addition, with respect to certain foreign countries, there is the possibil-
ity of expropriation or confiscatory taxation, political or social instabili-
ty, or diplomatic developments which could affect U.S. investments in those
countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Fund's Portfolios. However,
these foreign withholding taxes are not expected to have a significant impact.
A-4
<PAGE>
PART B
UAM FUNDS
- --------------------------------------------------------------------------------
ICM FIXED INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with the
Prospectus of UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the ICM Fixed
Income Portfolio's Institutional Class Shares dated January 3, 1997. To obtain
the Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objective and Policies.......................................... 2
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Shareholder Services....................................................... 15
Investment Limitations..................................................... 16
Management of the Fund..................................................... 18
Investment Adviser......................................................... 20
Portfolio Transactions..................................................... 22
Administrative Services.................................................... 22
Performance Calculations................................................... 23
General Information........................................................ 27
Financial Statements....................................................... 28
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment policies of the ICM Fixed
Income Portfolio (the "Portfolio") as set forth in the Portfolio's Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable de-
posits maintained in a banking institution for a specified period of time
at a stated interest rate. Time deposits maturing in more than seven days
will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calender days will not exceed 10% of the total
assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other
2
<PAGE>
currencies, (ii) in the case of U.S. banks, it is a member of the Federal De-
posit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, issued by a corporation having an outstanding unsecured
debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of
the U.S. Government and differ mainly in interest rates, maturities and
dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. These include securities
issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Ad-
ministration, Federal Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennes-
see Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts, options, and options on
futures contracts for the purposes of remaining fully invested and reducing
transactions costs. In addition, interest rate futures and options are used to
increase or reduce interest rate exposure resulting from market changes or
cash flow variations. Futures and options also allow the efficient implementa-
tion of strategies to hedge U.S. positions with currency-hedged foreign inter-
est rate exposure. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at
a specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are
traded on national futures exchanges, boards of trade, or similar entity or
quoted on an automated quotation system. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
3
<PAGE>
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. The Portfolio intends to use futures contracts generally only
for hedging purposes.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While the Portfolio will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES TRANSACTIONS
The Portfolio will only enter into futures contracts or futures options
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system. The
Portfolio will use futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable regulations of the
CFTC, or, with respect to positions in financial futures and related options
that do not qualify as "bona fide hedging" positions, will enter such non-
hedging positions only to the extent that aggregate initial margin deposits
plus premiums paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money," would not exceed 5% of the Port-
folio's total net assets.
4
<PAGE>
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Portfolio has insuf-
ficient cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures posi-
tions also could have an adverse impact on the Portfolio's ability to effec-
tively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contracts would result
in a total loss of the margin deposit, before any deduction for the transac-
tion costs, if the account were then closed out. A 15% decrease would result
in a loss equal to 150% of the original margin deposit if the contract were
closed out. Thus, a purchase or sale of a futures contract may result in ex-
cess of the amount invested in the contract. However, because the futures
strategies of the Portfolio are generally engaged in only for hedging purpos-
es, the Adviser does not believe that the Portfolio is subject to the risks of
loss frequently associated with futures transactions. The Portfolio would pre-
sumably have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures con-
tracts have different maturities than the portfolio securities being hedged.
It is also possible that the Portfolio could lose money on futures contracts
and also experience a decline in value of portfolio securities. There is also
the risk of loss by the Portfolio of margin deposits in the event of bank-
ruptcy of a broker with whom the Portfolio has an open position in a futures
contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily
5
<PAGE>
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not limit poten-
tial losses, because the limit may prevent the liquidation of unfavorable po-
sitions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby pre-
venting prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
Futures contracts, and options on futures contracts, may be traded on for-
eign exchanges. Such transactions are subject to the risk of governmental ac-
tions affecting trading in or the prices of foreign currencies or securities.
The value of such positions also could be adversely affected by (i) other com-
plex foreign political and economic factors, (ii) lesser availability than in
the United States of data on which to make trading decisions, (iii) delays in
the Portfolio's ability to act upon economic events occurring in foreign mar-
kets during nonbusiness hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States, and (v) lesser trading volume.
OPTIONS
The Portfolio may purchase and sell put and call options on futures con-
tracts securities and currencies for hedging purposes. Investments in options
involve some of the same considerations that are involved in connection with
investments in futures contracts (e.g., the existence of a liquid secondary
market). In addition, the purchase of an option also entails the risk that
changes in the value of the underlying security or contract will not be fully
reflected in the value of the option purchased. Depending on the pricing of
the option compared to either the futures contract on which it is based or the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract or securities.
WRITING COVERED OPTIONS
The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on
the securities alone. By writing covered call options, the Portfolio gives up
the opportunity, while the option is in effect, to profit from any price in-
crease in the underlying security above the option exercise price. In addi-
tion, the Portfolio's ability to sell the underlying security will be limited
while the option is in effect unless the Portfolio effects a closing purchase
transaction. A closing purchase transaction cancels out the Portfolio's posi-
tion as the writer of an option by means of an offsetting purchase of an iden-
tical option prior to the expiration of the option it has written. Covered
call options serve as a partial hedge against the price of the underlying se-
curity declining.
6
<PAGE>
The Portfolio writes only covered put options, which means that so long as a
Portfolio is obligated as the writer of the option it will, through its Custo-
dian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt securities denominated in U.S. dol-
lars or non-U.S. currencies with a securities depository with a value equal to
or greater than the exercise price of the underlying securities. By writing a
put, a Portfolio will be obligated to purchase the underlying security at a
price that may be higher than the market value of that security at the time of
exercise for as long as the option is outstanding. The Portfolio may engage in
closing transactions in order to terminate put options that it has written.
PURCHASING OPTIONS
The amount of any appreciation in the value of the underlying security will
be partially offset by the amount of the premium paid for the put option and
any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and profit or loss from the sale will de-
pend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs. A closing sale transaction
cancels out the Portfolio's position as the purchaser of an option by means of
an offsetting sale of an identical option prior to the expiration of the op-
tion it has purchased. In certain circumstances, the Portfolio may purchase
call options on securities held in its investment portfolio on which it has
written call options or on securities which it intends to purchase.
OPTIONS ON FOREIGN CURRENCIES
The Portfolio may purchase and write options on foreign currencies for hedg-
ing purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. For example, a decline in
the dollar value of a foreign currency in which portfolio securities are de-
nominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminution in the value of portfolio securities, the Portfolio may purchase
put options on the foreign currency. If the value of the currency does de-
cline, the Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securi-
ties to be acquired are denominated is projected, thereby increasing the cost
of such securities, the Portfolio may purchase call options thereon. The pur-
chase of such options could offset, at least partially, the effects of the ad-
verse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign cur-
rency options will be reduced by the amount of the premium and related trans-
action costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the
7
<PAGE>
Portfolio could sustain losses on transaction in foreign currency options
which would require it to forego a portion or all of the benefits of advanta-
geous changes in such rates.
The Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where the Portfolio anticipates a decline in
the dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline oc-
curs, the option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the premium re-
ceived.
Similarly, instead of purchasing a call option to hedge against an antici-
pated increase in the dollar cost of securities to be acquired, the Portfolio
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Portfolio to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will con-
stitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Portfolio would be required to purchase or sell the un-
derlying currency at a loss which may not be offset by the amount of the pre-
mium. Through the writing of options on foreign currencies, the Portfolio also
may be required to forego all or a portion of the benefits which might other-
wise have been obtained from favorable movements in exchange rates.
The Portfolio intends to write covered call options on foreign currencies. A
call option written on a foreign currency by the Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without addi-
tional cash consideration (or for additional cash consideration held in a seg-
regated account by the Custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call option is also covered if the Portfolio
has a call on the same foreign currency and in the same principal amount as
the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the
Portfolio in cash, U.S. Government securities or other high grade liquid debt
securities in a segregated account with the Custodian.
The Portfolio also intends to write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign cur-
rency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which
the Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate.
In such circumstances, the Portfolio collateralizes the option by maintaining
in a segregated account with the
8
<PAGE>
Custodian, cash or U.S. Government securities or other high grade liquid debt
securities in an amount not less than the value of the underlying foreign cur-
rency in U.S. dollars marked to market daily.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on con-
tract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although for-
eign currency options are also traded on certain national securities ex-
changes, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to the regulation of the Commission. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading en-
vironment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over
a period of time. Although the purchase of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corpo-
ration ("OCC"), thereby reducing the risk of counterparty default. Further-
more, a liquid secondary market in options traded on a national securities ex-
change may be more readily available than in the over-the-counter market, po-
tentially permitting the Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of adverse
market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market de-
scribed above, as well as the risks regarding adverse market movements, mar-
gining of options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effect of other political and
economic events. In addition, exchange-traded options of foreign currencies
involve certain risks not presented by the over-the-counter market. For exam-
ple, exercise and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in applicable foreign
countries for this purpose. As a result,
9
<PAGE>
the OCC may, if it determines that foreign governmental restrictions or taxes
would prevent the orderly settlement of foreign currency option exercises, or
would result in undue burdens on the OCC or its clearing member, impose spe-
cial procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward con-
tracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Portfo-
lio's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different exer-
cise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Portfolio may be affected favor-
ably or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the Portfolio may incur costs in connection with con-
versions between various currencies. The Portfolio will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward foreign currency exchange contracts ("forward contracts") to pur-
chase or sell foreign currencies. A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no de-
posit requirement, and no commissions are charged at any stage for such
trades.
The Portfolio may enter into forward contracts in several circumstances.
When the Portfolio enters into a contract for the purchase or sale of a secu-
rity denominated in a foreign currency, or when the Portfolio anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Portfolio may desire to "lock-in" the U.S. dollar price of
the security or the U.S. dollar equivalent of such dividend or interest pay-
ment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Portfolio will be able to protect
itself against a possible loss resulting from an adverse change in the rela-
tionship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or
10
<PAGE>
sold, or on which the dividend or interest payment is declared, and the date
on which such payments are made or received.
Additionally, when the Portfolio anticipates that the currency of a particu-
lar foreign country may suffer a substantial decline against the U.S. dollar,
it may enter into a forward contract for a fixed amount of dollars, to sell
the amount of foreign currency approximating the value of some or all of the
Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities in-
volved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the
value of these securities between the date on which the forward contract is
entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. The Portfolio does not intend
to enter into such forward contracts to protect the value of portfolio securi-
ties on a regular or continuous basis. The Portfolio will not enter into such
forward contracts or maintain a net exposure to such contracts where the con-
summation of the contracts would obligate the Portfolio to deliver an amount
of foreign currency in excess of the value of the Portfolio securities or
other assets denominated in that currency.
Under normal circumstances, consideration of the prospect for currency pari-
ties will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward con-
tracts when it determines that the best interests of the performance of the
Portfolio will thereby be served. The Fund's Custodian will place cash, U.S.
government securities, or high-grade debt securities into a segregated account
in an amount equal to the value of the Portfolio's total assets committed to
the consummation of forward contracts. If the value of the securities placed
in the segregated account declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the account will
be equal to the amount of the Portfolio's commitments with respect to such
contracts.
The Portfolio generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, the Portfolio
may either sell the security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same cur-
rency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for the Portfolio to purchase additional foreign currency
on the spot market (and bear the expense of such purchase) if the market value
of the security
11
<PAGE>
is less than the amount of foreign currency that the Portfolio is obligated to
deliver and if a decision is made to sell the security and make delivery of
the foreign currency.
If the Portfolio retains the portfolio security and engages in an offsetting
transaction, the Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between the Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters
into an offsetting contract for the purchase of the foreign currency, the
Portfolio will realize a gain to the extent that the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to pur-
chase. Should forward prices increase, the Portfolio would suffer a loss to
the extent that the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
The Portfolio's dealings in forward contracts will be limited to the trans-
actions described above. Of course, the Portfolio is not required to enter
into such transactions with regard to its foreign currency-denominated securi-
ties. It also should be realized that this method of protecting the value of
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging transac-
tions, the Portfolio is required for Federal income tax purposes to recognize
as income for each taxable year its net unrealized gains and losses on regu-
lated futures contracts as of the end of the year as well as those actually
realized during the year. In most cases, any gain or loss recognized with re-
spect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Realized gain or loss attributable to a foreign cur-
rency forward contract is treated as 100% ordinary income. Furthermore, sales
of futures contracts which are intended to hedge against a change in the value
of securities held by the Portfolio may affect the holding period of such se-
curities and, consequently, the nature of the gain or loss on such securities
upon disposition.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income: i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or
12
<PAGE>
foreign currencies, or other related income including gains from options,
futures and forward contracts, derived with respect to its business of invest-
ing in such securities or currencies. In addition, gains realized on the sale
or other disposition of securities held for less than three months must be
limited to less than 30% of the Portfolio's annual gross income. It is antici-
pated that any net gain realized from the closing out of futures contracts
will be considered a gain from the sale of securities and therefore will be
qualifying income for purposes of the 90% requirement. Qualification as a reg-
ulated investment company also requires that less than 30% of the Portfolio's
gross income be derived from the sale or other disposition of securities, op-
tions, futures or forward contracts (including certain foreign currencies not
directly related to the Portfolio's business of investing in securities) held
less than three months. In order to avoid realizing excessive gains on securi-
ties held for less than three months, the Portfolio may be required to defer
the closing out of futures contracts beyond the time when it would otherwise
be advantageous to do so. It is anticipated that unrealized gains on futures
contracts, which have been open for less than three months as of the end of
the Portfolio's taxable year and which are recognized for tax purposes, will
not be considered gains on securities held for less than three months for the
purposes of the 30% test.
The Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures trans-
actions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments, and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased without a sales commission, at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required is $100,000 with certain exceptions as may be de-
termined from time to time by officers of the Fund. An order received in
proper form prior to the 4:00 p.m. close of the New York Stock Exchange ("Ex-
change") will be executed at the price computed on the date of receipt; and an
order received not in proper form or after the 4:00 p.m. close of the Exchange
will be executed at the price computed on the next day the Exchange is open
after proper receipt. The Exchange will be closed on the following days: Pres-
idents' Day, February 17, 1997; Good Friday, March 28, 1997; Memorial Day, May
26, 1997; Independence Day, July 4, 1997; Labor Day, September 1, 1997;
Thanksgiving Day, November 27, 1997; Christmas Day, December 25, 1997; New
Year's Day, January 1, 1998.
The Portfolio reserves the right in its sole discretion (i) to suspend the
offering of its shares, (ii) to reject purchase orders when in the judgement
of management
13
<PAGE>
such rejection is in the best interest of the Fund, and (iii) to reduce or
waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of the Portfolio's shares.
REDEMPTION OF SHARES
REDEMPTIONS
The Portfolio may suspend redemption privileges or postpone the date of pay-
ment (i) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (ii) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for
the Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (iii) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the net assets of the
Fund at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Commission. Redemptions in excess of the above lim-
its may be paid in whole or in part, in investment securities or in cash, as
the Directors may deem advisable; however, payment will be made wholly in cash
unless the Directors believe that economic or market conditions exist which
would make such a practice detrimental to the best interests of the Fund. If
redemptions are paid in investment securities, such securities will be valued
as set forth in the Portfolio's Prospectus under "Valuation of Shares" and a
redeeming shareholder would normally incur brokerage expenses if these securi-
ties were converted to cash.
No charge is made by any Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
("CGFSC") from fraud, signature guarantees are required for certain redemp-
tions. The purpose of signature guarantees is to verify the identity of the
person who has authorized a redemption from your account. Signature guarantees
are required in connection with (1) all redemptions when the proceeds are to
be paid to someone other than the registered owner(s) and/or registered ad-
dress; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities
14
<PAGE>
exchanges, registered securities associations, clearing agencies and savings
associations. A complete definition of eligible guarantor institutions is
available from CGFSC, the Fund's sub-transfer agent. Broker-dealers guarantee-
ing signatures must be a member of a clearing corporation or maintain net cap-
ital of at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the Portfolio's Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of the ICM Portfolios may be exchanged for Insti-
tutional Class Shares of the other ICM Portfolios. In addition, Institutional
Class Shares of the ICM Portfolio may be exchanged for any other Institutional
Class Shares of a Portfolio included in the UAM Funds which is comprised of
the Fund and UAM Funds Trust. (See the list of Portfolios of the UAM Funds --
Institutional Class Shares at the end of the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM
Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O.
Box 2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are qualified for sale in the shareholder's state
of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder, and the reg-
istration of the two accounts will be identical. Requests for exchanges re-
ceived prior to 4:00 p.m. (Eastern time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed
on the next business day. Neither the Fund nor the Administrator, the Fund's
transfer agent, will be respon-
15
<PAGE>
sible for the authenticity of the exchange instructions received by telephone.
Exchanges may also be subject to limitations as to amounts or frequency and to
other restrictions established by the Board of Directors to assure that such
exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
or entity by making a written request to the Fund. The request should clearly
identify the account and number of shares to be transferred, and include the
signature of all registered owners and all stock certificates, if any, which
are subject to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as de-
scribed under "Redemption of Shares". As in the case of redemptions, the writ-
ten request must be received in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The Portfolio is subject to the following restrictions, which are non-funda-
mental, and which may be changed by the Fund's Board of Directors upon reason-
able notice to investors. Investment limitation (4), (6) and (7) are classi-
fied as fundamental. The Portfolio's fundamental investment limitation cannot
be changed without approval by a "majority of the outstanding shares" (as de-
fined in the 1940 Act) of the Portfolio. These restrictions supplement the in-
vestment objective and policies set forth in the Prospectus. The Portfolio
will not:
(1) invest in commodities except that the Portfolio may invest in futures
contracts and options to the extent that not more than 5% of the
Portfolio's assets are required as deposit to secure obligations un-
der futures contracts;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, subject to the limitation
described in (10) below) which are publicly distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial
16
<PAGE>
institutions so long as such loans are not inconsistent with the 1940
Act or the rules and regulations or interpretations of the Commission
thereunder;
(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii) enter-
ing into options, futures or repurchase transactions;
(5) purchase on margin or sell short except as specified in (1) above;
(6) purchase more than 10% of any class of the outstanding voting securi-
ties of any issuer;
(7) with respect as to 75% of its assets, purchase securities of any is-
suer (except obligations of the United States Government and its in-
strumentalities) if as the result more than 5% of the Portfolio's to-
tal assets, at the time of purchase, would be invested in the securi-
ties of such issuer;
(8) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(9) borrow money, except from banks and as a temporary measure for ex-
traordinary or emergency purposes and then, in no event, in excess of
10% of the Portfolio's gross assets valued at the lower of market or
cost, and the Portfolio may not purchase additional securities when
borrowings exceed 5% of total gross assets;
(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(11) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% of the assets of the Portfolio, determined at the time
of investment, in securities subject to legal or contractual restric-
tions on resale or securities for which there are no readily avail-
able markets, including repurchase agreements having maturities of
more than seven days;
(12) invest for the purpose of exercising control over management of any
company;
(13) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) continuous opera-
tions consisting of less than three years;
(14) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of the Portfo-
lio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no limi-
tation on the purchase
17
<PAGE>
of obligations issued or guaranteed by the U.S. Government, its agen-
cies or instrumentalities, or instruments issued by U.S. banks when
the Portfolio adopts a temporary defensive position; and
(15) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec
Age: 47 Corporation and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of
the Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square In-
Boston, MA 02111 vestors Corporation since 1988; Director
Age: 52 and Chief Executive Officer of H.T. In-
vestors, Inc., formerly a subsidiary of
Dewey Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund Distrib-
Boston, MA 02110 utors, Inc.; Vice President of Opera-
Age: 45 tions, Development and Control of Fidel-
ity Investments in 1995; Treasurer of the
Fidelity Group of Mutual Funds from 1991
to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street ident of UAM Fund Services, Inc.; former
Boston, MA 02110 Manager of Fund Administration and Com-
Age: 32 pliance of Chase Global Fund Services
Company from 1995 to 1996; formerly Se-
nior Manager of Deloitte & Touche LLP
from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services,
Boston, MA 02110 Inc. and UAM Fund Distributors, Inc.; As-
Age: 28 sociate Attorney of Ropes & Gray (a law
firm) from 1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of
Boston, MA 02108 Chase Global Funds Services Company; Se-
Age: 41 nior Vice President, Secretary and Gen-
eral Counsel of Leland, O'Brien, Ruben-
stein Associates, Inc. from November 1990
to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
As of December 31, 1996, the Directors and officers of the Fund owned less
than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their services as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator, or CGFSC and receive no compensation from the Fund. The
following table shows aggregate compensation paid to each of the Fund's unaf-
filiated Directors by the Fund and total compensation paid by the Fund, UAM
Funds Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively
the "Fund Complex") in the fiscal year ended October 31, 1996.
19
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of the Portfolio:
ICM Fixed Income Portfolio: Finney Trimble & Associates, Profit Sharing
Plan, First National Bank of Maryland, P.O. Box 1596, Baltimore, MD, 15.4%;
MSTA Pension, c/o Investment Counselors of Maryland, 803 Cathedral Street,
Baltimore, MD, 11.2%; Friends School of Baltimore, Inc., Trustee, FBO Mercan-
tile-Safe Deposit & Trust Co., Attn: Ms Isabel Corbett, Two Hopkins Plaza,
Baltimore, MD, 10.8%*; ICM-UAM Profit Sharing & 401(k) Plan, c/o Investment
Counselors of Maryland, 803 Cathedral Street, Baltimore, MD, 9.2%; Bryn Mawr
School, c/o Investment Counselors of Maryland, 803 Cathedral Street, Balti-
more, MD, 8.7%; First National Bank of Maryland, FBO for East Madison PSR-ICM,
P.O. Box 1596, Baltimore, MD, 6.8%; and Greenhorne & O'Mara, c/o Investment
Counselors of Maryland, 803 Cathedral Street, Baltimore, MD, 5%.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
The persons or organizations owning 25% or more of the outstanding shares of
a Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have
the ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
Investment Counselors of Maryland, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December,
1980 for the purpose of acquiring and owning firms engaged primarily in insti-
tutional investment management. Since its first acquisition in August, 1983,
UAM has acquired or organized approximately 45 such wholly-owned affiliated
firms (the
20
<PAGE>
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their own
firm name, with their own leadership and individual investment philosophy and
approach. Each UAM Affiliated Firm manages its own business independently on a
day-to-day basis. Investment strategies employed and securities selected by
UAM Affiliated Firms are separately chosen by each of them.
PHILOSOPHY AND STYLE
The Adviser employs a conservative fixed income investment strategy. It is
designed to provide superior, risk-adjusted returns with an emphasis on con-
sistently outperforming the broad intermediate-term market as interest rates
climb and participating in market rallies as rates fall. The investment proc-
ess is largely driven by independent research on relative value along the
yield curve and a view on interest rate trends. The Adviser considers events
affecting both the U.S. and international capital markets in its analysis.
Market models developed in-house and other internal systems quantify and moni-
tor a broad set of risk measures used to identify relative value between sec-
tors and within security groups. Relative value generally exists when a secu-
rity or sector offers the prospect of superior rewards for a given amount of
risk.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: Georgia Gulf Corp. State of
Maryland, Johns Hopkins Hospital, State of Kentucky, NYNEX, TRW Corp., and
Wisconsin Power & Light.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Portfolio's
Investment Advisory Agreement, the Portfolio pays the Adviser an annual fee,
in monthly installments, calculated by applying the following annual percent-
age rates to the Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
ICM Fixed Income Portfolio............................................. 0.50%
</TABLE>
For the fiscal years ended October 31, 1994, 1995 and 1996, the Portfolio
paid advisory fees of approximately $65,000, $0 and $0, respectively. During
these periods,
21
<PAGE>
the Adviser voluntarily waived advisory fees of approximately $59,000, $76,000
and $101,707, respectively.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the lowest
rate available when the Adviser believes it is reasonable to do so in light of
the value of the research, statistical, and pricing services provided by the
broker effecting the transaction. It is not the Fund's practice to allocate
brokerage or principal business on the basis of sales of shares which may be
made through broker-dealer firms. However, the Adviser may place portfolio or-
ders with qualified broker-dealers who recommend the Fund's Portfolios or who
act as agents in the purchase of shares of the Portfolio for their clients.
During the fiscal years ended, October 31, 1994, 1995 and 1996, the entire
Fund paid brokerage commissions of approximately $2,402,000, $2,983,000 and
$2,887,884, respectively.
Some securities considered for investment by the Portfolio may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, CGFSC or its predecessor, Mutual Funds Service Company, pro-
vided certain administrative services to the Fund under an Administration
Agreement between the Fund and U.S. Trust Company of New York. During the fis-
cal years ended October 31, 1994, 1995 and 1996, administrative services fees
paid to the Administrator by the ICM Fixed Income Portfolio totaled approxi-
mately $65,000, $82,000 and $89,268. Of the fees paid during the
22
<PAGE>
year ended October 31, 1996, ICM Fixed Income Portfolio paid $84,340 to CGFSC
and $4,928 to UAMFSI. The services provided by the Administrator and the basis
of the fees payable to the Administrator are described in the Portfolio's Pro-
spectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to illus-
trate the Fund's past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by the Fund to compute or express
performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5, and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis. The average annual total rates of return for the Portfolio
from inception and for the one year period ended on the date of the Financial
Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
THROUGH YEAR
ONE YEAR ENDED
ENDED OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 DATE
----------------- --------------- ---------
<S> <C> <C> <C>
ICM Fixed Income Portfolio.......... 5.17% 6.31% 11/3/92
</TABLE>
These figures are calculated according to the following formula:
P (1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
23
<PAGE>
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ments.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for
the period include any fees charged to all shareholders during the base peri-
od. The yield for the Portfolio for the 30-day period ended on October 31,
1996 was 6.22%.
This figure is obtained using the following formula:
Yield = 2 [(a -- b + 1)/6/ -- 1]
----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
24
<PAGE>
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/ agency is-
sues and mortgage pass-through securities.
(k) Lehman Brothers Aggregate Index -- is a fixed income market value-
weighted index that combines the Lehman Brothers Government/ Corporate
Index and the Lehman Brothers Mortgage-Backed Securities Index. It in-
cludes fixed rate issues of investment grade (BBB) or higher, with ma-
turities of at least one year and outstanding par values of at least
$100 million for U.S. Government issues and $25 million for others.
(l) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
25
<PAGE>
(o) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(p) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- publi-
cations that rate fund performance over specified time periods.
(t) Consumer Price Index (or cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(v) Savings and Loan Historical Interest Rates -- as published in the U.S.
Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc.; and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. In addition, there can be no assur-
ance that the Fund will continue this performance as compared to such other
averages.
26
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be addressed to the Fund at UAM Funds Service Center,
c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798.
The Fund's Articles of Incorporation, as amended, authorize the Directors to
issue 3,000,000,000 shares of common stock, $.001 par value. The Board of Di-
rectors has the power to designate one or more series (Portfolios) or classes
of common stock and to classify or reclassify any unissued shares with respect
to such Portfolios.
The shares of each Portfolio of each Fund, when issued and paid for as pro-
vided for in its Prospectuses, will be fully paid and nonassessable, and have
no preference as to conversion, exchange, dividends, retirement or other fea-
tures. The shares of each Portfolio of the Fund have no preemptive rights. The
shares of the Fund have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors
can elect 100% of the Directors if they choose to do so. A shareholder is en-
titled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his or her name on the books of the
Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Portfolios' Prospectus). The amounts of any income
dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of that Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Portfolios'
Prospectus.
As set forth in the Portfolios' Prospectus, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are auto-
matically received in additional shares of that Portfolio of the Fund at net
asset value (as of the business day following the record date). This will re-
main in effect until the Fund is
27
<PAGE>
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option
(both income dividends and capital gains distributions in cash) has been
elected. An account statement is sent to shareholders whenever an income divi-
dend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the ICM Fixed Income Portfolio for the fiscal
period ended October 31, 1996 and the Financial Highlights for the respective
periods presented, which appear in the Portfolio's 1996 Annual Report to
Shareholders, and the report thereon of Price Waterhouse LLP, independent ac-
countants, also appearing therein, are attached to this SAI.
28
<PAGE>
ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (12.8%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (8.8%)
American General Finance
8.125%, 8/15/09....................................... $ 250,000 $ 271,875
Associates Corp. of North America
8.375%, 1/15/98....................................... 25,000 25,750
Commercial Credit Corp.
8.70%, 6/15/09........................................ 100,000 114,375
*Dean Witter Discover
5.65%, 3/2/99......................................... 15,000 15,019
Ford Motor Credit Corp. Medium Term Note
6.70%, 8/2/00......................................... 250,000 252,188
Ford Motor Credit Corp.
7.00%, 9/25/01........................................ 250,000 255,625
General Electric Capital Corp.
8.85%, 4/1/05......................................... 350,000 398,125
General Motors Acceptance Corp.
8.875%, 6/1/10........................................ 50,000 58,312
Morgan Stanley, Inc.
5.65%, 6/15/97........................................ 350,000 349,828
Norwest Financial, Inc.
6.23%, 9/1/98......................................... 300,000 301,875
U.S. West Capital, Inc.
8.40%, 9/15/99........................................ 100,000 105,375
-----------
2,148,347
- -------------------------------------------------------------------------------
INDUSTRIAL (2.2%)
American Home Products
7.70%, 2/15/00........................................ 250,000 260,825
Dow Chemical Co.
8.55%, 10/15/09....................................... 25,000 27,906
EG & G, Inc.
6.80%, 10/15/05....................................... 200,000 196,320
Weyerhaeuser Co.
9.05%, 2/1/03......................................... 50,000 56,313
-----------
541,364
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (1.8%)
Boeing Co.
7.95%, 8/15/24........................................ $ 250,000 $ 275,313
Ryder System, Inc.
7.30%, 10/30/00....................................... 150,000 154,815
-----------
430,128
- -------------------------------------------------------------------------------
UTILITIES (0.0%)
General Telephone of Wisconsin
7.50%, 3/1/02......................................... 10,000 10,125
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $3,037,883)....... 3,129,964
- -------------------------------------------------------------------------------
YANKEE BOND (0.5%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (0.5%)
InterAmerica Development Bank
8.40%, 9/1/09 (COST $108,277)......................... 100,000 115,625
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH SECURITIES (27.2%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (6.0%)
Pool #E48794,
15 yr. Guarantee 6.50%, 7/1/08........................ 102,039 100,541
Pool #E00292,
Gold 6.50%, 4/1/09.................................... 284,969 280,783
Pool #E64395
15 yr. Guarantee 7.00%, 6/1/11........................ 491,574 492,803
*Pool #845640
7.736%, 8/1/23........................................ 204,021 208,611
Pool #C00449
7.00%, 3/1/26......................................... 391,558 385,318
-----------
1,468,056
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (13.1%)
Pool #81817
9.50%, 8/1/02......................................... 10,309 10,911
Pool #232847
7.00%, 8/1/08......................................... 44,193 44,249
</TABLE>
F-7
<PAGE>
ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH SECURITIES--(CONTINUED)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--(CONTINUED)
Pool # 232361
6.00%, 10/1/08......................................... $ 69,466 $ 66,969
Pool #264441
6.00%, 1/1/09.......................................... 75,662 72,943
Pool #250498
6.50%, 3/1/11.......................................... 285,186 280,618
Pool #346544,
7.00%, 5/1/11.......................................... 387,364 387,848
Pool #50013
9.50%, 10/1/17......................................... 3,681 3,965
Pool #55343
9.50%, 10/1/17......................................... 4,353 4,689
Pool #50993
7.00%, 2/1/24.......................................... 445,182 437,113
Pool #298034
8.00%, 11/1/24......................................... 249,245 254,225
Pool #311025
8.00%, 5/1/25.......................................... 344,401 351,612
Pool #322345
7.50%, 9/1/25.......................................... 318,806 319,604
Pool #330297
7.00%, 11/1/25......................................... 435,149 427,262
Pool #250710
8.50%, 10/1/26......................................... 495,001 512,635
-----------
3,174,643
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (8.1%)
Pool #17084
8.00%, 9/15/07......................................... 23,828 24,379
Pool #20335
8.00%, 10/15/07........................................ 34,312 35,492
Pool #400216
7.00%, 4/15/09......................................... 257,079 258,444
</TABLE>
F-8
<PAGE>
ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--(CONTINUED)
Pool #109599
12.00%, 1/15/14......................................... $ 60,008 $ 68,709
Pool #311575
7.50%, 2/15/23.......................................... 471,833 473,603
Pool #387161
7.50%, 10/15/25......................................... 194,844 195,451
Pool #405183
7.50%, 11/15/25......................................... 408,449 409,981
Pool #423836
8.00%, 8/15/26.......................................... 499,280 510,826
----------
1,976,885
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH SECURITIES (COST $6,603,413)................ 6,619,584
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (8.2%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (8.2%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.8%)
Series 1544-E
6.25%, 6/15/08.......................................... 200,000 199,805
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (7.4%)
Series 1990-103 CL J PAC
7.50%, 10/25/19......................................... 33,217 33,495
Series 1991-21 H PAC
7.00%, 12/25/19......................................... 109,544 110,101
Series 1993-52 CL D PAC-1(11)
5.50%, 12/25/02......................................... 150,000 149,130
Series 1993-71 CL PG PAC(11)
6.25%, 7/25/07.......................................... 300,000 297,900
Series 1993-194 CL PG PAC(11)
5.65%, 4/25/05.......................................... 350,000 343,640
Series 1996-M5 CL A1
7.141%, 6/25/08......................................... 248,427 253,395
</TABLE>
F-9
<PAGE>
ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--(CONTINUED)
Series G19-H PAC
8.40%, 6/25/20......................................... $ 200,000 $ 209,300
Series 692-15 CL G PAC(11)
7.00%, 4/25/20......................................... 395,000 391,722
-----------
1,788,683
- --------------------------------------------------------------------------------
OTHER (0.0%)
*FBC Mortgage Securities Trust Series 7-B
6.09%, 1/25/17......................................... 1,802 1,805
Morgan Stanley Mortgage Trust Series Y3
8.95%, 3/1/16.......................................... 9,145 9,304
-----------
11,109
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $2,006,123)....................................... 1,999,597
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (47.1%)
- --------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION (1.0%)
*5.50%, 3/3/97......................................... 250,000 250,081
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (15.7%)
12.75%, 11/15/10....................................... 25,000 35,687
7.50%, 11/15/16........................................ 3,000,000 3,255,450
7.125%, 2/15/23........................................ 500,000 523,170
-----------
3,814,307
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (30.4%)
5.125%, 3/31/98........................................ 375,000 372,585
6.125%, 3/31/98........................................ 500,000 503,430
5.125%, 4/30/98........................................ 1,000,000 992,840
6.125%, 8/31/98........................................ 500,000 503,515
6.375%, 1/15/99........................................ 700,000 709,009
6.875%, 8/31/99........................................ 1,125,000 1,153,406
5.50%, 4/15/00......................................... 100,000 98,548
6.25%, 5/31/00......................................... 1,300,000 1,311,076
</TABLE>
F-10
<PAGE>
ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES--(CONTINUED)
6.375%, 8/15/02....................................... $1,635,000 $ 1,653,851
7.25%, 8/15/04........................................ 100,000 105,828
-----------
7,404,088
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(COST $11,273,327)..................................... 11,468,476
- -------------------------------------------------------------------------------
<CAPTION>
SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
CLOSED-END INVESTMENT COMPANY (0.1%)
Blackrock 1998 Term Trust (COST $25,620).............. 2,800 26,250
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.9%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $218,034, collateralized
by $210,721 of various
U.S. Treasury Notes, 5.875%-7.75%, due from 3/31/99-
11/30/99, valued at $218,000.......................... $ 218,000 218,000
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION (0.4%)
++**U.S. Treasury Bill 5.32%, 1/30/97................... 100,000 98,731
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $316,669)............ 316,731
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.2%) (COST $23,371,312)(A)......... 23,676,227
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.8%)..................... 682,007
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $24,358,234
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ A portion of this security was pledged to cover margin requirements for
open futures contracts.
* Variable/Floating rate security--rate disclosed is as of October 31, 1996.
** Interest Rate disclosed for the U.S. Treasury Bill represents effective
yield at October 31, 1996.
PAC Planned Amortization Class.
(a) The cost for federal income tax purposes was $23,375,390. At October 31,
1996, net unrealized appreciation for all securities based on tax cost
was $300,837. This consisted of aggregate gross unrealized appreciation
for all securities of $359,451 and aggregate gross unrealized deprecia-
tion for all securities of $58,614.
F-11
<PAGE>
ICM FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................. $23,371,312
===========
Investments, at Value............................................ $23,676,227
Cash............................................................. 3,507
Receivable for Investments Sold.................................. 408,829
Receivable from Investment Adviser............................... 8,311
Interest Receivable.............................................. 309,751
Other Assets..................................................... 4,553
- -------------------------------------------------------------------------------
Total Assets.................................................... 24,411,178
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Administrative Fees.................................. 8,006
Payable for Daily Variation on Futures Contracts................. 3,779
Payable for Custodian Fees....................................... 5,243
Payable for Directors' Fees...................................... 654
Other Liabilities................................................ 35,262
- -------------------------------------------------------------------------------
Total Liabilities............................................... 52,944
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $24,358,234
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $24,049,112
Undistributed Net Investment Income.............................. 212,125
Accumulated Net Realized Loss.................................... (187,076)
Unrealized Appreciation.......................................... 284,073
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $24,358,234
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
50,000,000)..................................................... 2,352,098
Net Asset Value, Offering and Redemption Price Per Share......... $ 10.36
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
ICM FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................. $1,313,156
- --------------------------------------------------------------------------------
Total Income............................................ 1,313,156
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.............................................. $101,707
Less: Fees Waived....................................... (101,707) --
--------
Administrative Fees--Note C.............................. 89,268
Printing Fees............................................ 27,361
Registration and Filing Fees............................. 16,050
Audit Fees............................................... 13,098
Custodian Fees--Note D................................... 12,561
Directors' Fees--Note G.................................. 2,798
Legal Fees............................................... 2,351
Other Expenses........................................... 3,597
Expenses Assumed by the Adviser--Note B.................. (64,762)
- --------------------------------------------------------------------------------
Total Expenses.......................................... 102,322
Expense Offset--Note A................................... (826)
- --------------------------------------------------------------------------------
Net Expenses............................................ 101,496
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... 1,211,660
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS):
Investments.............................................. (81,237)
Written Options.......................................... (12,593)
Futures Contracts........................................ 59,939
- --------------------------------------------------------------------------------
TOTAL NET REALIZED LOSS ON INVESTMENTS, WRITTEN OPTIONS
AND FUTURES CONTRACTS.................................... (33,891)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON
INVESTMENTS AND FUTURES CONTRACTS........................ (87,594)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS, WRITTEN OPTIONS AND FUTURES CON-
TRACTS................................................... (121,485)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $1,090,175
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
ICM FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 1,211,660 $ 915,043
Net Realized Gain (Loss)............................. (33,891) 30,438
Net Change in Unrealized Appreciation/Depreciation... (87,594) 1,097,379
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions.............................................. 1,090,175 2,042,860
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (1,168,003) (812,578)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular...................................... 8,726,617 7,677,245
--In Lieu of Cash Distributions...................... 1,021,678 787,949
Redeemed............................................. (2,077,394) (5,531,650)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 7,670,901 2,933,544
- --------------------------------------------------------------------------------
Total Increase....................................... 7,593,073 4,163,826
Net Assets:
Beginning of Period.................................. 16,765,161 12,601,335
- --------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $212,125 and $134,418, respectively)...... $24,358,234 $16,765,161
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 846,409 749,788
In Lieu of Cash Distributions....................... 99,711 78,271
Shares Redeemed..................................... (200,725) (541,400)
- --------------------------------------------------------------------------------
745,395 286,659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
NOVEMBER 3,
YEARS ENDED OCTOBER 31, 1992** TO
------------------------- OCTOBER 31,
1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $ 10.43 $ 9.55 $ 10.58 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.59 0.59 0.52 0.51
Net Realized and Unrealized Gain
(Loss).............................. (0.07) 0.82 (0.98) 0.51
- -------------------------------------------------------------------------------
Total From Investment Operations.... 0.52 1.41 (0.46) 1.02
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ (0.59) (0.53) (0.48) (0.44)
Net Realized Gain.................... -- -- (0.09) --
- -------------------------------------------------------------------------------
Total Distributions................. (0.59) (0.53) (0.57) (0.44)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........ $ 10.36 $ 10.43 $ 9.55 $ 10.58
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+ ........................ 5.17% 15.11% (4.43)% 10.38%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands)............................... $24,358 $16,765 $12,601 $12,465
Ratio of Expenses to Average Net As-
sets................................. 0.50% 0.63% 0.84% 0.84%*
Ratio of Net Investment Income to
Average Net Assets................... 5.98% 6.04% 5.26% 5.41%*
Portfolio Turnover Rate............... 46% 49% 82% 65%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per Share..... $ 0.08 $ 0.08 $ 0.04 $ 0.03
Ratio of Expenses to Average Net
Assets Including Expense Offsets..... 0.50% 0.61% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Adviser during the period.
F-15
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are regis-
tered under the Investment Company Act of 1940, as amended. The ICM Fixed In-
come Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a diversi-
fied, open-end management investment company. At October 31, 1996, the UAM
Funds were composed of forty active portfolios. The financial statements of the
remaining portfolios are presented separately. The objective of the ICM Fixed
Income Portfolio is to provide maximum, long-term total return consistent with
reasonable risk to principal, by investing primarily in investment grade, fixed
income securities of varying maturities.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting poli-
cies are in conformity with generally accepted accounting principles. Such pol-
icies are consistently followed by the Portfolio in the preparation of its fi-
nancial statements. Generally accepted accounting principles may require man-
agement to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results may differ from those
estimates.
1. SECURITY VALUATION: Fixed income securities are stated on the basis of
valuations provided by brokers and/or a pricing service which uses informa-
tion with respect to transactions in fixed income securities, quotations
from dealers, market transactions in comparable securities and various re-
lationships 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 qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements.
At October 31, 1996 , the Portfolio had available a capital loss carryover
for Federal income tax purposes of $109,521 and $93,355 which will expire
on October 31, 2002 and October 31, 2004, respectively.
3. REPURCHASE AGREEMENTS: In connection with transactions involving repur-
chase 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 col-
lateral is monitored on a daily basis to determine the adequacy of the col-
lateral. In the event of default on the obligation to repurchase, the Port-
folio 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 col-
lateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange Com-
mission, the UAM Funds may transfer their daily uninvested cash balances
into a joint trading account which invests in one or more repurchase agree-
ments. This joint repurchase agreement is covered by the same collateral
requirements as discussed above.
F-16
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. FUTURES AND OPTIONS CONTRACTS: The Portfolio may use futures and options
contracts to hedge against changes in the values of securities the Portfo-
lio owns or expects to purchase. The Portfolio may also write covered op-
tions on securities it owns or in which it may invest to increase its cur-
rent returns.
The potential risk to the Portfolio is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the value
of the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to perform.
Futures contracts are valued at the quoted daily settlement prices estab-
lished by the exchange on which they trade. Exchange traded options are
valued at the last sale price, or if no sales are reported, the last bid
price for purchased options and the last ask price for written options.
The Portfolio had the following futures contracts open at October 31, 1996:
<TABLE>
<CAPTION>
NET UNREALIZED
NUMBER OF AGGREGATE EXPIRATION APPRECIATION
CONTRACTS CONTRACTS FACE VALUE DATE (DEPRECIATION)
--------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
Purchases:
United Kingdom 15 Year
Bond.................... 5 $273,281 December 1996 $ (762)
Canadian 10 Year Bond.... 5 584,400 December 1996 6,416
Sales:
U.S. Treasury 10 Year
Note.................... 5 584,125 December 1996 (19,546)
U.S. Treasury 10 Year
Note.................... 5 584,125 December 1996 (5,975)
U.S. Treasury 10 Year
Note.................... 5 584,125 December 1996 (975)
--------
$(20,842)
========
</TABLE>
During the year ended October 31, 1996, the Portfolio participated in writ-
ing covered call and put options. The Portfolio had option activity as fol-
lows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
--------- --------
<S> <C> <C>
Options outstanding at October 31, 1995................ 0 $ 0
Options written during the period...................... 25 16,438
Options expired during the period...................... (15) (3,125)
Options canceled in closing transactions during the pe-
riod.................................................. (10) (13,313)
--- --------
Options outstanding at October 31, 1996................ 0 $ 0
=== ========
</TABLE>
5. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income 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. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
F-17
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Permanent book and tax basis differences relating to shareholder distribu-
tions resulted in reclassifications of $34,050 to increase undistributed
net investment income, with decreases to accumulated net realized gain and
paid in capital of $33,744 and $306, respectively.
Current year permanent book-tax differences are not included in ending un-
distributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
6. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific identifica-
tion method. Dividend income is recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Discounts and premiums on secu-
rities purchased are amortized using the effective yield basis 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 port-
folios 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 in-
creased to include expense offsets for custodian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement, In-
vestment Counselors of Maryland, Inc. (the "Adviser"), a wholly-owned subsidi-
ary of United Asset Management Corporation ("UAM"), provides investment advi-
sory services to the Portfolio at a fee calculated at an annual rate of 0.50%
of average daily net assets. The Adviser has voluntarily agreed to waive a por-
tion of its advisory fees and to assume expenses, if necessary, in order to
keep the Portfolio's total annual operating expenses, after the effect of ex-
pense offset arrangements, from exceeding 0.50% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.04% of average daily net assets of the Portfolio. Also effec-
tive April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain services,
including but not limited to, administration, fund accounting, dividend dis-
bursing and transfer agent services. Pursuant to the Mutual Funds Service
Agreement, the Administrator pays CGFSC a monthly fee. For the period April 15,
1996 to October 31, 1996, UAM Fund Services, Inc. earned $49,690 from the Port-
folio as Administrator of which $44,762 was paid to CGFSC for their services.
F-18
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net assets
in excess of $1 billion but less than $3 billion; plus 0.06% of the combined
aggregate net assets in excess of $3 billion. The fees were allocated among the
portfolios of the UAM Funds and AEW on the basis of their relative net assets
and were subject to a graduated minimum fee schedule per portfolio which rose
from $2,000 per month, upon inception of a portfolio, to $70,000 annually after
two years. For the period November 1, 1995 to April 15, 1996, CGFSC earned
$39,578 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the "Bank"),
an affiliate of CGFSC, is custodian for the Portfolio's assets held in accor-
dance with the custodian agreement. For the period July 17, 1996 to October 31,
1996, the amount charged to the Portfolio by the Bank aggregated $3,622, all of
which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
PortfoliO.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio made
purchases of $880,028 and sales of $850,708 of investment securities other than
long-term U.S. Government and short-term securities. Purchases and sales of
long-term U.S. Government securities were $15,355,147 and $8,013,820, respec-
tively.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds and AEW, plus a quarterly retainer of $150
for each active portfolio of the UAM Funds and AEW, and reimbursement of ex-
penses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating Portfolio based on its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolio had no borrowings under the agreement.
I. OTHER: At October 31, 1996, 37.7% of total shares outstanding were held by
three record shareholders owning more than 10% of the aggregate total shares
outstanding. At October 31, 1996, 10% of the Portfolio was held by a related
party of the Fund.
F-19
<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 assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all mate-
rial respects, the financial position of ICM Fixed Income Portfolio (the "Port-
folio"), a Portfolio of UAM Funds, Inc., at October 31, 1996, and the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter re-
ferred 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 re-
quire 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 dis-
closures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall finan-
cial statement presentation. We believe that our audits, which included confir-
mation of securities at October 31, 1996 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
F-20
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of its
highest bond ratings: AAA -- judged to be the best quality; carry the smallest
degree of investment risk: AA -- judged to be of high quality by all stan-
dards; A -- possess many favorable investment attributes and are to be consid-
ered as higher medium grade obligations; BAA -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its high-
est bond ratings: AAA -- highest grade obligations; possess the ultimate de-
gree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues
only in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as safe;
BBB -- regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the lowest
which qualifies for commercial bank investment.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of res-
idential mortgage loans. These securities are designed to provide monthly pay-
ments of interest and principal to the investor. The mortgagor's monthly pay-
ments to his/her lending institution are "passed-through" to investors such as
the Portfolio. Most issuers or poolers provide guarantees of payments, regard-
less of whether or not the mortgagor actually makes the payment. The guaran-
tees made by issuers or poolers are supported by various forms of credit, col-
lateral, guarantees or insurance, including individual loan, title, pool and
hazard insurance purchased by the issuer. There can be no assurance that the
private issuers can meet their obligations under the policies. Mortgage-backed
securities issued by private issuers, whether or not such securities are sub-
ject to guarantees, may entail greater risk. If there is no guarantee provided
by the issuer, mortgage-backed securities purchased by the Portfolio will be
rated investment grade by Moody's or S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participants in loans. The majority
of these loans are made to purchasers of 1-4 family homes. The terms and char-
acteristics of the mortgage instruments are generally uniform within a pool
but may vary among pools. For example, in addition to fixed-rate, fixed-term
mortgages, the Portfolio may purchase pools of variable rate mortgages (VRM),
growing equity mortgages (GEM), graduated payment mortgages (GPM) and other
types where the principal and interest payment procedures vary. VRMs are mort-
gages which reset
A-1
<PAGE>
the mortgage's interest rate with changes in open market interest rates. The
Portfolio's interest income will vary with changes in the applicable interest
rate on pools of VRMs. GPM and GEM pools maintain constant interest rates,
with varying levels of principal repayment over the life of the mortgage.
These different interest and principal payment procedures should not impact
the Portfolio's net asset value since the prices at which these securities are
valued each day will reflect the payment procedure.
All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit stan-
dards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through pri-
vate mortgage insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of the un-
derlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors in-
cluding the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturi-
ties of different characteristics will have varying assumptions for average
life.
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life as-
sumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yields
of the Portfolio. The compounding effect from reinvestment of monthly payments
received by the Portfolio will increase its yield to shareholders, compared to
bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates. In-
stead, these securities provide a monthly payment which consists of both in-
terest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their residential
mortgage loans, net of any
A-2
<PAGE>
fees paid to the issuer or guarantor of such securities. Additional payments
are caused by repayments resulting from the sale of the underlying residential
property, refinancing or foreclosure net of fees or costs which may be in-
curred. Some mortgage-backed securities are described as "modified pass-
through". These securities entitle the holders to receive all interest and
principal payments owed on the mortgages in the pool, net of certain fees, re-
gardless of whether or not the mortgagors actually make the payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage Cor-
poration (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the avail-
ability of mortgage credit for residential housing. Its stock is owned by the
twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfo-
lio. FHLMC guarantees the timely payment of interest and ultimate collection
of principal.
The Federal National Mortgage Association (FNMA) is a Government sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller/services which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.
The principal Government guarantor of mortgage-backed securities is the Gov-
ernment National Mortgage Association (GNMA). GNMA is a wholly-owned U.S. Gov-
ernment corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued
by approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Pools created
by such non-governmental issuers generally offer a higher rate of interest
than Government and Government-related pools because there are no direct or
indirect Government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by vari-
ous forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers and the mortgage poolers.
There can be no assurance that the private insurers can meet their obligations
under the policies. Mortgage-backed securities
A-3
<PAGE>
purchased for the Portfolio will, however, be rated investment grade by
Moody's or S&P.
The Portfolio expects that Governmental or private entities may create mort-
gage loan pools offering pass-through investments in addition to those de-
scribed above. The mortgages underlying these securities may be alternative
mortgage instruments, that is mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and of-
fered to investors, the Portfolio will, consistent with their investment ob-
jective and policies, consider making investments in such new types of securi-
ties.
III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the GNMA are, in effect,
backed by the full faith and credit of the United States through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the FHLMC, are federally chartered institutions under Government supervi-
sion, but their debt securities are backed only by the creditworthiness of
those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
A-4
<PAGE>
IV. DESCRIPTION OF COMMERCIAL PAPER
The Portfolio may invest in commercial paper (including variable amount mas-
ter demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by S&P.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not ex-
ceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's in-
dustry or industries and the appraisal of speculative-type risks which may be
inherent in certain areas; (3) evaluation of the issuer's products in relation
to completion and customer acceptance; (4) liquidity; (5) amount and quality
of long term debt; (6) trend of earnings over a period of ten years; (7) fi-
nancial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by the management of issuer of obligations
which may be present or may arise as a result of public interest questions and
preparations to meet such obligations.
V. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are
A-5
<PAGE>
negotiable short-term obligations of commercial banks. Variable rate certifi-
cates of deposit are certificates of deposit on which the interest rate is pe-
riodically adjusted prior to their stated maturity based upon a specified mar-
ket rate. As a result of these adjustments, the interest rate on these obliga-
tions may increase or decrease periodically. Frequently, dealers selling vari-
able rate certificates of deposit to the Portfolio will agree to repurchase
such instruments, at the Portfolio's option, at par on or near the coupon
dates. The dealers' obligations to repurchase these instruments are subject to
conditions imposed by various dealers. Such conditions typically are the con-
tinued credit standing of the issuer and the existence of reasonably orderly
market conditions. The Portfolio is also able to sell variable rate certifi-
cates of deposit in the secondary market. Variable rate certificates of de-
posit normally carry a higher interest rate than comparable fixed rate certif-
icates of deposit. A banker's acceptance is a time draft drawn on a commercial
bank by a borrower usually in connection with an international commercial
transaction to finance the import, export, transfer or storage of goods. The
borrower is liable for payment as well as the bank which unconditionally guar-
antees to pay the draft at its face amount on the maturity date. Most accept-
ances have maturities of six months or less and are traded in the secondary
markets prior to maturity.
VI. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between vari-
ous currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation or confiscatory taxation, po-
litical or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come re-
A-6
<PAGE>
ceived from the companies comprising the Fund's Portfolios. However, these for-
eign withholding taxes are not expected to have a significant impact.
A-7
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
ICM SMALL COMPANY PORTFOLIO
ICM EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
ICM Small Company and ICM Equity Portfolios' Institutional Class Shares dated
January 3, 1997 . To obtain the Prospectus, please call the UAM Funds Service
Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 7
Shareholder Services....................................................... 9
Investment Limitations..................................................... 10
Management of the Fund..................................................... 12
Investment Adviser......................................................... 15
Portfolio Transactions..................................................... 16
Administrative Services.................................................... 16
Performance Calculations................................................... 17
General Information........................................................ 22
Financial Statements....................................................... 23
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment policies of the ICM Small
Company and ICM Equity Portfolios (the "Portfolios") as set forth in the Port-
folios' Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable de-
posits maintained in a banking institution for a specified period of time
at a stated interest rate. Time deposits maturing in more than seven days
will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calendar days will not exceed 10% of the total
assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
2
<PAGE>
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank had total assets of a least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, issued by a corporation have an outstanding unsecured
debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of
the U.S. Government and differ mainly in interest rates, maturities and
dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. These include securities
issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Ad-
ministration, Federal Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennes-
see Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FUTURES CONTRACTS
The Portfolios may enter into futures contracts, options, and options on
futures contracts for the purposes of remaining fully invested and reducing
transactions costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at
a specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are
traded on national futures exchanges. Futures exchanges and trading are regu-
lated under the Commodity Exchange Act by the Commodity Futures Trading Com-
mission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
3
<PAGE>
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. The Portfolios intend to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect secu-
rities it owns against price declines or purchase contracts to protect against
an increase in the price of securities it intends to purchase. As evidence of
this hedging interest, the Portfolio expects that approximately 75% of its
futures contracts purchases will be "completed"; that is, equivalent amounts
of related securities will have been purchased or are being purchased by the
Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolios' exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While the Portfolios will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
4
<PAGE>
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolios will not enter into futures contract transactions to the ex-
tent that, immediately thereafter, the sum of their initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. In addi-
tion, the Portfolios will not enter into futures contracts to the extent that
their outstanding obligations to purchase securities under these contracts
would exceed 20% of their total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Portfolios would continue to be required to make daily cash payments to
maintain their required margin. In such situations, if the Portfolios have in-
sufficient cash, they may have to sell portfolio securities to meet daily mar-
gin requirements at a time when it may be disadvantageous to do so. In addi-
tion, the Portfolios may be required to make delivery of the instruments un-
derlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the Portfolios' ability
to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contracts would result
in a total loss of the margin deposit, before any deduction for the transac-
tion costs, if the account were then closed out. A 15% decrease would result
in a loss equal to 150% of the original margin deposit if the contract were
closed out. Thus, a purchase or sale of a futures contract may result in ex-
cess of the amount invested in the contract. However, because the futures
strategies of the Portfolio is engaged in only for hedging purposes, the Ad-
viser does not believe that the Portfolios are subject to the risks of loss
frequently associated with futures transactions. The Portfolios would presuma-
bly have sustained comparable losses if, instead of the futures contract, they
had invested in the underlying financial instrument and sold it after the de-
cline.
Utilization of futures transactions by the Portfolios does involve the risk
of imperfect or no correlation where the securities underlying a futures con-
tract have different maturities than the portfolio securities being hedged. It
is also possible that the Portfolios could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss by the Portfo-
5
<PAGE>
lios of margin deposits in the event of bankruptcy of a broker with whom the
Portfolios have an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging transac-
tions, the Portfolios are required for Federal income tax purposes to recog-
nize as income for each taxable year its net unrealized gains and losses on
regulated futures contracts as of the end of the year as well as those actu-
ally realized during the year. In most cases, any gain or loss recognized with
respect to a futures contract is considered to be 60% long-term capital gain
or loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are in-
tended to hedge against a change in the value of securities held by the Port-
folios may affect the holding period of such securities and, consequently, the
nature of the gain or loss on such securities upon disposition.
In order for the Portfolios to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of their gross in-
come for a taxable year must be derived from qualifying income: i.e., divi-
dends, interest, income derived from loans of securities, and gains from the
sale of securities or foreign currencies, or other income derived with respect
to its business of investing in such securities or currencies. In addition,
gains realized on the sale or other disposition of securities held for less
than three months must be limited to less than 30% of the Portfolios' annual
gross income. It is anticipated that any net gain realized from the closing
out of futures contracts will be considered a gain from the sale of securities
and therefore will be qualifying income for purposes of the 90% requirement.
In order to avoid realizing excessive gains on securities held for less than
three months, the Portfolio may be required to defer the closing out of
futures contracts beyond the time when it would otherwise be advantageous to
do so. It is anticipated that unrealized gains on futures contracts, which
have been open for less than three months as of the end of the Portfolios'
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities held for less than three months for the purposes of the
30% test.
6
<PAGE>
The Portfolios will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolios' fiscal year) on futures trans-
actions. Such distributions will be combined with distributions of capital
gains realized on the Portfolios' other investments and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission, at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investments required for the ICM Small Company and ICM Equity Portfo-
lios are $5,000,000 and $2,500, respectively, with certain exceptions as may
be determined from time to time by the officers of the Fund. Other investment
minimums are: initial IRA investment, $500; initial spousal IRA investment,
$250; minimum additional investment for Small Company and Equity Portfolios
are $1,000 and $100, respectively. An order received in proper form prior 4:00
p.m. Eastern Time (ET), to the close of the New York Stock Exchange ("Ex-
change"), will be executed at the price computed on the date of receipt; and
an order received not in proper form or after the close of the Exchange will
be executed at the price computed on the next day the Exchange is open after
proper receipt. The Exchange will be closed on the following days: Presidents'
Day, February 17, 1997; Good Friday, March 28, 1997; Memorial Day, May 26,
1997; Independence Day, July 4, 1997; Labor Day, September 1, 1997; Thanksgiv-
ing Day, November 27, 1997; Christmas Day, December 25, 1997; and New Year's
Day, January 1, 1997.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of the Portfolio's shares.
REDEMPTION OF SHARES
REDEMPTIONS
Each Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (ii) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (iii) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any
7
<PAGE>
shareholder of record limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the net assets of the Fund at the beginning of such peri-
od. Such commitment is irrevocable without the prior approval of the Commis-
sion. Redemptions in excess of the above limits may be paid in whole or in
part, in investment securities or in cash, as the Directors may deem advis-
able; however, payment will be made wholly in cash unless the Directors be-
lieve that economic or market conditions exist which would make such a prac-
tice detrimental to the best interests of the Fund. If redemptions are paid in
investment securities, such securities will be valued as set forth in the Pro-
spectus under "Valuation of Shares" and a redeeming shareholder would normally
incur brokerage expenses if these securities were converted to cash.
No charge is made by a Portfolio for redemptions. Any redemption may be more
or less than the shareholder's initial cost depending on the market value of
the securities held by a Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
("CGFSC") from fraud, signature guarantees are required for certain redemp-
tions. The purpose of signature guarantees is to verify the identity of the
person who has authorized a redemption from your account. Signature guarantees
are required in connection with (1) all redemptions when the proceeds are to
be paid to someone other than the registered owner(s) and/or registered ad-
dress; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
8
<PAGE>
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each ICM Portfolio may be exchanged for Insti-
tutional Class Shares of the other ICM Portfolios. In addition, Institutional
Class Shares of each ICM Portfolio may be exchanged for any other Institu-
tional Class Shares of a Portfolio included in the UAM Funds which is com-
prised of the Fund and UAM Funds Trust. (See the list of Portfolios of the UAM
Funds -- Institutional Class Shares in the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM
Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O.
Box 2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are qualified for sale in a shareholder's state of
residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. ET will be processed as of the close of business on the
same day. Requests received after 4:00 p.m. ET will be processed on the next
business day. Neither the Fund nor CGFSC, the Fund's sub-transfer agent, will
be responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or fre-
quency, and to other restrictions established by the Board of Directors to as-
sure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
9
<PAGE>
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
or entity by making a written request to the Fund. The request should clearly
identify the account and number of shares to be transferred, and include the
signature of all registered owners and all stock certificates, if any, which
are subject to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as de-
scribed under "Redemption of Shares". As in the case of redemptions, the writ-
ten request must be received in good order before any transfer can be made.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions which are fundamen-
tal policies (except as noted below) and may not be changed without the ap-
proval of the lesser of: (1) at least 67% of the voting securities of the
Portfolio present at a meeting if the holders of more than 50% of the out-
standing voting securities of the Portfolio are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the Port-
folio. The Portfolios will not:
(1) invest in commodities except that the Portfolio may invest in futures
contracts and options to the extent that not more than 5% of a Port-
folio's assets are required as deposit to secure obligations under
futures contracts;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, subject to the limitation
described in (10) below) which are publicly distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent
with the 1940 Act or the rules and regulations or interpretations of
the Commission thereunder;
(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into options, futures or repurchase transactions;
(5) purchase on margin or sell short except as specified in (1) above;*
(6) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer;
(7) with respect as to 75% of its assets, purchase securities of any is-
suer (except obligations of the United States Government and its
instrumen
10
<PAGE>
talities) if as the result more than 5% of the Portfolio's total as-
sets, at the time of purchase, would be invested in the securities of
such issuer;
(8) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;*
(9) borrow money, except from banks and as a temporary measure for ex-
traordinary or emergency purposes and then, in no event, in excess of
10% of the ICM Small Company Portfolio's gross assets (33 1/3% for
the ICM Equity Portfolio) valued at the lower of market or cost, and
the Portfolio may not purchase additional securities when borrowings
exceed 5% of total gross assets;
(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;*
(11) underwrite the securities of other issuers;
(12) invest more than an aggregate of 10% of net assets determined at the
time of investment, in securities subject to legal or contractual re-
strictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;
(13) invest for the purpose of exercising control over management of any
company;*
(14) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) continuous opera-
tions consisting of less than three years;*
(15) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of the Portfo-
lio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no limi-
tation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position; and
(16) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.*
- ----------
* This restriction is a non-fundamental policy of the ICM Equity Portfolio.
Therefore, it may be changed by the Fund's Board of Directors upon a reason-
able notice to investors.
11
<PAGE>
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years. As of December 31, 1996, the Di-
rectors and Officers of the Fund owned less than 1% of the Fund's outstanding
shares.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 19878 to 1993
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
Age: 47 poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Invest-
Boston, MA 02111 ors Corporation since 1988; Director and
Age: 52 Chief Executive Officers of H.T. Investors,
Inc., formerly a subsidiary of Dewey
Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc, and UAM Fund Distribu-
Boston, MA 02110 tors, Inc.; Vice President of Operations,
Age: 45 Development and Control of Fidelity Invest-
ments in 1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to 1995.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street ident of UAM Fund Services, Inc.; former
Boston, MA 02110 Manager of Fund Administration and Compli-
Age: 32 ance of Chase Global Fund Services Company
from 1995 to 1996; formerly Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their services as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator or CGFSC and receive no compensation from the Fund. The fol-
lowing table shows aggregate compensation paid to each of the Fund's unaffili-
ated Directors by the Fund and total compensation paid by the Fund, UAM Funds
Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively the
"Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
AME OF PERSON,N COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
- --------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Former Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
13
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of the ICM Portfolios, as noted.
ICM Equity Portfolio: Bryn Mawr School, c/o Investment Counselors of Mary-
land, 803 Cathedral Street, Baltimore, MD, 30%; ICM/UAM Profit Sharing &
401(k) Plan, c/o Investment Counselors of Maryland, 803 Cathedral Street, Bal-
timore, MD, 27%; Reliable Contracting Co., Inc., Profit Sharing Plan, c/o In-
vestment Counselors of Maryland, 803 Cathedral Street, Baltimore, MD, 15%; and
AAMC Employee Thrift Plan 401A, Franklin & Cathedral Streets, Annapolis, MD,
5.4%.
ICM Small Company Portfolio: Major League Baseball Players Benefit Plan, c/o
Investment Counselors of Maryland, 803 Cathedral Street, Baltimore, MD, 11.5%;
North Carolina Trust Company, P.O. Box 1108, Greensboro, NC, 8.5%*; Northern
Trust Company, Trustee, FBO Washington Suburban Sanitary Commission, 801 South
Canal, Attn: Mutual Fund Department, A/C WSSC 22-03376, Chicago, IL, 5%*.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
14
<PAGE>
INVESTMENT ADVISER
CONTROL OF ADVISER
Investment Counselors of Maryland, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December,
1980 for the purpose of acquiring and owning firms engaged primarily in insti-
tutional investment management. Since its first acquisition in August, 1983,
UAM has acquired or organized approximately 45 such wholly-owned affiliated
firms (the "UAM Affiliated Firms"). UAM believes that permitting UAM Affili-
ated Firms to retain control over their investment advisory decisions is nec-
essary to allow them to continue to provide investment management services
that are intended to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to oper-
ate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
PHILOSOPHY AND STYLE
The Adviser employs an investment strategy and approach which can best be
characterized as bottom up and value oriented. In selecting stocks for pur-
chase, the Adviser looks for companies which have strong financial and operat-
ing characteristics and whose shares are selling at valuations below that of
the market in general, and below the average of the companies' own historic
valuation ranges. The primary indicator of value to the Adviser is a low price
to earnings ratio both on trailing twelve month earnings and one year forward
earnings estimates. Other indicators of value include low price to book value,
low price to cash flow, and low price to revenue per share. In addition to an-
alyzing company financial statements and talking to management, the Adviser's
research includes analysis of suppliers and competitors as well as consulting
with outside research sources.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: Georgia Gulf Corp. State of
Maryland, Johns Hopkins Hospital, State of Kentucky, NYNEX, TRW Corp., and
Wisconsin Power & Light.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, the Portfolios pay the Adviser an annual fee, in monthly
15
<PAGE>
installments, calculated by applying the following annual percentage rates to
the Portfolios' average net assets for the month:
<TABLE>
<CAPTION>
RATE
------
<S> <C>
ICM Small Company Portfolio........................................... 0.700%
ICM Equity Portfolio.................................................. 0.625%
</TABLE>
For the fiscal years ended October 31, 1994, 1995 and 1996 the ICM Small
Company Portfolio paid advisory fees of approximately $701,000, $1,242,000 and
$2,068,648, respectively, to the Adviser. Advisory fees of approximately
$16,000, $35,000 and $44,350 were incurred by the ICM Equity Portfolio and
waived by the Adviser for the fiscal years ended October 31, 1994, 1995 and
1996, respectively.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for each Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the bro-
ker effecting the transaction. It is not the Fund's practice to allocate bro-
kerage or principal business on the basis of sales of shares which may be made
through broker-dealer firms. However, the Adviser may place portfolio orders
with qualified broker-dealers who recommend the Fund's Portfolios or who act
as agents in the purchase of shares of the Portfolios for their clients. Dur-
ing the fiscal years ended, October 31, 1994, 1995, and 1996, the entire Fund
paid brokerage commissions of approximately $2,402,000, $2,983,000 and
$2,887,884, respectively.
Some securities considered for investment by a Portfolio may also be appro-
priate for other clients served by the Adviser. If purchases or sales of secu-
rities consistent with the investment policies of a Portfolio and one or more
of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfo-
lio and clients in a manner deemed fair and reasonable by the Adviser. Al-
though there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
16
<PAGE>
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by
UAMFSI, Inc. and CGFSC and the basis of the fees payable by the Fund under the
Fund Administration Agreement are described in the Portfolios' Prospectus.
Prior to April 15, 1996, Chase Global Funds Services Company or its predeces-
sor, Mutual Funds Service Company, provided certain administrative services to
the Fund under an Administration Agreement between the Fund and U.S. Trust
Company of New York. During the fiscal years ended October 31, 1994, 1995 and
1996, administrative services fees paid by the ICM Small Company and ICM Eq-
uity Portfolios totaled approximately $125,000, $207,000 and $384,267 and
$28,000, $60,000 and $76,615, respectively. Of the fees paid during the year
ended October 31, 1996. ICM small Company Portfolio paid $316,060 to CGFSC and
$68,707 to UAMFSI, and ICM Equity Portfolio paid $74,696 to CGFSC and $1,919
to UAMFSI. The services provided by the Administrator and the basis of the
fees payable to the Administrator are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to illus-
trate the Fund's past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by the Fund to compute or express
performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5, and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis.
The average annual total return for the ICM Small Company Portfolio from in-
ception and for the one and five year periods ended on the date of the Finan-
cial Statements included herein and the average annual total return for the
ICM Equity
17
<PAGE>
Portfolio from inception and for the one year period ended on the date of the
Financial Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR FIVE YEARS THROUGH YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1996 1996 INCEPTION DATE
----------- ----------- --------------- --------------
<S> <C> <C> <C> <C>
ICM Equity Portfolio.... 26.23% -- 16.69% 10/1/93
ICM Small Company
Portfolio............. 15.62% 19.00% 16.25% 4/19/89
</TABLE>
These figures are calculated according to the following formula:
P (1 + T)/n/ = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ment.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for
the period include any fees charged to all shareholders during the base peri-
od.
A yield figure is obtained using the following formula:
Yield = 2 [(a - b + 1)/6/ - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above)
18
<PAGE>
to performance as reported by other investments, indices and averages. The
following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the per-
formance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
19
<PAGE>
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass-through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) The Lehman Brothers Intermediate Government/Corporate Index -- is an
unmanaged index composed of a combination of the Government and Corpo-
rate 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 oth-
ers. 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 noncon-
vertible debt issued by or guaranteed by foreign or international gov-
ernments 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.
(m) The Lehman Brothers Aggregate Index -- is a fixed income market value-
weighted index that combines the Lehman Brothers Government/Corporate
Index and the Lehman Brothers Mortgage-Backed Securities Index. It in-
cludes fixed rate issues of investment grade (BBB) or higher, with ma-
turities of at least one year and outstanding par values of at least
$100 million for U.S. Government issues and $25 million for others.
(n) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(o) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(p) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(q) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
20
<PAGE>
(r) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(s) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(t) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- publi-
cations that rate fund performance over specified time periods.
(u) Consumer Price Index (or cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates -- historical measure of yield, price and total return for com-
mon and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(w) Savings and Loan Historical Interest Rates -- as published in the U.S.
Savings & Loan League Fact Book.
(x) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. In addition, there can be no assur-
ance that the Fund will continue this performance as compared to such other
averages.
21
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be addressed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of com-
mon stock and to classify or reclassify any unissued shares with respect to
such Portfolios.
The shares of each Portfolio of the Fund, when issued and paid for as pro-
vided for in its Prospectuses, will be fully paid and nonassessable, and have
no preference as to conversion, exchange, dividends, retirement or other fea-
tures. The shares of each Portfolio of the Fund have no preemptive rights. The
shares of the Fund have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors
can elect 100% of the Directors if they choose to do so. A shareholder is en-
titled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his or her name on the books of the
Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolios' net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Portfolios' Prospectus). The amounts of any income
dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of that Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Portfolios'
Prospectus.
As set forth in the Portfolios' Prospectus, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are auto-
matically received in additional shares of the Portfolio at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified
22
<PAGE>
by the shareholder in writing at least three days prior to the record date
that either the Income Option (income dividends in cash and capital gains dis-
tributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capi-
tal gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the ICM Small Company Portfolio and the ICM Eq-
uity Portfolio for the fiscal period ended October 31, 1996 and the Financial
Highlights for the respective periods presented which appear in the Portfo-
lios' 1996 Annual Reports to Shareholders and the reports thereon of Price
Waterhouse LLP, the Fund's independent accountants, also appearing therein,
are attached to this SAI.
23
<PAGE>
ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.5%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.4%)
Donnelly Corp. ........................................... 115,000 $ 2,285,625
*Dorsey Trailers, Inc. ................................... 200,000 725,000
Excel Industries, Inc. ................................... 100,000 1,512,500
Smith (A.O.) Corp. ....................................... 125,000 3,281,250
*Starcraft Corp. ......................................... 90,000 303,750
*Strattec Security Corp. ................................. 150,000 2,325,000
Wynn's International, Inc. ............................... 126,450 3,588,019
------------
14,021,144
- --------------------------------------------------------------------------------
BANKS (3.0%)
First Financial Corp. .................................... 140,000 3,797,500
TCF Financial Corp. ...................................... 80,000 3,100,000
Vermont Financial Services Corp. ......................... 85,000 2,911,250
------------
9,808,750
- --------------------------------------------------------------------------------
CONSTRUCTION (10.7%)
Centex Construction Products, Inc. ....................... 300,000 4,687,500
Centex Corp. ............................................. 50,000 1,506,250
*Central Sprinkler Corp. ................................. 87,000 1,500,750
Continental Homes Holding Corp. .......................... 125,000 2,031,250
Granite Construction, Inc. ............................... 232,500 4,475,625
*Griffon Corp. ........................................... 425,000 4,037,500
Juno Lighting, Inc. ...................................... 135,000 2,092,500
Martin Marietta Materials, Inc. .......................... 150,000 3,562,500
MDC Holdings, Inc. ....................................... 500,000 3,687,500
Southdown, Inc. .......................................... 250,000 6,843,750
------------
34,425,125
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (8.7%)
Applied Power, Inc., Class A.............................. 100,000 3,600,000
*Astec Industries, Inc. .................................. 130,000 1,121,250
*Avondale Industries, Inc. ............................... 200,000 3,275,000
*BE Aerospace, Inc. ...................................... 75,000 1,612,500
*CMI Corp., Class A....................................... 300,000 1,275,000
Core Industries, Inc. .................................... 200,000 2,650,000
Gradall Industries, Inc. ................................. 165,000 1,794,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT--(CONTINUED)
Kennametal, Inc. ......................................... 100,000 $ 3,400,000
Pfeiffer Vacuum Technology ADR............................ 100,000 1,600,000
Scotsman Industries, Inc. ................................ 150,000 3,600,000
Varlen Corp. ............................................. 96,800 2,105,400
Woodhead Industries, Inc. ................................ 134,500 1,765,312
------------
27,798,837
- --------------------------------------------------------------------------------
CHEMICALS (3.3%)
Aceto Corp. .............................................. 88,000 1,133,000
*Applied Extrusion Technologies, Inc. .................... 200,000 1,700,000
Cambrex Corp. ............................................ 61,200 1,912,500
Dexter Corp. ............................................. 125,000 3,875,000
Furon Co. ................................................ 100,000 2,100,000
------------
10,720,500
- --------------------------------------------------------------------------------
CONSUMER DURABLES (4.8%)
Aaron Rents, Inc., Class B................................ 300,000 3,975,000
Coachmen Industries, Inc. ................................ 100,000 2,800,000
General Housewares Corp. ................................. 100,000 950,000
*Material Science Corp. .................................. 140,000 2,135,000
*Rex Stores Corp. ........................................ 225,000 2,137,500
Toro Co. ................................................. 100,000 3,137,500
*Winsloew Furniture, Inc. ................................ 60,000 465,000
------------
15,600,000
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.9%)
*Cone Mills Corp. ........................................ 200,000 1,575,000
*CSS Industries, Inc. .................................... 115,600 2,716,600
EKCO Group, Inc. ......................................... 45,000 151,875
*Fieldcrest Cannon, Inc. ................................. 70,000 997,500
*Galey & Lord, Inc. ...................................... 200,000 2,775,000
Guilford Mills, Inc. ..................................... 130,000 3,087,500
*Sylvan, Inc. ............................................ 95,000 1,223,125
------------
12,526,600
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (4.2%)
*Nabors Industries, Inc. ................................. 250,000 $ 4,156,250
*Oceaneering International, Inc. ......................... 150,000 2,700,000
*Offshore Logistics, Inc. ................................ 120,000 1,995,000
Penn Virginia Corp. ...................................... 50,000 2,012,500
Zeigler Coal Holding Co. ................................. 135,000 2,446,875
------------
13,310,625
- --------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (0.5%)
*Carmike Cinemas, Inc. Class A............................ 70,000 1,662,500
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (0.9%)
Alex Brown, Inc. ......................................... 50,000 2,837,500
- --------------------------------------------------------------------------------
HEALTH CARE (1.7%)
*Bio Rad Labs Class A..................................... 70,000 1,697,500
*Living Centers of America, Inc. ......................... 75,000 1,753,125
*Spacelabs Medical, Inc. ................................. 100,000 2,000,000
------------
5,450,625
- --------------------------------------------------------------------------------
INSURANCE (8.7%)
*ACMAT Corp. ............................................. 100,000 1,325,000
Allied Group, Inc. ....................................... 100,000 4,150,000
Capital Re Corp. ......................................... 68,200 2,642,750
CMAC Investment Corp. .................................... 50,000 3,456,250
Financial Security Assurance Holding...................... 53,728 1,504,384
GCR Holdings, Ltd. ....................................... 100,000 2,312,500
Lawyers Title Corp. ...................................... 70,000 1,233,750
Life RE Corp. ............................................ 125,000 4,578,125
*MAIC Holdings, Inc. ..................................... 33,390 1,085,175
PXRE Corp. ............................................... 160,000 3,840,000
Trenwick Group, Inc. ..................................... 40,000 1,965,000
------------
28,092,934
- --------------------------------------------------------------------------------
MANUFACTURING (2.6%)
Clarcor, Inc. ............................................ 55,000 1,196,250
Donaldson Co., Inc. ...................................... 40,500 1,184,625
*Essef Corp. ............................................. 70,000 1,225,000
Hunt Manufacturing Co. ................................... 225,000 3,796,875
Synalloy Corp. ........................................... 52,000 819,000
------------
8,221,750
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
METALS (1.9%)
Carpenter Technology Corp. ............................... 80,000 $ 2,610,000
J & L Specialty Steel, Inc. .............................. 225,000 2,643,750
*Steel of West Virginia, Inc. ............................ 125,000 781,250
------------
6,035,000
- --------------------------------------------------------------------------------
PAPER & PACKAGING (2.9%)
American Business Products, Inc. ......................... 175,000 3,893,750
Rayonier, Inc. ........................................... 80,000 3,170,000
*Specialty Paperboard, Inc. .............................. 135,000 2,210,625
------------
9,274,375
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (4.6%)
Cali Realty Corp. ........................................ 100,000 2,687,500
Evans Withycombe Residential, Inc. ....................... 90,000 1,901,250
Healthcare Realty Trust, Inc. ............................ 50,000 1,231,250
Irvine Apartment Communities.............................. 50,000 1,150,000
Liberty Property Trust.................................... 75,000 1,621,875
Omega Healthcare Investors, Inc. ......................... 24,500 744,188
Prime Retail, Inc. ....................................... 125,000 1,453,125
Shurgard Storage Centers, Inc. ........................... 70,000 1,837,500
Town & Country Trust...................................... 45,000 652,500
United Dominion Realty Trust, Inc. ....................... 100,000 1,412,500
------------
14,691,688
- --------------------------------------------------------------------------------
RETAIL (3.9%)
Big B, Inc. .............................................. 75,000 1,275,000
*Carson Pirie Scott & Co. ................................ 175,000 4,353,125
*Lechters, Inc. .......................................... 225,000 1,040,625
Ruddick Corp. ............................................ 175,000 2,275,000
Shopko Stores, Inc. ...................................... 150,000 2,418,750
Strawbridge & Clothier.................................... 69,000 1,155,750
------------
12,518,250
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SERVICES (5.8%)
*Anixter International, Inc. ............................. 175,000 $ 2,603,125
Bowne & Co., Inc. ........................................ 120,000 2,805,000
*Devon Group, Inc. ....................................... 125,000 3,031,250
PHH Corp. ................................................ 170,000 5,057,500
*Rexel, Inc. ............................................. 300,000 4,350,000
*Unitel Video, Inc. ...................................... 120,000 795,000
------------
18,641,875
- --------------------------------------------------------------------------------
TECHNOLOGY (10.3%)
AMETEK, Inc. ............................................. 200,000 3,975,000
*BancTec, Inc. ........................................... 132,800 2,705,800
Charter Power System, Inc. ............................... 100,000 2,400,000
*Cidco, Inc. ............................................. 100,000 1,875,000
*ILC Technology, Inc. .................................... 140,000 1,522,500
*Marshall Industries...................................... 100,000 3,012,500
Methode Electronics, Inc., Class A........................ 200,000 3,850,000
National Computer Systems, Inc. .......................... 150,000 3,187,500
*Norstan, Inc. ........................................... 110,000 1,897,500
*Photronics, Inc. ........................................ 140,000 3,745,000
Pioneer Standard Electronics.............................. 125,000 1,312,500
Quixote Corp. ............................................ 200,000 1,525,000
*Silicon Valley Group, Inc. .............................. 125,000 2,078,125
------------
33,086,425
- --------------------------------------------------------------------------------
TRANSPORTATION (1.1%)
Rollins Truck Leasing Corp. .............................. 206,200 2,345,525
USFreightways Corp. ...................................... 60,000 1,312,500
------------
3,658,025
- --------------------------------------------------------------------------------
UTILITIES (1.6%)
Comsat Corp. ............................................. 213,700 5,021,950
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $235,174,649)...................................... 287,404,478
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (10.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.3%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $13,743,130,
collateralized by $13,282,194 of various
U.S. Treasury Notes, 5.875%-7.75%, due from
3/31/99-11/30/99, valued at $13,741,032........... $13,741,000 $ 13,741,000
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.2%)
Federal National Mortgage Association Discount Note:
5.32%, 11/08/96.................................... 10,000,000 9,989,656
5.15%, 11/22/96.................................... 10,000,000 9,969,958
------------
19,959,614
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $33,700,614)................................. 33,700,614
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100%)
(COST $268,875,263)(A)............................. 321,105,092
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%).................. (122,801)
- -------------------------------------------------------------------------------
NET ASSETS (100%).................................... $320,982,291
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
(a) The cost for federal income tax purposes was $268,875,263. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$52,229,829. This consisted of aggregate gross unrealized appreciation for
all securities of $67,257,621 and aggregate gross unrealized depreciation
for all securities of $15,027,792.
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at Cost............................................. $268,875,263
============
Investments, at Value............................................ $321,105,092
Cash............................................................. 147
Receivable for Portfolio Shares Sold............................. 548,887
Dividends Receivable............................................. 155,092
Interest Receivable.............................................. 2,130
Other Assets..................................................... 10,524
- -------------------------------------------------------------------------------
Total Assets.................................................... 321,821,872
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................ 322,772
Payable for Portfolio Shares Redeemed............................ 232,282
Payable for Investment Advisory Fees............................. 190,259
Payable for Administrative Fees.................................. 37,939
Payable for Custodian Fees....................................... 12,816
Payable for Directors' Fees...................................... 1,352
Other Liabilities................................................ 42,161
- -------------------------------------------------------------------------------
Total Liabilities............................................... 839,581
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $320,982,291
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $250,527,014
Undistributed Net Investment Income.............................. 391,542
Accumulated Net Realized Gain.................................... 17,833,906
Unrealized Appreciation.......................................... 52,229,829
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $320,982,291
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
50,000,000).................................................... 15,496,375
Net Asset Value, Offering and Redemption Price Per Share......... $ 20.71
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-11
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- ---------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends......................................................... $ 4,081,210
Interest.......................................................... 2,073,768
- ---------------------------------------------------------------------------------
Total Income..................................................... 6,154,978
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B.................................. 2,068,648
Administrative Fees--Note C....................................... 384,267
Registration and Filing Fees...................................... 31,326
Custodian Fees--Note D............................................ 28,135
Legal Fees........................................................ 20,658
Printing Fees..................................................... 18,254
Audit Fees........................................................ 14,662
Directors' Fees--Note G........................................... 8,011
Other Expenses.................................................... 35,403
- ---------------------------------------------------------------------------------
Total Expenses................................................... 2,609,364
Expense Offset--Note A............................................ (10,080)
- ---------------------------------------------------------------------------------
Net Expenses..................................................... 2,599,284
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME.............................................. 3,555,694
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS................................... 17,847,683
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVESTMENTS.. 20,915,250
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS............................................ 38,762,933
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $42,318,627
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-12
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 3,555,694 $ 1,817,054
Net Realized Gain................................... 17,847,683 12,751,608
Net Change in Unrealized Appreciation/Depreciation.. 20,915,250 13,795,508
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations....................................... 42,318,627 28,364,170
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (3,589,374) (1,470,593)
Net Realized Gain................................... (12,736,570) (5,148,697)
- ----------------------------------------------------------------------------------
Total Distributions................................ (16,325,944) (6,619,290)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular..................................... 89,883,861 128,619,244
--In Lieu of Cash Distributions................... 14,462,723 6,136,708
Redeemed............................................ (60,154,751) (21,463,855)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions....... 44,191,833 113,292,097
- ----------------------------------------------------------------------------------
Total Increase...................................... 70,184,516 135,036,977
Net Assets:
Beginning of Period................................. 250,797,775 115,760,798
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $391,542 and $437,992,
respectively)..................................... $320,982,291 $250,797,775
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 4,584,935 7,177,784
In Lieu of Cash Distributions....................... 779,674 376,824
Shares Redeemed..................................... (3,038,186) (1,175,792)
- ----------------------------------------------------------------------------------
2,326,423 6,378,816
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-13
<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,
----------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 19.04 $ 17.05 $ 18.75 $ 14.96 $ 12.50
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income........ 0.24 0.16 0.09 0.08 0.11
Net Realized and Unrealized
Gain....................... 2.59 2.70 0.64 4.94 2.81
- -------------------------------------------------------------------------------
Total From Investment
Operations................ 2.83 2.86 0.73 5.02 2.92
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........ (0.24) (0.14) (0.09) (0.07) (0.10)
Net Realized Gain............ (0.92) (0.73) (2.34) (1.16) (0.36)
- -------------------------------------------------------------------------------
Total Distributions......... (1.16) (0.87) (2.43) (1.23) (0.46)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 20.71 $ 19.04 $ 17.05 $ 18.75 $ 14.96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN.................. 15.62% 17.73% 4.59% 35.20% 23.96%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $320,982 $250,798 $115,761 $81,870 $58,483
Ratio of Expenses to Average
Net Assets.................. 0.88% 0.87% 0.93% 0.95% 0.95%
Ratio of Net Investment Income
to Average Net Assets....... 1.20% 1.02% 0.58% 0.46% 0.77%
Portfolio Turnover Rate....... 23% 20% 21% 47% 34%
Average Commission Rate #..... $ 0.0595 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... 0.88% 0.86% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
# For fiscal years beginning on or after September 30, 1995, a portfolio is
required to disclose the average commission rate per share it paid for port-
folio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The ICM Small
Company Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a di-
versified, open-end management investment company. At October 31, 1996, the
UAM Funds were composed of forty active portfolios. The financial statements
of the remaining portfolios are presented separately. The objective of the ICM
Small Company Portfolio is to provide maximum, long-term total return consis-
tent with reasonable risk to principal, by investing primarily in the common
stocks of smaller companies in terms of revenues, assets and market capital-
ization.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: 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 valua-
tion is made. Price information on listed securities is taken from the ex-
change where the security is primarily traded. Unlisted securities are
valued not exceeding the asked prices nor less than the bid 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 qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement,
F-15
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income 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. These dif-
ferences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $12,770 and $22,422 to decrease
undistributed net investment income and accumulated net realized gains,
respectively, with an increase to paid in capital of $35,192.
Current year permanent book-tax differences are not included in ending un-
distributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
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. Ex-
penses which cannot be directly attributed are apportioned among the port-
folios 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 as-
sets. Custodian fees for the Portfolio have been increased to include ex-
pense offsets for custodian balance credits.
F-16
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, Inc. (the "Adviser"), a wholly-owned sub-
sidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio at a fee calculated at an annual rate of
0.70% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.04% of average daily net assets of the
Portfolio. Also effective April 15, 1996, the Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the period April 15, 1996 to October 31, 1996, UAM Fund Services,
Inc. earned $239,761 from the Portfolio as Administrator of which $171,554 was
paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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 mil-
lion of the combined aggregate net assets; plus 0.12% of the next $800 million
of the combined aggregate net assets; plus 0.08% of the combined aggregate net
assets in excess of $1 billion but less than $3 billion; plus 0.06% of the
combined aggregate net assets in excess of $3 billion. The fees were allocated
among the portfolios of the UAM Funds and AEW on the basis of their relative
net assets and
F-17
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
were subject to a graduated minimum fee schedule per portfolio which rose from
$2,000 per month, upon inception of a portfolio, to $70,000 annually after two
years. For the period November 1, 1995 to April 15, 1996, CGFSC earned
$144,506 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$9,091, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $101,921,722 and sales of $60,131,883 of investment securi-
ties other than long-term U.S. Government and short-term securities. There
were no purchases or sales of long-term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to partici-
pate in a $100 million unsecured line of credit with several banks. Borrowings
will be made solely to temporarily finance the repurchase of Capital 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 its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolio had no borrowings under the agreement.
I. OTHER: At October 31, 1996, 11.1% of total shares outstanding were held
by one record shareholder owning more than 10% of the aggregate total shares
outstanding.
F-18
<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 assets and liabilities, in-
cluding the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of ICM Small Company Portfolio
(the "Portfolio"), a Portfolio of UAM Funds, Inc., at October 31, 1996, 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 au-
diting standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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, 1996 by cor-
respondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, pro-
vide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The ICM Small Company Portfolio hereby designates $10,100,000 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, 1996, the percentage
of dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 46.9%.
F-19
<PAGE>
ICM EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.6%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.8%)
Lockheed Martin Corp......................................... 1,540 $ 138,022
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.6%)
Ford Motor Corp.............................................. 5,070 158,437
General Motors Corp.......................................... 3,800 204,725
----------
363,162
- --------------------------------------------------------------------------------
BASIC RESOURCES (4.9%)
Phelps Dodge Corp............................................ 3,170 199,314
USX-US Steel Group, Inc...................................... 6,800 185,300
----------
384,614
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.9%)
Philip Morris Cos., Inc...................................... 1,630 150,979
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (2.6%)
Parker-Hannifin Corp......................................... 5,440 206,040
- --------------------------------------------------------------------------------
CHEMICALS (2.7%)
Dow Chemical Co.............................................. 2,720 211,480
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (2.4%)
IBP, Inc..................................................... 7,600 190,000
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.1%)
Guilford Mills, Inc.......................................... 10,420 247,475
- --------------------------------------------------------------------------------
ENERGY (8.8%)
Atlantic Richfield Co........................................ 1,810 239,825
Equitable Resources, Inc..................................... 6,700 192,625
Union Pacific Resources Group, Inc........................... 1,838 50,540
YPF S.A. ADR................................................. 9,060 206,115
----------
689,105
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (19.6%)
BankAmerica Corp............................................. 2,360 215,940
Chase Manhattan Corp......................................... 2,720 233,240
Comerica, Inc................................................ 4,080 216,750
Dean Witter Discover and Co.................................. 4,000 235,500
First Union Corp............................................. 2,540 184,785
NationsBank Corp............................................. 2,450 230,913
Republic New York Corp....................................... 2,990 227,987
----------
1,545,115
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-5
<PAGE>
ICM EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HEALTH CARE (2.8%)
Integrated Health Services................................... 9,060 $ 223,103
- --------------------------------------------------------------------------------
INSURANCE (6.3%)
Providian Corp............................................... 4,980 234,060
Torchmark Corp............................................... 5,400 261,225
----------
495,285
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (7.1%)
Omega Healthcare Investors, Inc.............................. 4,800 145,800
Pacific Gulf Properties, Inc................................. 11,330 211,021
United Dominion Realty Trust................................. 14,140 199,728
----------
556,549
- --------------------------------------------------------------------------------
TECHNOLOGY (14.6%)
Hewlett-Packard Co........................................... 2,180 96,193
International Business Machines Corp......................... 2,780 358,620
Nokia Corp. ADR.............................................. 6,400 296,800
Philips Electronics N.V...................................... 5,260 185,415
*Seagate Technology.......................................... 3,160 210,930
----------
1,147,958
- --------------------------------------------------------------------------------
TRANSPORTATION (2.8%)
Norfolk Southern Corp........................................ 1,090 97,146
Union Pacific Corp........................................... 2,170 121,791
----------
218,937
- --------------------------------------------------------------------------------
UTILITIES (13.6%)
AT&T Corp.................................................... 3,270 114,041
Consolidated Edison of New York.............................. 6,300 184,275
Edison International......................................... 10,600 209,350
General Public Utilities Corp................................ 5,200 170,950
MCI Communications Corp...................................... 7,920 198,000
Telefonos de Mexico S.A. ADR, Class L........................ 6,250 190,625
----------
1,067,241
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $6,370,834)......................... 7,835,065
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-6
<PAGE>
ICM EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.4%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $35,005, collateralized by
$33,831 of various U.S. Treasury Notes, 5.875%-7.75%,
due from 3/31/99-11/30/99, valued at $35,000
(COST $35,000).......................................... $35,000 $ 35,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(COST $6,405,834)(A)..................................... 7,870,065
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%)........................ (2,060)
- -------------------------------------------------------------------------------
NET ASSETS (100%).......................................... $7,868,005
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
ADR American Depositary Receipt.
(a) The cost for federal income tax purposes was $6,405,834. At October 31,
1996, net unrealized appreciation for all securities based on tax cost
was $1,464,231. This consisted of aggregate gross unrealized
appreciation for all securities of $1,553,686 and aggregate gross
unrealized depreciation for all securities of $89,455.
The accompanying notes are an integral part of the financial statements.
FINA-7
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................... $6,405,834
==========
Investments, at Value.............................................. $7,870,065
Cash............................................................... 16,929
Dividends Receivable............................................... 10,375
Receivable due from Investment Adviser............................. 7,526
Other Assets....................................................... 217
- -------------------------------------------------------------------------------
Total Assets...................................................... 7,905,112
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Administrative Fees.................................... 6,341
Payable for Custodian Fees......................................... 2,497
Payable for Directors' Fees........................................ 620
Other Liabilities.................................................. 27,649
- -------------------------------------------------------------------------------
Total Liabilities................................................. 37,107
- -------------------------------------------------------------------------------
NET ASSETS.......................................................... $7,868,005
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................... $5,599,051
Undistributed Net Investment Income................................ 23,704
Accumulated Net Realized Gain...................................... 781,019
Unrealized Appreciation............................................ 1,464,231
- -------------------------------------------------------------------------------
NET ASSETS.......................................................... $7,868,005
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)...................................................... 542,893
Net Asset Value, Offering and Redemption Price Per Share........... $ 14.49
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-8
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 212,580
Interest................................................. 14,432
- --------------------------------------------------------------------------------
Total Income............................................ 227,012
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.............................................. $ 44,350
Less: Fees Waived....................................... (44,350) --
--------
Administrative Fees--Note C.............................. 76,615
Registration and Filing Fees............................. 31,625
Printing Fees............................................ 16,001
Audit Fees............................................... 12,853
Custodian Fees--Note D................................... 6,394
Directors' Fees--Note G.................................. 2,563
Other Expenses........................................... 3,099
Expenses Assumed by the Adviser--Note B.................. (85,031)
- --------------------------------------------------------------------------------
Total Expenses.......................................... 64,119
Expense Offset--Note A................................... (289)
- --------------------------------------------------------------------------------
Net Expenses............................................ 63,830
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... 163,182
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.......................... 870,649
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON
INVESTMENTS............................................. 621,990
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS................................... 1,492,639
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $1,655,821
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-9
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.................................. $ 163,182 $ 137,128
Net Realized Gain...................................... 870,649 247,299
Net Change in Unrealized Appreciation/Depreciation..... 621,990 747,004
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.. 1,655,821 1,131,431
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................................. (150,729) (129,521)
Net Realized Gain...................................... (244,703) (7,612)
- ----------------------------------------------------------------------------------
Total Distributions................................... (395,432) (137,133)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular........................................ 1,827,059 2,502,255
--In Lieu of Cash Distributions...................... 392,817 130,999
Redeemed............................................... (2,477,023) (422,084)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions........................................ (257,147) 2,211,170
- ----------------------------------------------------------------------------------
Total Increase......................................... 1,003,242 3,205,468
Net Assets:
Beginning of Period.................................... 6,864,763 3,659,295
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $23,704 and $18,005, respectively)......... $ 7,868,005 $6,864,763
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued.......................................... 139,421 239,816
In Lieu of Cash Distributions.......................... 31,573 11,694
Shares Redeemed........................................ (193,752) (37,388)
- ----------------------------------------------------------------------------------
(22,758) 214,122
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FINA-10
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
OCTOBER 1,
YEARS ENDED OCTOBER 31, 1993** TO
-------------------------- OCTOBER 31,
1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $ 12.14 $ 10.41 $ 9.94 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.30 0.26 0.20 0.01
Net Realized and Unrealized Gain
(Loss)............................. 2.76 1.75 0.45 (0.07)
- -------------------------------------------------------------------------------
Total From Investment Operations.... 3.06 2.01 0.65 (0.06)
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ (0.28) (0.26) (0.18) --
Net Realized Gain.................... (0.43) (0.02) -- --
- -------------------------------------------------------------------------------
Total Distributions................. (0.71) (0.28) (0.18) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........ $ 14.49 $ 12.14 $ 10.41 $ 9.94
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+......................... 26.23% 19.62% 6.63% (0.60)%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)......................... $ 7,868 $ 6,865 $ 3,659 $1,977
Ratio of Expenses to Average Net
Assets.............................. 0.90% 0.92% 0.90% 0.90%*
Ratio of Net Investment Income to
Average Net Assets.................. 2.30% 2.44% 2.15% 1.06%*
Portfolio Turnover Rate............... 57% 37% 17% 11%
Average Commission Rate#.............. $ 0.0661 N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per Share.... $ 0.24 $ 0.16 $ 0.21 $ 0.04
Ratio of Expenses to Average Net
Assets Including Expense Offsets.... 0.90% 0.90% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Adviser during the period.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
FINA-11
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The ICM Equity
Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a diversified,
open-end management investment company. At October 31, 1996, the UAM Funds
were composed of forty active portfolios. The financial statements of the re-
maining portfolios are presented separately. The objective of the ICM Equity
Portfolio is to provide maximum long-term total return, consistent with rea-
sonable risk to principal, by investing primarily in common stocks of rela-
tively large companies measured in terms of revenues, assets and market capi-
talization.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: 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 valua-
tion is made. Price information on listed securities is taken from the ex-
change where the security is primarily traded. Unlisted securities are
valued not exceeding the asked prices nor less than the bid 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 qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation.
FINA-12
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income 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. These dif-
ferences are primarily due to differing book and tax treatments of in-kind
transactions and in the timing of the recognition of gains or losses on
investments.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $6,754 to decrease undistributed
net investment income and $91,522 to decrease accumulated net realized
gain, with an increase to paid in capital of $98,276.
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
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. Ex-
penses which cannot be directly attributed are apportioned among the port-
folios 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 as-
sets. Custodian fees for the Portfolio have been increased to include ex-
pense offsets for custodian balance credits.
FINA-13
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, Inc. (the "Adviser"), a wholly-owned sub-
sidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio at a fee calculated at an annual rate of
0.625% of average daily net assets. The Adviser has voluntarily agreed to
waive a portion of its advisory fees and to assume expenses, if necessary, in
order to keep the Portfolio's total annual operating expenses, after the ef-
fect of expense offset arrangements, from exceeding 0.90% of average daily net
assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.06% of average daily net assets of the
Portfolio. Also effective April 15, 1996, the Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the period April 15, 1996 to October 31, 1996, UAM Fund Services,
Inc. earned $42,238 from the Portfolio as Administrator of which $40,319 was
paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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 mil-
lion 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
FINA-14
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
assets in excess of $1 billion but less than $3 billion; plus 0.06% of the
combined aggregate net assets in excess of $3 billion. The fees were allocated
among the portfolios of the UAM Funds and AEW on the basis of their relative
net assets and were subject to a graduated minimum fee schedule per portfolio
which rose from $2,000 per month, upon inception of a portfolio, to $70,000
annually after two years. For the period November 1, 1995 to April 15, 1996,
CGFSC earned $34,377 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$1,791, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $4,098,650 and sales of $3,919,411 of investment securities
other than long-term U.S. Government and short-term securities. The Portfo-
lio's sales figure includes $682,598 of in-kind transactions which resulted in
realized gains of $90,826. There were no purchases or sales of long-term U.S.
Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to partici-
pate in a $100 million unsecured line of credit with several banks. Borrowings
will be made solely to temporarily finance the repurchase of Capital 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 its average daily
unused portion of the line of
FINA-15
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
credit. During the year ended October 31, 1996, the Portfolio had no borrowings
under the agreement.
I. OTHER: At October 31, 1996, 61.5% of total shares outstanding were held by
two record shareholders owning more than 10% of the aggregate total shares out-
standing, one of the record shareholders was a related party of the Fund owning
40% of the total shares.
F-16
<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 assets and liabilities, in-
cluding the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of ICM Equity Portfolio (the
"Portfolio"), a Portfolio of UAM Funds, Inc., at October 31, 1996, and the re-
sults of its operations, the changes in its net assets and the financial high-
lights for the periods indicated, in conformity with generally accepted ac-
counting 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 reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements, assessing the ac-
counting 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, 1996 by cor-
respondence with the custodian and brokers, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
At October 31, 1996, the Portfolio hereby designates $57,000 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, 1996, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
39.6%.
FINA-17
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of its
highest bond ratings: Aaa -- judged to be the best quality; carry the smallest
degree of investment risk: Aa -- judged to be of high quality by all stan-
dards; A --possess many favorable investment attributes and are to be consid-
ered as higher medium grade obligations; Baa -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its high-
est bond ratings: AAA -- highest grade obligations; possess the ultimate de-
gree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues
only in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as safe;
BBB -- regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the lowest
which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the GNMA are, in effect,
backed by the full faith and credit of the United States through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institu-
A-1
<PAGE>
tions are protected by the discretionary authority of the U.S. Treasury to
purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the FHLMC, are federally chartered institu-
tions under Government supervision, but their debt securities are backed only
by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolios may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's in-
dustry or industries and the appraisal of speculative-type risks
A-2
<PAGE>
which may be inherent in certain areas; (3) evaluation of the issuer's prod-
ucts in relation to completion and customer acceptance; (4) liquidity; (5)
amount and quality of long term debt; (6) trend of earnings over a period of
ten years; (7) financial strength of a parent company and the relationships
which exist with the issuer; and (8) recognition by the management of issuer
of obligations which may be present or may arise as a result of public inter-
est questions and preparations to meet such obligations.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolio is also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment as well as the bank which uncondi-
tionally guarantees to pay the draft at its face amount on the maturity date.
Most acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, a Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision
A-3
<PAGE>
and regulation of stock exchanges, brokers and listed companies than in the
U.S. In addition, with respect to certain foreign countries, there is the pos-
sibility of expropriation or confiscatory taxation, political or social insta-
bility, or diplomatic developments which could affect U.S. investments in
those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Fund's Portfolios. However,
these foreign withholding taxes are not expected to have a significant impact.
A-4
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
MCKEE U.S. GOVERNMENT PORTFOLIO
MCKEE DOMESTIC EQUITY PORTFOLIO
MCKEE INTERNATIONAL EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
McKee U.S. Government, McKee Domestic Equity and McKee International Equity
Portfolios' Institutional Class Shares dated January 3, 1997. To obtain the
Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 7
Shareholder Services....................................................... 8
Investment Limitations..................................................... 9
Management of the Fund..................................................... 10
Investment Adviser......................................................... 13
Portfolio Transactions..................................................... 15
Administrative Services.................................................... 15
Performance Calculations................................................... 16
General Information........................................................ 20
Appendix -- Description of Securities and Ratings.......................... A-1
Financial Statements....................................................... 22
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the McKee U.S. Government, McKee Domestic Equity and McKee International Eq-
uity Portfolios (the "McKee Portfolios") as set forth in the McKee Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
2
<PAGE>
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
INVESTMENTS IN FOREIGN SECURITIES
Investors in the McKee International Equity Portfolio should recognize that
investing in foreign companies involves certain special considerations which
are not typically associated with investing in U.S. companies. Since the secu-
rities of foreign companies are frequently denominated in foreign currencies,
the Portfolio may be affected favorably or unfavorably by changes in currency
rates and in exchange control regulations, and may incur costs in connection
with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation or confiscatory taxation, po-
litical or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
3
<PAGE>
Although the McKee International Equity Portfolio will endeavor to achieve
the most favorable execution costs in its portfolio transactions, fixed com-
missions on many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Portfolio's investments. How-
ever, these foreign withholding taxes are not expected to have a significant
impact.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the McKee International Equity Port-
folio may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Portfolio may incur
costs in connection with conversions between various currencies. The Portfolio
will conduct their foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency ex-
change market, or through entering into forward foreign currency exchange con-
tracts ("forward contracts") to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the con-
tract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A for-
ward contract generally has no deposit requirement, and no commissions are
charged at any stage for such trades.
The McKee International Equity Portfolio may enter into forward contracts in
several circumstances. When the Portfolio enters into a contract for the pur-
chase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividends or inter-
est payments on a security which it holds, the Portfolio may desire to "lock-
in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such dividend or interest payment, as the case may be. By entering into a for-
ward contract for a fixed amount of dollars, for the purchase or sale of the
amount of foreign currency involved in the underlying transactions, the Port-
folio will be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared,
and the date on which such payments are made or received.
Additionally, when the Portfolio anticipates that the currency of a particu-
lar foreign country may suffer a substantial decline against the U.S. dollar,
it may enter into a forward contract for a fixed amount of dollars, to sell
the amount of foreign
4
<PAGE>
currency approximating the value of some or all of the Portfolio's securities
denominated in such foreign currency. The precise matching of the forward con-
tract amounts and the value of the securities involved will not generally be
possible since the future value of securities in foreign currencies will
change as a consequence of market movements in the value of these securities
between the date on which the forward contract is entered into and the date it
matures. The projection of short-term currency market movement is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. The Portfolio does not intend to enter into such forward
contracts to protect the value of portfolio securities on a regular or contin-
uous basis. The Portfolio will not enter into such forward contracts or main-
tain a net exposure to such contracts where the consummation of the contracts
would obligate the Portfolio to deliver an amount of foreign currency in ex-
cess of the value of the Portfolio securities or other assets denominated in
that currency.
Under normal circumstances, consideration of the prospect for currency pari-
ties will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward con-
tracts when it determines that the best interests of the performance of the
Portfolio will thereby be served. The Fund's Custodian will place cash, U.S.
government securities, or high-grade debt securities into a segregated account
of the Portfolio in an amount equal to the value of the Portfolio's total as-
sets committed to the consummation of forward contracts. If the value of the
securities placed in the segregated account declines, additional cash or secu-
rities will be placed in the account on a daily basis so that the value of the
account will be equal to the amount of the Portfolio's commitments with re-
spect to such contracts.
The Portfolio generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, the Portfolio
may either sell the security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same cur-
rency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for the Portfolio to purchase additional foreign currency
on the spot market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency that the Portfolio
is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency.
If the Portfolio retains the portfolio security and engages in an offsetting
transaction, the Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices
5
<PAGE>
decline during the period between the Portfolio entering into a forward con-
tract for the sale of a foreign currency and the date it enters into an off-
setting contract for the purchase of the foreign currency, the Portfolio will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should for-
ward prices increase, the Portfolio would suffer a loss to the extent that the
price of the currency it has agreed to purchase exceeds the price of the cur-
rency it has agreed to sell.
The Portfolio's dealings in forward contracts will be limited to the trans-
actions described above. Of course, the Portfolio is not required to enter
into such transactions with regard to their foreign currency-denominated secu-
rities. It also should be realized that this method of protecting the value of
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
FEDERAL TAX TREATMENT OF FORWARD CONTRACTS
In order for the McKee International Equity Portfolio to continue to qualify
for Federal income tax treatment as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), at least 90% of its
gross income for a taxable year must be derived from certain qualifying in-
come, i.e., dividends, interest, income derived from loans of securities and
gains from the sale or other disposition of stock, securities or foreign cur-
rencies, or other related income, including gains from forward contracts, de-
rived with respect to its business investing in stock, securities or curren-
cies. Any net gain realized from the closing out of forward contracts will,
therefore, generally be qualifying income for purposes of the 90% requirement.
Qualification as a regulated investment company also requires that less than
30% of the Portfolio's gross income be derived from the sale or other disposi-
tion of stock, securities or forward contracts (including certain foreign cur-
rencies not directly related to the Fund's business of investing in stock or
securities) held less than three months. In order to avoid realizing excessive
gains on securities held for less than three months, the McKee International
Equity Portfolio may be required to defer the closing out of contracts beyond
the time when it would otherwise be advantageous to do so. It is anticipated
that unrealized gains on contracts which have been open for less than three
months as of the end of the Portfolio's taxable year, and which are recognized
for tax purposes, will not be considered gains on securities held for less
than three months for the purposes of the 30% test.
The Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes (including
unrealized
6
<PAGE>
gains at the end of the Portfolio's taxable year) on regulated futures trans-
actions. Such distribution will be combined with distributions of capital
gains realized on the Portfolio's other investments, and shareholders will be
advised on the nature of the payment.
PURCHASE OF SHARES
Shares of each McKee Portfolio may be purchased without a sales commission
at the net asset value per share next determined after an order is received in
proper form by the Fund and payment is received by the Fund's custodian. The
minimum initial investment required for the McKee International Equity Portfo-
lio is $2,500. The minimum initial investment required for both the McKee U.S.
Government Portfolio and the McKee Domestic Equity Portfolio is $100,000. Cer-
tain exceptions may be determined from time to time by the officers of the
Fund. An order received in proper form prior to the 4:00 p.m. close of the New
York Stock Exchange ("Exchange") will be executed at the price computed on the
date of receipt; and an order received not in proper form or after the 4:00
p.m. close of the Exchange will be executed at the price computed on the next
day the Exchange is open after proper receipt. The Exchange will be closed on
the following days: President's Day, February 17, 1997; Good Friday, March 28,
1997; Memorial Day, May 26, 1997; Independence Day, July 4, 1997; Labor Day,
September 1, 1997; Thanksgiving Day, November 27, 1997; Christmas Day, Decem-
ber 25, 1997; New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemp-
7
<PAGE>
tions in excess of the above limits may be paid, in whole or in part, in in-
vestment securities or in cash as the Directors may deem advisable; however,
payment will be made wholly in cash unless the Directors believe that economic
or market conditions exist which would make such a practice detrimental to the
best interests of the Fund. If redemptions are paid in investment securities,
such securities will be valued as set forth in the Prospectus under "Valuation
of Shares" and a redeeming shareholder would normally incur brokerage expenses
if these securities were converted to cash.
No charge is made by a Portfolio for redemptions. Any redemption may be more
or less than the shareholder's initial cost depending on the market value of
the securities held by the Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
("CGFSC") from fraud, signature guarantees are required for certain redemp-
tions. Signature guarantees are required for (1) redemptions where the pro-
ceeds are to be sent to someone other than the registered shareowner(s) or the
registered address or (2) share transfer requests. The purpose of signature
guarantees is to verify the identity of the party who has authorized a redemp-
tion.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institution is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
natures guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the McKee Portfolios' Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each McKee Portfolio may be exchanged for In-
stitutional Class Shares of the other McKee Portfolios. In addition, Institu-
tional
8
<PAGE>
Class Shares of each McKee Portfolio may be exchanged for any other Institu-
tional Class Shares of a Portfolio included in the UAM Funds which is com-
prised of the Fund and UAM Funds Trust. (See the list of Portfolios of the UAM
Funds -- Institutional Class Shares at the end of the Prospectus.) Exchange
requests should be made by calling the Fund (1-800-638-7983) or by writing to
UAM Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company,
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only available
with respect to Portfolios that are qualified for sale in the shareholder's
state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. ET will be processed as of the close of business on the
same day. Requests received after 4:00 p.m. ET will be processed on the next
business day. Neither the Fund nor CGFSC will be responsible for the authen-
ticity of the exchange instructions received by telephone. Exchanges may also
be subject to limitations as to amounts or frequency, and to other restric-
tions established by the Board of Directors to assure that such exchanges do
not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on in-
vestment or utilization of assets, such limitation shall be determined immedi-
ately after and as a result of the Portfolios' acquisition of such security or
other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered
when determining whether the investment complies with the Portfolios' invest-
ment limitations. A Portfolio's fundamental
9
<PAGE>
investment limitations cannot be changed without approval by a "majority of
the outstanding shares" (as defined in the 1940 Act) of that Portfolio. The
Portfolios will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships, al-
though it may purchase and sell securities of companies which deal in
real estate and may purchase and sell securities which are secured by
interests in real estate;
(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and (ii) by lending its portfolio se-
curities to banks, brokers, dealers and other financial institutions
so long as such loans are not inconsistent with the 1940 Act or the
rules and regulations or interpretations of the Commission thereun-
der;
(4) underwrite the securities of other issuers;
(5) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into repurchase transactions;
(6) purchase on margin or sell short;
(7) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(8) invest more than an aggregate of 15% of the assets of the Portfolio,
determined at the time of investment, in securities subject to legal
or contractual restrictions on resale or securities for which there
are no readily available markets;
(9) invest for the purpose of exercising control over management of any
company; and
(10) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the
10
<PAGE>
past five years.
<TABLE>
<C> <S>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
Age:47 poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age:54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Invest-
Boston, MA 02111 ors Corporation since 1988; Director and
Age: 52 Chief Executive Officer of H.T. Investors,
Inc., formerly a subsidiary of Dewey
Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund Distribu-
Boston, MA 02110 tors, Inc.; Vice President of Operations,
Age: 45 Development and Control of Fidelity Invest-
ments in 1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street ident of UAM Fund Services, Inc.; former
Boston, MA 02110 Manager of Fund Administration and Compli-
Age: 32 ance of Chase Global Fund Services Company
from 1995 to 1996; formerly Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 and 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act. As of December 31, 1996, the Directors and Offi-
cers of the Fund owned less than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator, or CGFSC and receive no compensation from the Fund. The
following table shows aggregate compensation paid to each of the Fund's unaf-
filiated Directors by the Fund and total compensation paid by the Fund, UAM
Funds Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively
the "Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Former Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
12
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of the McKee Portfolios.
C.S. McKee International Equity Portfolio: Saxon & Co., FBO Westmoreland
County Employees Retirement Fund, P.O. Box 7780-1888, Philadelphia, PA,
17.8%*; Meridian Trust Company, FBO Lehigh County Employees Retirement Fund,
P.O. Box 16004, Reading, PA, 10.6%*; USBanCorp Trust Company, FBO Cambria Co.,
Attn: Beth Shank, Main and Franklin Streets, Johnston, PA, 7.7%*; Saul & Co.,
FBO Monroe City Employees Retirement Fund, c/o First Fidelity Bank & Trust,
P.O. Box 1289, Newark, NJ, 9.9%*; Saxon & Co., FBO Cumberland County, P.O. Box
7780-1888, Philadelphia, PA, 6.4%*; Fulvest & Co., FBO Lancaster County ERA,
P.O. Box 3215, Lancaster, PA, 5.9%* and Keystone Financial, FBO Northumberland
County Employees Retirement Fund, P.O. Box 2450, 5.2%*; Patterson & Company
327, P.O. Box 7829, Philadelphia, PA 11.6%.
C.S. McKee U.S. Government Portfolio: Chase Manhattan Bank NA, FBO Servistar
Corp. Profit Sharing Plan, Attn: Alan L. Miller, 770 Broadway, New York, NY,
69.1%. Municipal Government, City of Huntington Police Pension & Relief Fund,
P.O. Box 1659, Huntington, WV, 7.9%.
C.S. McKee Domestic Equity Portfolio: Chase Manhattan Bank NA, FBO Servistar
Corp. Profit Sharing Plan, Attn: Alan L. Miller, 770 Broadway, New York, NY,
65.1%*. Wesbanco Bank, Agent for City of Wheeling Municipal Employees Retire-
ment & Benefit Fund, 1 Bank Plaza, Wheeling, WV, 10.4%*; Divrev Co., P.O. Box
3985, Charleston, WV, 13%; Hartnat & Co., GRB, P.O. Box 4044, Boston, MA,
5.1%*.
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
C.S. McKee & Company (the "Adviser") is a wholly-owned subsidiary of UAM, a
holding company incorporated in Delaware in December 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment man-
agement. Since its first acquisition in August 1983, UAM has acquired or orga-
nized approximately 45 such wholly- owned affiliated firms (the "UAM
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
13
<PAGE>
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to re-
tain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
PHILOSOPHY AND STYLE
The Adviser's philosophical approach to all asset classes is to be opportu-
nistic while controlling risk. This approach captures opportunity, when avail-
able, to provide capital growth, consistent with the Fund's pursuit of total
return while quantifying and controlling risk to protect capital. The purpose
of this approach is to generate favorable results through a high quality, low
risk portfolio. The Adviser's approach is to look for companies which are sta-
tistically inexpensive yet have improving fundamentals. A number of statisti-
cal measures are used to rank the initial pool of over 2,000 stocks. The top-
ranking stocks are then subjected to fundamental analytical screens prior to
investment.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: Blue Cross of Western Pennsyl-
vania, City of Pittsburgh, The Dickinson School of Law, Edgewater Steel Corpo-
ration and ServiStar Incorporated.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, the Portfolio pays the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rates to
each Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
McKee U.S. Government Portfolio........ 0.45%
McKee Domestic Equity Portfolio........ 0.65%
McKee International Equity Portfolio... 0.70%
</TABLE>
For the period from May 26, 1994 (commencement of operations) to October 31,
1994, McKee International Equity Portfolio paid advisory fees of
14
<PAGE>
approximately $93,000. For the fiscal years ended October 31, 1995 and 1996,
the McKee International Equity Portfolio paid advisory fees of approximately
$453,000 and $618,081, respectively. For the period from March 2, 1995
(commencement of operations) to October 31, 1995, the McKee U.S. Government
Portfolio and the McKee Domestic Equity Portfolio paid no advisory fees, and
for the fiscal year ended October 31, 1996, these Portfolios paid advisory
fees of $48,813 and $222,792, respectively. During these periods, the Adviser
voluntarily waived advisory fees of approximately $9,000 and $18,140 for the
U.S. Government Portfolio, and $15,000 and $15,445 for the Domestic Equity
Portfolio, respectively.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the bro-
ker effecting the transaction. It is not the Fund's practice to allocate bro-
kerage or effect principal transactions with dealers on the basis of sales of
shares which may be made through broker-dealer firms. However, the Adviser may
place portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios
for their clients. During the fiscal years ended, October 31, 1994, 1995 and
1996, the entire Fund paid brokerage commissions of approximately $2,402,000,
$2,983,000, and $2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. and Chase
15
<PAGE>
Global Funds Services Company. The services provided by UAM Fund Services,
Inc. and Chase Global Funds Services Company and the basis of the fees payable
by the Fund under the Fund Administration Agreement are described in the Port-
folios' Prospectus. Prior to April 15, 1996, Chase Global Funds Services Com-
pany or its predecessor, Mutual Funds Service Company, provided certain admin-
istrative services to the Fund under an Administration Agreement between the
Fund and U.S. Trust Company of New York. For the period from May 26, 1994
(commencement of operations) to October 31, 1994, administrative services fees
paid to the Administrator by the McKee International Equity Portfolio totaled
$21,000. During the fiscal years ended October 31, 1995 and 1996, administra-
tive services fees paid to the Administrator by the McKee International Equity
Portfolio totaled approximately $82,000 and $137,744, respectively. Of the to-
tal fees paid in the fiscal year ended 1996, McKee International Portfolio
paid $107,833 to CGFSC and $29,911 to UAMFSI. For the period from March 2,
1995 to October 31, 1995, and for the fiscal year ended October 31, 1996, ad-
ministrative services fees paid to the Administrator by the McKee U.S. Govern-
ment Portfolio and the McKee Domestic Equity Portfolio totaled approximately
$20,000 and $67,641, $21,000, and $74,694, respectively. Of the fees paid in
the fiscal year ended October 31, 1996, McKee U.S. Government Portfolio paid
$63,013 to CGFSC and $4,628 to UAMFSI, and McKee Domestic Equity Portfolio
paid $63,012 to CGFSC and $11,682 to UAMFSI. The services provided by the Ad-
ministrator and the basis of the fees payable for the 1994, 1995 and 1996 fis-
cal years to the Administrator are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolios may from time to time quote various performance figures to
illustrate past performance. Performance quotations by investment companies
are subject to rules adopted by the Commission, which require the use of stan-
dardized performance quotations or, alternatively, that every non-standardized
performance quotation furnished by the Fund be accompanied by certain stan-
dardized performance information computed as required by the Commission. Cur-
rent yield and average annual compounded total return quotations used by the
Fund are based on the standardized methods of computing performance mandated
by the Commission. An explanation of those and other methods used to compute
or express performance follows.
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ment. The current yield of the McKee U.S. Government Portfolio is determined
by dividing the net investment income per share earned during a 30-day base
period by the maximum offering price per share on the last day of the period
and annualizing the result. Expenses accrued for the period include any fees
charged to all shareholders
16
<PAGE>
during the base period. The yield for the McKee U.S. Government Portfolio for
the 30-day period ended on October 31, 1996 was 5.74%.
This figure was obtained using the following formula:
Yield = 2[( a - b + 1 )/6/ - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeem-
able value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis.
The average annual total return for the McKee International Equity Portfo-
lio, the McKee U.S. Government Portfolio, and the McKee Domestic Equity Port-
folio from inception and for the one year ended on the date of the Financial
Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR THROUGH YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 DATE
----------- --------------- ---------
<S> <C> <C> <C>
McKee U.S. Government Portfolio.......... 3.77% 8.23% 3/2/95
McKee Domestic Equity Portfolio.......... 19.31% 20.96% 3/2/95
McKee International Equity Portfolio..... 8.29% 3.96% 5/26/94
</TABLE>
These figures are calculated according to the following formula:
P(1 + T)n = ERV
where:
P
= a hypothetical initial payment of $1,000
T
= average annual total return
n
= number of years
ERV
= ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1,
5 or 10 year periods (or fractional portion thereof).
17
<PAGE>
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
18
<PAGE>
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) Lehman Brothers Government/Corporate Index -- is an unmanaged index
composed of a combination of the Government and Corporate Bond Indi-
ces. 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 noncon-
vertible debt issued by or guaranteed by foreign or international gov-
ernments and agencies. All issues are investment grade (BBB) or high-
er, 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.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(o) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(p) Composite indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
19
<PAGE>
(r) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger Invest-
ment Companies Service -- publications that rate fund performance over
specified time periods.
(t) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(v) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and
Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Portfolio, that
the averages are generally unmanaged, and that the items included in the cal-
culations of such averages may not be identical to the formula used by the
Portfolio to calculate its performance. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other aver-
ages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Mutual Funds Services Company, P.O. Box 2798, Boston, MA 02208-
2798. The Fund's Articles of Incorporation, as amended, authorize the Direc-
tors to issue 3,000,000,000 shares of common stock, $.001 par value. The Board
20
<PAGE>
of Directors has the power to designate one or more series ("Portfolios") or
classes of common stock and to classify or reclassify any unissued shares with
respect to such Portfolios, without further action by shareholders.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains. (See discussion under "Dividends, Capital Gains Dis-
tributions and Taxes" in the Prospectus.) The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolios by an investor may have the effect of reducing the per share
net asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Prospec-
tus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the Portfolio at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
The Portfolios will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital
gains recognized by a Portfolio will be distributed to its investors without
need to offset (for Federal income tax purposes) such gains against any net
capital losses of another Portfolio.
FEDERAL TAXES
In order for the Portfolios to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived with
respect to its business of investing in such securities or currencies. In ad-
dition, gains realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of a Portfolio's an-
nual gross income.
21
<PAGE>
The Portfolios will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the McKee Portfolios and the Financial High-
lights for the respective periods presented, which appear in the Portfolios'
1996 Annual Report to Shareholders, and the report thereon of Price Waterhouse
LLP, independent accountants, also appearing therein, are attached to this
SAI.
22
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY SECURITIES (62.0%)
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
5.95%, 1/19/06......................................... $ 415,000 $ 396,574
6.75%, 5/30/06......................................... 765,000 772,038
6.785%, 9/21/05........................................ 140,000 138,207
6.89%, 10/3/05......................................... 140,000 138,895
6.97%, 10/3/05......................................... 140,000 139,447
7.225%, 5/17/05........................................ 145,000 146,000
7.65%, 5/10/05......................................... 85,000 86,485
7.974%, 4/20/05........................................ 60,000 60,792
-----------
1,878,438
- --------------------------------------------------------------------------------
Federal National Mortgage Association
6.70%, 8/10/01......................................... 1,075,000 1,080,902
6.70%, 11/10/05........................................ 205,000 201,882
7.37%, 4/14/04......................................... 140,000 142,624
8.00%, 4/13/05......................................... 70,000 71,031
-----------
1,496,439
- --------------------------------------------------------------------------------
U.S. Treasury Bonds
7.125%, 2/15/23........................................ 410,000 428,999
7.875%, 2/15/21........................................ 3,120,000 3,533,868
-----------
3,962,867
- --------------------------------------------------------------------------------
U.S. Treasury Notes
6.25%, 2/15/03......................................... 2,346,000 2,355,102
6.50%, 5/15/05......................................... 2,460,000 2,485,609
7.25%, 8/15/04......................................... 825,000 873,081
9.375%, 2/15/06........................................ 1,055,000 1,278,006
-----------
6,991,798
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(COST $14,119,619)..................................... 14,329,542
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE OBLIGATIONS (16.0%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (16.0%)
Federal Home Loan Mortgage Corp.
Gold Pool #C00387, 9.00%, 2/1/25...................... $ 519,094 $ 547,320
Gold Pool #C80328, 7.50%, 7/1/25...................... 212,837 213,568
Gold Pool #C80370, 6.50%, 12/1/25..................... 67,296 64,478
Gold Pool #D61891, 7.50%, 7/1/25...................... 1,130,519 1,134,405
Gold Pool #D63857, 6.50%, 9/1/25...................... 671,811 643,679
Gold Pool #D66220, 6.50%, 12/1/25..................... 465,055 445,581
-----------
3,049,031
- -------------------------------------------------------------------------------
Federal National Mortgage Association Series:
93-87 H, CMO, REMIC, 6.50%, 10/25/21.................. 259,000 253,801
93-136 PD, CMO, REMIC,
6.25%, 11/25/21..................................... 206,000 198,823
93-139 H, CMO, REMIC,
6.75%, 12/25/21..................................... 186,000 184,988
-----------
637,612
- -------------------------------------------------------------------------------
TOTAL MORTGAGE OBLIGATIONS
(COST $3,670,825)..................................... 3,686,643
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (8.3%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (8.3%)
Advanta Mortgage Loan Trust, Series 94-1 A1 6.30%,
7/25/25 ............................................. 113,439 109,361
Case Equipment Loan Trust, Series 95-A A 7.30%,
3/15/02.............................................. 254,201 257,648
Citibank Credit Card Master Trust, Series A 7.25%,
4/7/08............................................... 360,000 368,778
MMCAT Automobile Trust, Series 95-1 A 5.70%, 11/15/00.. 331,281 331,242
Union Acceptance Corp., Series 95-B A 6.575%, 7/10/02.. 436,055 438,860
World Financial Network Credit Card,
Series 96-B A 6.95%, 4/15/06......................... 405,000 411,957
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $1,896,173)..................................... 1,917,846
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (10.7%)
- --------------------------------------------------------------------------------
BANKS (0.6%)
NationsBank Corp. 5.125%, 9/15/98....................... $ 150,000 $ 147,750
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.7%)
Associates Corp. N. A. 6.75%, 7/15/01................... 75,000 75,750
Lehman Brothers, Inc. 9.875%, 10/15/00.................. 395,000 436,969
Progressive Corporation 7.30%, 6/1/06................... 100,000 102,750
-----------
615,469
- --------------------------------------------------------------------------------
INDUSTRIAL (2.7%)
Aetna Services, Inc. 6.75%, 8/15/01..................... 100,000 100,875
Lockheed Martin Corp. 7.75%, 5/1/26..................... 170,000 175,313
Marriott International, Series B 7.875%, 4/15/05........ 170,000 176,800
Nabisco, Inc. 7.55%, 6/15/15............................ 170,000 166,812
-----------
619,800
- --------------------------------------------------------------------------------
RETAIL (0.4%)
J.C. Penney & Co. 5.375%, 11/15/98...................... 15,000 14,812
May Department Stores 7.15%, 8/15/04.................... 70,000 71,050
Walmart Stores 5.50%, 9/15/97........................... 15,000 14,960
-----------
100,822
- --------------------------------------------------------------------------------
UTILITIES (2.7%)
Pacific Bell Telephone 6.25%, 3/1/05.................... 255,000 245,119
Pacific Gas & Electric 5.875%, 10/1/05.................. 260,000 241,800
U.S. West Cap Funding, Inc. 6.75%, 10/1/05.............. 140,000 137,550
-----------
624,469
- --------------------------------------------------------------------------------
YANKEE BONDS (1.6%)
Carnival Cruise Lines 7.20%, 10/1/23.................... 75,000 71,906
Province of Ontario
7.00%, 8/4/05.......................................... 145,000 147,356
7.625%, 6/22/04........................................ 145,000 152,975
-----------
372,237
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $2,449,079)...................................... 2,480,547
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.7%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.7%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96 to be repurchased at $402,062, collateralized
by $388,577 of various U.S. Treasury Notes, 5.875%-
7.75%, due 3/31/99-11/30/99, valued at $402,001 (COST
$402,000)............................................ $ 402,000 $ 402,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.7%)
(COST $22,537,696) (A)................................ 22,816,578
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.3%)..................... 301,462
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $23,118,040
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
CMO Collateralized Mortgage Obligation
REMIC Real Estate Mortgage Investment Conduit
(a) The cost for federal income tax purposes was $22,582,343. At October
31, 1996, net unrealized appreciaton for all securities based on tax
cost was $234,235. This consisted of aggregate gross unrealized
appreciation for all securities of $275,612 and aggregate gross
unrealized depreciation for all securities of $41,377.
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.1%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (1.0%)
General Motors Corp......................................... 11,500 $ 619,563
- --------------------------------------------------------------------------------
BANKS (6.0%)
Bank of Boston Corp......................................... 15,150 969,600
Bankers Trust New York Corp................................. 8,900 752,050
First Commerce Corp......................................... 16,674 591,927
Mellon Bank Corp. .......................................... 22,000 1,432,750
-----------
3,746,327
- --------------------------------------------------------------------------------
BASIC RESOURCES (1.2%)
Olsten Corp................................................. 36,000 720,000
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.2%)
Philip Morris Cos., Inc..................................... 12,800 1,185,600
Pioneer Hi-Bred International, Inc.......................... 16,800 1,127,700
*Ryan's Family Steak House, Inc............................. 46,800 333,450
-----------
2,646,750
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (2.4%)
Aviall, Inc................................................. 45,200 412,450
*IMO Industries, Inc. ...................................... 65,200 293,400
Magna International, Inc., Class A.......................... 15,600 781,950
-----------
1,487,800
- --------------------------------------------------------------------------------
CHEMICALS (2.5%)
Akzo N.V. ADR............................................... 25,100 1,584,438
- --------------------------------------------------------------------------------
CONSTRUCTION (1.2%)
Owens-Corning Fiberglass Corp............................... 19,000 736,250
- --------------------------------------------------------------------------------
ELECTRONICS (1.3%)
*MEMC Electronic Materials, Inc............................. 42,900 831,187
- --------------------------------------------------------------------------------
ENERGY (9.3%)
Mitchell Energy & Development Corp., Class B................ 76,970 1,597,128
Occidental Petroleum Corp................................... 30,700 752,150
*Stone Energy Corp.......................................... 57,400 1,205,400
Ultramar Corp............................................... 30,300 867,337
YPF S.A. ADR................................................ 60,200 1,369,550
-----------
5,791,565
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (3.9%)
Dean Witter Discover and Co................................ 21,300 $ 1,254,037
Lehman Brothers Holdings, Inc. ............................ 47,100 1,183,388
-----------
2,437,425
- -------------------------------------------------------------------------------
HEALTH CARE (1.6%)
Foundation Health Corp..................................... 19,400 579,575
*Humana, Inc. ............................................. 21,400 390,550
-----------
970,125
- -------------------------------------------------------------------------------
INDUSTRIAL (2.1%)
*Global Industrial Technologies, Inc....................... 68,590 1,277,489
- -------------------------------------------------------------------------------
INSURANCE (1.1%)
CIGNA Corp................................................. 5,400 704,700
- -------------------------------------------------------------------------------
METALS (1.8%)
Cincinnati Milacron, Inc. ................................. 45,500 870,187
Huntco, Inc., Class A...................................... 1,000 17,875
Steel Technologies, Inc. .................................. 18,800 237,350
-----------
1,125,412
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (2.6%)
Loews Corp. ............................................... 11,400 941,925
Whitman Corp. ............................................. 27,200 659,600
-----------
1,601,525
- -------------------------------------------------------------------------------
PAPER & PACKAGING (6.2%)
Rayonier, Inc. ............................................ 7,936 314,464
*Shorewood Packaging Corp. ................................ 74,490 1,405,999
Willamette Industries ..................................... 31,600 2,117,200
-----------
3,837,663
- -------------------------------------------------------------------------------
PHARMACEUTICALS (6.5%)
American Home Products Corp. .............................. 24,100 1,476,125
Becton, Dickinson & Co. ................................... 22,900 996,150
Mylan Laboratories, Inc. .................................. 30,700 464,337
SmithKline Beecham plc ADR ................................ 17,300 1,083,413
-----------
4,020,025
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL (7.3%)
American Stores Co. ...................................... 29,000 $ 1,199,875
Dayton-Hudson Corp. ...................................... 19,150 663,069
Dillard Department Stores, Class A........................ 22,500 714,375
Gap, Inc. ................................................ 20,700 600,300
*Venture Stores, Inc. .................................... 66,400 224,100
*Waban, Inc. ............................................. 42,700 1,115,537
-----------
4,517,256
- -------------------------------------------------------------------------------
SERVICES (2.3%)
Bowne & Co., Inc. ........................................ 60,800 1,421,200
- -------------------------------------------------------------------------------
TECHNOLOGY (18.4%)
*Adaptec, Inc. ........................................... 25,400 1,543,050
*Advanced Micro Devices, Inc. ............................ 92,400 1,640,100
*Avid Technology, Inc. ................................... 53,800 726,300
*Computer Network Technology Corp. ....................... 62,100 333,787
Intelligent Electronics, Inc. ............................ 130,400 1,124,700
*Planar Systems, Inc. .................................... 53,500 541,688
*Policy Management Systems................................ 26,700 961,200
*Sequent Computer Systems, Inc. .......................... 100,800 1,486,800
*Sterling Software, Inc. ................................. 53,196 1,728,870
*Systems & Computer Technology Corp. ..................... 64,500 903,000
*3D Systems Corp. ........................................ 43,500 424,125
-----------
11,413,620
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (8.0%)
NYNEX Corp. .............................................. 19,500 867,750
Nokia Corp. ADR .......................................... 39,900 1,850,362
Pacific Telesis Group..................................... 38,700 1,315,800
Sprint Corp. ............................................. 24,100 945,925
-----------
4,979,837
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (0.7%)
Delta Woodside Industries, Inc. .......................... 79,000 454,250
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (3.4%)
Airborne Freight Corp. ............................... 43,600 $ 866,550
APL Ltd. ............................................. 56,500 1,243,000
-----------
2,109,550
- -------------------------------------------------------------------------------
UTILITIES (3.1%)
GPU, Inc. ............................................ 23,200 762,700
Illinova Corp. ....................................... 21,800 594,050
Southern New England Telecommunications Corp. ........ 14,900 555,025
-----------
1,911,775
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $57,962,499)................................... 60,945,732
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.6%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $3,503,543,
collateralized by $3,386,036 of various U.S.
Treasury Notes, 5.875%-7.75%, due 3/31/99-11/30/99,
valued at $3,503,008 (COST $3,503,000).............. $3,503,000 3,503,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.7%)
(COST $61,465,499) (A)............................... 64,448,732
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
(-3.7%).............................................. (2,278,719)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $62,170,013
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
ADR American Depositary Receipt
(a) The cost for federal income tax purposes was $61,472,542. At October
31, 1996, net unrealized appreciation for all securities based on tax
cost was $2,976,190. This consisted of aggregate gross unrealized ap-
preciation for all securities of $5,797,605 and aggregate gross
unrealized depreciation for all securities of $2,821,415.
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.2%)
- --------------------------------------------------------------------------------
ARGENTINA (2.7%)
YPF S.A. ADR............................................... 109,700 $ 2,495,675
- --------------------------------------------------------------------------------
AUSTRALIA (2.6%)
Westpac Banking Corp....................................... 312,000 1,780,272
Westpac Banking Corp. ADR.................................. 20,100 570,337
-----------
2,350,609
- --------------------------------------------------------------------------------
CANADA (5.7%)
Alcan Aluminium Ltd........................................ 33,700 1,105,989
Canadian Imperial Bank of Commerce......................... 38,240 1,588,698
Seagram Co., Ltd........................................... 31,830 1,198,937
West Coast Energy, Inc. ................................... 25,000 413,031
West Coast Energy, Inc. ADR................................ 52,600 867,900
-----------
5,174,555
- --------------------------------------------------------------------------------
CHINA (2.0%)
*Huaneng Power International, Inc. ADR..................... 118,000 1,799,500
- --------------------------------------------------------------------------------
FINLAND (4.8%)
Nokia AB................................................... 81,300 3,839,645
Nokia AB, Series A......................................... 11,100 512,964
-----------
4,352,609
- --------------------------------------------------------------------------------
FRANCE (6.8%)
Alcatel Alsthom............................................ 18,615 1,588,224
Alcatel Alsthom ADR........................................ 22,926 389,742
Coflexip................................................... 23,000 1,056,788
Coflexip ADR............................................... 44,334 997,515
PSA Peugeot S.A............................................ 11,665 1,216,673
Total S.A., Class B........................................ 11,850 927,325
-----------
6,176,267
- --------------------------------------------------------------------------------
GERMANY (5.3%)
Bayer AG................................................... 47,650 1,800,846
Bayer AG ADR............................................... 29,900 1,130,632
Commerzbank AG............................................. 40,000 897,258
Commerzbank AG ADR......................................... 21,600 967,801
-----------
4,796,537
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HONG KONG (8.8%)
Cathay Pacific Airways Ltd............................... 835,000 $ 1,306,763
Cathay Pacific Airways Ltd. ADR.......................... 67,800 530,487
DSG International Ltd.................................... 71,916 827,034
*Guangshen Railway Co., Ltd. ADR......................... 60,000 1,117,500
Hong Kong Electric Holdings.............................. 240,000 768,266
Hong Kong Electric Holdings ADR.......................... 244,800 783,556
HSBC Holdings plc........................................ 23,100 484,891
HSBC Holdings plc (75p).................................. 108,000 2,200,034
-----------
8,018,531
- --------------------------------------------------------------------------------
IRELAND (3.2%)
*Elan Corp. plc ADR...................................... 106,820 2,964,255
- --------------------------------------------------------------------------------
ISRAEL (1.8%)
Teva Pharmaceutical Industries Ltd. ADR.................. 40,000 1,670,000
- --------------------------------------------------------------------------------
ITALY (1.1%)
*Montedison S.p.A. ...................................... 1,270,580 831,793
*Montedison S.p.A. ADR................................... 32,634 216,200
-----------
1,047,993
- --------------------------------------------------------------------------------
JAPAN (18.2%)
Amada Co., Ltd. ......................................... 78,000 672,118
Amada Co., Ltd. ADR...................................... 21,350 735,817
Credit Saison Co......................................... 79,500 1,838,433
Hitachi Ltd.............................................. 108,000 959,114
Hitachi Ltd. ADR......................................... 8,100 723,938
Ito-Yokado Co., Ltd...................................... 17,000 849,029
Ito-Yokado Co., Ltd. ADR................................. 4,700 935,300
Kao Corp................................................. 34,000 400,598
Kao Corp. ADR............................................ 6,428 757,299
Mitsubishi Electric Corp. ............................... 160,000 927,108
Mitsubishi Electric Corp. ADR............................ 14,400 834,323
Mitsui & Co., Ltd. ADR................................... 4,900 788,900
Mitsui Fire & Marine Insurance........................... 82,000 533,544
Mitsui Fire & Marine Insurance ADR....................... 10,630 691,594
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Nissan Motor Co., Ltd................................... 52,000 $ 393,669
Nissan Motor Co., Ltd. ADR.............................. 34,200 513,000
Sanwa Bank Ltd.......................................... 13,000 221,753
Sanwa Bank Ltd. ADR..................................... 4,000 682,257
Sony Corp. ADR.......................................... 13,320 804,195
Toyota Motor Corp....................................... 51,000 1,206,278
Toyota Motor Corp. ADR.................................. 23,584 1,114,344
-----------
16,582,611
- -------------------------------------------------------------------------------
KOREA (3.0%)
L.G. Electronics, Inc................................... 60,936 1,005,740
Pohang Iron & Steel Co., Ltd............................ 13,700 875,370
Pohang Iron & Steel Co., Ltd. ADR....................... 42,000 871,500
-----------
2,752,610
- -------------------------------------------------------------------------------
MEXICO (4.4%)
*Grupo Industrial Durango ADR........................... 257,000 2,794,875
Telefonos de Mexico S.A. ADR, Class L................... 39,800 1,213,900
-----------
4,008,775
- -------------------------------------------------------------------------------
NETHERLANDS (5.5%)
Akzo Nobel N.V.......................................... 22,715 2,861,964
Akzo Noble N.V. ADR..................................... 2,500 157,812
Philips Electronics N.V. ............................... 58,200 2,051,011
-----------
5,070,787
- -------------------------------------------------------------------------------
PHILIPPINES (0.6%)
Philippine Long Distance Telephone Co. ................. 8,500 510,194
- -------------------------------------------------------------------------------
PORTUGAL (1.1%)
Banco Comercial Portugues S.A. ......................... 34,900 433,399
Banco Comercial Portugues S.A. ADR...................... 42,820 524,545
-----------
957,944
- -------------------------------------------------------------------------------
SPAIN (3.5%)
Banco Santander S.A. ................................... 20,400 1,047,754
Repsol S.A. ............................................ 64,230 2,097,686
Repsol S.A. ADR......................................... 2,000 65,250
-----------
3,210,690
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SWITZERLAND (3.2%)
Nestle S.A. ADR......................................... 17,000 $ 927,172
Nestle S.A. (Registered)................................ 1,835 1,996,082
-----------
2,923,254
- -------------------------------------------------------------------------------
UNITED KINGDOM (14.9%)
British Steel plc....................................... 751,300 2,090,510
British Steel plc ADR................................... 8,500 233,750
Carlton Communications plc.............................. 170,787 1,367,297
Carlton Communications plc ADR.......................... 29,500 1,202,125
Grand Metropolitan plc.................................. 156,270 1,178,605
Grand Metropolitan plc ADR.............................. 21,300 652,313
RTZ Corp. plc ADR....................................... 14,600 945,350
RTZ Corp. plc (Registered).............................. 79,780 1,275,467
SmithKline Beecham plc ADR.............................. 37,390 2,341,549
*Waste Management International plc..................... 417,500 1,902,205
*Waste Management International plc ADR................. 43,900 400,587
-----------
13,589,758
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (99.2%)
(COST $85,748,857)..................................... 90,453,154
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.6%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.6%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $601,093, collateralized
by $580,933 of various U.S. Treasury Notes, 5.875%-
7.75%, due 3/31/99-11/30/99, valued at $601,001
(COST $601,000)....................................... $601,000 $ 601,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%)
(COST $86,349,857) (A)................................. 91,054,154
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)...................... 169,719
- ------------------------------------------------------------------------------
NET ASSETS (100%)........................................ $91,223,873
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
ADR American Depositary Receipt
(a) The cost for federal income tax purposes was $86,355,424. At October 31,
1996, net unrealized appreciaton for all securities based on tax cost
was $4,698,730. This consisted of aggregate gross unrealized
appreciation for all securities of $11,937,446 and aggregate gross
unrealized depreciation for all securities of $7,238,716.
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
At October 31, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF
NET MARKET
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Automotive................................................. 3.1% $ 2,844,018
Banks...................................................... 5.5 5,040,284
Basic Resources............................................ 8.9 8,141,473
Beverages, Food & Tobacco.................................. 3.9 3,515,387
Broadcasting & Publishing.................................. 1.3 1,202,125
Capital Equipment.......................................... 12.3 11,206,955
Chemicals.................................................. 7.4 6,783,048
Consumer Durables.......................................... 9.0 8,252,315
Electronics................................................ 5.5 5,024,727
Energy..................................................... 9.4 8,566,732
Financial Services......................................... 9.0 8,197,148
Health Care................................................ 8.6 7,802,838
Home Furnishings & Appliances.............................. 0.9 804,195
Insurance.................................................. 0.6 533,544
Metals..................................................... 2.3 2,051,339
Multi-Industry............................................. 0.2 216,200
Retail..................................................... 1.0 935,300
Repurchase Agreement....................................... 0.7 601,000
Services................................................... 1.8 1,637,928
Telecommunications......................................... 2.8 2,581,197
Transportation............................................. 3.2 2,954,751
Utilities.................................................. 2.4 2,161,650
- -------------------------------------------------------------------------------
Total Investments........................................ 99.8% $91,054,154
Other Assets and Liabilities (Net)......................... 0.2 169,719
- -------------------------------------------------------------------------------
Net Assets............................................... 100.0% $91,223,873
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
MCKEE PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
MCKEE MCKEE MCKEE
U.S. DOMESTIC INTERNATIONAL
GOVERNMENT EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Value
(Cost $22,537,696; $61,465,499;
$86,349,857, respectively)........... $22,816,578 $64,448,732 $91,054,154
Foreign Currency, at Value
(Cost $173,720)...................... -- -- 179,135
Cash................................... 640 305 468
Receivable for Portfolio Shares Sold... 12,295 165,841 1,387
Dividends Receivable................... -- 61,621 37,793
Foreign Withholding Tax Reclaim
Receivable........................... -- -- 72,449
Interest Receivable.................... 327,998 543 93
Other Assets........................... 3,838 1,743 233
- -------------------------------------------------------------------------------
Total Assets.......................... 23,161,349 64,678,785 91,345,712
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased...... -- 2,431,533 --
Payable for Investment Advisory Fees... 8,350 32,990 55,046
Payable for Administrative Fees........ 7,304 8,371 13,839
Payable for Custodian Fees............. 2,803 5,878 25,868
Payable for Directors' Fees............ 632 753 901
Other Liabilities...................... 24,220 29,247 26,185
- -------------------------------------------------------------------------------
Total Liabilities..................... 43,309 2,508,772 121,839
- -------------------------------------------------------------------------------
NET ASSETS.............................. $23,118,040 $62,170,013 $91,223,873
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital........................ $22,824,028 $56,846,274 $85,371,982
Undistributed Net Investment Income.... 146,402 67,031 61,752
Accumulated Net Realized Gain (Loss)... (131,272) 2,273,475 1,082,642
Unrealized Appreciation................ 278,882 2,983,233 4,707,497
- -------------------------------------------------------------------------------
NET ASSETS.............................. $23,118,040 $62,170,013 $91,223,873
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding
($0.001par value) (Authorized
25,000,000).......................... 2,185,220 4,647,807 8,644,787
Net Asset Value, Offering and
Redemption Price Per Share........... $ 10.58 $ 13.38 $ 10.55
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
MCKEE PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
<TABLE>
<CAPTION>
MCKEE MCKEE MCKEE
U.S. DOMESTIC INTERNATIONAL
GOVERNMENT EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................. $ -- $ 652,628 $1,746,472
Interest.................. 973,470 52,220 84,851
Less: Foreign Taxes
Withheld................ -- -- (133,611)
- -------------------------------------------------------------------------------------
Total Income............. 973,470 704,848 1,697,712
- -------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--
Note B
Basic Fees............... $ 66,953 $238,237 618,081
Less: Fees Waived........ (18,140) 48,813 (15,445) 222,792 --
-------- --------
Administrative Fees--Note
C....................... 67,641 74,694 137,744
Custodian Fees--Note D.... 5,629 13,544 61,425
Audit Fees................ 11,495 12,589 13,632
Directors' Fees--Note G... 3,199 2,977 3,574
Registration and Filing
Fees.................... 17,924 23,067 26,576
Printing Fees............. 10,419 10,393 10,236
Other Expenses............ 4,266 5,080 18,358
- -------------------------------------------------------------------------------------
Total Expenses........... 169,386 365,136 889,626
Expense Offset--Note A.... (299) (1,441) (1,922)
- -------------------------------------------------------------------------------------
Net Expenses............. 169,087 363,695 887,704
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME...... 804,383 341,153 810,008
- -------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
ON:
Investments............... (129,588) 2,272,594 1,109,876
Foreign Exchange
Transactions............ -- -- (24,301)
- -------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN EXCHANGE
TRANSACTIONS............. (129,588) 2,272,594 1,085,575
- -------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON:
Investments............... 169,467 2,835,631 4,696,692
Foreign Exchange
Translation............. -- -- 3,201
- -------------------------------------------------------------------------------------
TOTAL NET CHANGE IN
UNREALIZED
APPRECIATION/DEPRECIATION.. 169,467 2,835,631 4,699,893
- -------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
EXCHANGE TRANSACTIONS.... 39,879 5,108,225 5,785,468
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $ 844,262 $5,449,378 $6,595,476
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 2, 1995**
OCTOBER 31, TO
1996 OCTOBER 31, 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................. $ 804,383 $ 109,234
Net Realized Gain (Loss).......................... (129,588) 73,427
Net Change in Unrealized
Appreciation/Depreciation....................... 169,467 109,415
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations..................................... 844,262 292,076
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................. (688,019) (81,080)
Net Realized Gain................................. (73,227) --
- ----------------------------------------------------------------------------------
Total Distributions.............................. (761,246) (81,080)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular................................... 16,987,714 6,209,516
--In Lieu of Cash Distributions................. 756,964 78,956
Redeemed.......................................... (778,902) (430,220)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions..... 16,965,776 5,858,252
- ----------------------------------------------------------------------------------
Total Increase.................................... 17,048,792 6,069,248
Net Assets:
Beginning of Period............................... 6,069,248 --
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $146,402 and $27,954,
respectively)................................... $23,118,040 $6,069,248
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued.................................... 1,622,458 597,331
In Lieu of Cash Distributions.................... 72,730 7,457
Shares Redeemed.................................. (74,046) (40,710)
- ----------------------------------------------------------------------------------
1,621,142 564,078
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MARCH 2, 1995**
YEAR ENDED TO
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 341,153 $ 27,257
Net Realized Gain.................................. 2,272,594 161,135
Net Change in Unrealized
Appreciation/Depreciation........................ 2,835,631 147,602
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations...................................... 5,449,378 335,994
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (279,306) (23,915)
Net Realized Gain.................................. (158,413) --
- ----------------------------------------------------------------------------------
Total Distributions............................... (437,719) (23,915)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 51,350,923 6,181,487
--In Lieu of Cash Distributions.................. 437,720 23,915
Redeemed........................................... (1,057,419) (90,351)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 50,731,224 6,115,051
- ----------------------------------------------------------------------------------
Total Increase..................................... 55,742,883 6,427,130
Net Assets:
Beginning of Period................................ 6,427,130 --
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $67,031 and $3,342,
respectively).................................... $62,170,013 $6,427,130
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued...................................... 4,134,152 567,561
In Lieu of Cash Distributions...................... 35,299 2,131
Shares Redeemed.................................... (83,413) (7,923)
- ----------------------------------------------------------------------------------
4,086,038 561,769
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 810,008 $ 748,047
Net Realized Gain..................................... 1,085,575 1,574,817
Net Change in Unrealized Appreciation/Depreciation.... 4,699,893 (1,166,869)
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 6,595,476 1,155,995
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (769,177) (609,199)
Net Realized Gain..................................... (1,669,691) --
- ----------------------------------------------------------------------------------
Total Distributions.................................. (2,438,868) (609,199)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 12,382,787 36,598,377
--In Lieu of Cash Distributions..................... 2,274,394 522,672
Redeemed.............................................. (2,482,687) (32,205)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 12,174,494 37,088,844
- ----------------------------------------------------------------------------------
Total Increase........................................ 16,331,102 37,635,640
Net Assets:
Beginning of Period................................... 74,892,771 37,257,131
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $61,752 and $41,376, respectively)........ $91,223,873 $74,892,771
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 1,200,799 3,831,599
In Lieu of Cash Distributions........................ 224,800 51,830
Shares Redeemed...................................... (244,706) (3,054)
- ----------------------------------------------------------------------------------
1,180,893 3,880,375
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MARCH 2, 1995**
YEAR ENDED TO
OCTOBER 31, OCTOBER 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 10.76 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.46 0.28
Net Realized and Unrealized Gain (Loss)......... (0.07)++ 0.71
- -------------------------------------------------------------------------------
Total From Investment Operations............... 0.39 0.99
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........................... (0.44) (0.23)
Net Realized Gain............................... (0.13) --
- -------------------------------------------------------------------------------
Total Distributions............................ (0.57) (0.23)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................... $ 10.58 $10.76
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+.................................... 3.77% 9.96%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)............ $23,118 $6,069
Ratio of Expenses to Average Net Assets.......... 1.13% 0.89%*
Ratio of Net Investment Income to Average Net
Assets......................................... 5.39% 5.39%*
Portfolio Turnover Rate.......................... 83% 104%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses Assumed by the
Adviser Per Share.............................. $ 0.01 $ 0.10
Ratio of Expenses to Average Net Assets Including
Expense Offsets................................ 1.13% 0.85%*
- -------------------------------------------------------------------------------
</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.
++ The amount shown for the year ended October 31, 1996 for a share outstand-
ing 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 invest-
ments of the Portfolio.
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MARCH 2, 1995**
YEAR ENDED TO
OCTOBER 31, OCTOBER 31,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 11.44 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............................ 0.10 0.08
Net Realized and Unrealized Gain................. 2.08 1.43
- ------------------------------------------------------------------------------
Total From Investment Operations................ 2.18 1.51
- ------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................ (0.09) (0.07)
Net Realized Gain................................ (0.15) --
- ------------------------------------------------------------------------------
Total Distributions............................. (0.24) (0.07)
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.................... $ 13.38 $11.44
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL RETURN+..................................... 19.31% 15.13%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)............. $62,170 $6,427
Ratio of Expenses to Average Net Assets........... 0.99% 1.08%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 0.93% 1.12%*
Portfolio Turnover Rate........................... 42% 27%
Average Commission Rate#.......................... $0.0482 N/A
- ------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses Assumed by the
Adviser Per Share............................... $ 0.00 $ 0.11
Ratio of Expenses to Average Net Assets Including
Expense Offsets................................. 0.99% 1.00%
- ------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain fees not been waived and ex-
penses assumed by the Adviser during the periods.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-32
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED MAY 26, 1994**
OCTOBER 31, TO
---------------- OCTOBER 31,
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 10.03 $ 10.40 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................... 0.09 0.11 0.04
Net Realized and Unrealized Gain (Loss).... 0.73 (0.39)+ 0.39
- ------------------------------------------------------------------------------
Total From Investment Operations.......... 0.82 (0.28) 0.43
- ------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income...................... (0.09) (0.09) (0.03)
Net Realized Gain.......................... (0.21) -- --
- ------------------------------------------------------------------------------
Total Distributions....................... (0.30) (0.09) (0.03)
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............. $ 10.55 $ 10.03 $ 10.40
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL RETURN................................ 8.29% (2.69)% 4.31%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)....... $91,224 $74,893 $37,257
Ratio of Expenses to Average Net Assets..... 1.01% 0.97% 1.12%*
Ratio of Net Investment Income to Average
Net Assets................................ 0.92% 1.16% 0.97%*
Portfolio Turnover Rate..................... 9% 7% 11%
Average Commission Rate#.................... $0.0560 N/A N/A
- ------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
Including Expense Offsets................. 1.01% 0.96% N/A
- ------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ The amount shown for the year ended October 31, 1995 for a share outstand-
ing 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 invest-
ments of the Portfolio.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The McKee U.S.
Government Portfolio, McKee Domestic Equity Portfolio, and McKee International
Equity Portfolio (the "Portfolios"), portfolios of UAM Funds, Inc., are non-
diversified, open-end management investment companies. At October 31, 1996,
the UAM Funds were composed of forty active portfolios. The financial state-
ments of the remaining portfolios are presented separately. The objectives of
the McKee Portfolios are as follows:
MCKEE U.S. GOVERNMENT PORTFOLIO seeks to achieve a high level of current
income consistent with preservation of capital by investing primarily in
U.S. Treasury and Government agency securities.
MCKEE DOMESTIC EQUITY PORTFOLIO seeks to achieve a superior long-term
total return over a market cycle by investing primarily in equity securi-
ties of U.S. issuers.
MCKEE INTERNATIONAL EQUITY PORTFOLIO seeks to achieve a superior long-
term total return over a market cycle by investing primarily in the equity
securities of non-U.S. issuers.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: Equity securities listed on a United States
securities exchange for which market quotations are readily available are
valued at the last quoted sales price as of the close of the exchange on
the day the valuation is made or, if no sale occurred on such day, at the
bid price on such day. Securities listed on a foreign exchange are valued
at their closing price. Price information on listed securities is taken
from the exchange where the security is primarily traded. Over-the-counter
and unlisted equity securities are valued not exceeding the current asked
prices nor less than the current bid 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
F-34
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
The McKee International Equity Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on either
income or gains earned or repatriated. The McKee International Equity
Portfolio accrues such taxes when the related income is earned.
At October 31, 1996, the McKee U.S. Government Portfolio had available
$86,623 of capital loss carryover for Federal income tax purposes, which
will expire on October 31, 2004.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolios have the right to liquidate the collateral and apply the pro-
ceeds in satisfaction of the obligation. In the event of default or bank-
ruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
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 on the date of valuation. 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
F-35
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
securities. These gains and losses are included in net realized and
unrealized gain and loss on investments on the statement of operations.
Net realized and unrealized gains and losses on foreign currency
transactions represent net foreign exchange gains or losses from forward
foreign currency exchange contracts, disposition of foreign currencies,
currency gains or losses realized between trade and settlement dates on
securities transactions and the difference between the amount of the
investment income and foreign withholding taxes recorded on the McKee
International Equity Portfolio's books and the U.S. dollar equivalent
amounts actually received or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The McKee International
Equity Portfolio may enter into forward foreign currency exchange con-
tracts to protect the value of securities held and related receivables and
payables against changes in future foreign exchange rates. A forward cur-
rency contract is an agreement between two parties to buy and sell cur-
rency 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 current forward rate and the change in
market value is recorded by the McKee International Equity Portfolio as
unrealized gain or loss. The McKee International Equity Portfolio recog-
nizes realized gain or loss when the contract is closed, equal to the dif-
ference 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 the unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distrib-
ute substantially all of its net investment income quarterly. Any realized
net capital gains will be distributed annually. All distributions are re-
corded 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 dif-
ferences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments and for for-
eign currency transactions.
F-36
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications as follows:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
MCKEE PORTFOLIOS INCOME GAIN (LOSS)
---------------- -------------- ------------
<S> <C> <C>
U.S. Government.................................. $ 2,084 $(2,084)
Domestic Equity.................................. $ 1,842 $(1,842)
International Equity............................. $(20,455) $20,455
</TABLE>
Current year permanent book-tax differences are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the financial highlights.
7. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded
as soon as the McKee International Equity Portfolio is informed of the ex-
dividend date. Interest income is recognized on the accrual basis. Dis-
counts and premiums on securities purchased are amortized using the effec-
tive yield basis 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 ex-
penses are apportioned among the portfolios of the UAM Funds and AEW Com-
mercial Mortgage Securities Fund, Inc. ("AEW"), an affiliated closed-end
management investment company, based on their relative net assets. Custo-
dian fees for the Portfolios have been increased to include expense off-
sets for custodian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
C.S. McKee & Co., Inc. (the "Adviser"), a wholly-owned subsidiary of United As-
set Management Corporation ("UAM"), provides investment advisory services to
the Portfolios at a fee calculated at an annual rate of 0.45%, 0.65% and 0.70%
of average daily net assets for the McKee U.S. Government Portfolio, McKee Do-
mestic Equity Portfolio and McKee International Equity Portfolio, respectively.
Effective March 1, 1996, the Adviser has discontinued waiving a portion of its
advisory fees and assuming expenses for the McKee U.S. Government Portfolio and
McKee Domestic Equity Portfolio. Prior to March 1, 1996, the Adviser had volun-
tarily agreed to waive a portion of its advisory fees and to assume expenses,
if necessary, in order to keep the Portfolio's total annual operating expenses,
after
F-37
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the effect of expense offset arrangements, from exceeding 0.85% and 1.00% of
average daily net assets for the McKee U.S. Government Portfolio and McKee Do-
mestic Equity Portfolio, respectively.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For Portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.04%, 0.04% and 0.06% of average daily net
assets for the McKee U.S. Government Portfolio, McKee Domestic Equity Portfo-
lio, and McKee International Equity Portfolio, respectively. Also effective
April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain servic-
es, including but not limited to, administration, fund accounting, dividend
disbursing and transfer agent services. Pursuant to the Mutual Funds Service
Agreement, the Administrator pays CGFSC a monthly fee. For the period April
15, 1996 to October 31, 1996, UAM Fund Services, Inc. earned the following
amounts from the Portfolios as Administrator and paid the following portion to
CGFSC:
<TABLE>
<CAPTION>
ADMINISTRATION PORTION PAID
MCKEE PORTFOLIOS FEES TO CGFSC
- ---------------- -------------- ------------
<S> <C> <C>
U.S. Government..................................... $44,650 $40,022
Domestic Equity..................................... 50,173 38,491
International Equity................................ 86,466 56,555
</TABLE>
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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
F-38
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
million of the combined aggregate net assets; plus 0.12% of the next $800 mil-
lion of the combined aggregate net assets; plus 0.08% of the combined aggre-
gate net assets in excess of $1 billion but less than $3 billion; plus 0.06%
of the combined aggregate net assets in excess of $3 billion. The fees were
allocated among the portfolios of the UAM Funds and AEW on the basis of their
relative net assets and were subject to a graduated minimum fee schedule per
portfolio which rose from $2,000 per month, upon inception of a portfolio, to
$70,000 annually after two years. For the period November 1, 1995 to April 15,
1996, CGFSC earned the following amounts from the Portfolios as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
MCKEE PORTFOLIOS FEES
- ---------------- --------------
<S> <C>
U.S. Government.................................................. $22,991
Domestic Equity.................................................. 24,521
International Equity............................................. 51,278
</TABLE>
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolios' assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolios by the Bank aggregated
the following:
<TABLE>
<CAPTION>
CUSTODIAN
MCKEE PORTFOLIOS FEES
- ---------------- ---------
<S> <C>
U.S. Government....................................................... $ 1,977
Domestic Equity....................................................... 4,037
International Equity.................................................. 18,333
</TABLE>
As of October 31, 1996, all of these amounts are unpaid.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
F. PURCHASES AND SALES: For the year ended October 31, 1996, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:
<TABLE>
<CAPTION>
MCKEE PORTFOLIOS PURCHASES SALES
- ---------------- ----------- -----------
<S> <C> <C>
U.S. Government......................................... $ 4,781,420 $ 799,194
Domestic Equity......................................... $64,876,783 $15,268,198
International Equity.................................... $17,794,935 $ 7,495,055
</TABLE>
F-39
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases and sales of long-term U.S. Government securities were $23,907,124
and $10,646,817, respectively, for the McKee U.S. Government Portfolio. There
were no long-term purchases and sales of U.S. Government securities for the Mc-
Kee Domestic Equity and the McKee International Equity Portfolios.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating Portfolio based on its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolios had no borrowings under the agreement.
I. OTHER: At October 31, 1996, the percentage of total shares outstanding
held by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF %
MCKEE PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ---------------- ------------ ---------
<S> <C> <C>
U.S. Government.......................................... 1 75.6%
Domestic Equity.......................................... 2 75.7%
International Equity..................................... 4 51.2%
</TABLE>
At October 31, 1996, the net assets of the McKee International Equity Portfo-
lio was substantially composed of foreign denominated securities and/or curren-
cy. 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 trans-
actions as a result of, among other factors, the possibly lower level of gov-
ernmental supervision and regulation of foreign securities markets and the pos-
sibility of political or economic instability.
F-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors ofUAM 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 assets and liabilities, in-
cluding the portfolios of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of McKee U.S. Government Portfo-
lio, McKee Domestic Equity Portfolio, and McKee International Equity Portfolio
(the "Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 1996, and
the results of each of their operations, the changes in each of their net as-
sets and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and finan-
cial highlights (hereafter referred to as "financial statements") are the re-
sponsibility of the Portfolios' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our au-
dits of these financial statements in accordance with generally accepted audit-
ing standards which require that we plan and perform the audits to obtain rea-
sonable 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 account-
ing principles used and significant estimates made by management, and evaluat-
ing the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at October 31, 1996 by correspondence
with the custodians and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a rea-
sonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
Foreign taxes accrued during the fiscal year ended October 31, 1996 the McKee
International Equity Portfolio amounting to $133,611 are expected to be passed
through to the shareholders as foreign tax credits on Form 1099 Dividend for
the year ending December 31, 1996, which shareholders of the McKee Interna-
tional Equity Portfolio will receive in late January 1997. In addition, for the
year ended October 31, 1996, gross income derived from sources within foreign
countries amounted to $1,746,748 for the McKee International Equity Portfolio.
For the year ended October 31, 1996, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
21.2% and 0.9% for the McKee Domestic Equity Portfolio and McKee International
Equity Portfolio, respectively.
F-41
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating cate-
gories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier
3 indicates that the issue ranks at the lower end of the rating category.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
A-2
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
NWQ BALANCED PORTFOLIO
NWQ VALUE EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
INSTITUTIONAL SERVICE CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
NWQ Balanced and NWQ Value Equity Portfolios' Institutional Class Shares (the
"NWQ Portfolios" or singularly a "Portfolio") dated January 3, 1997 and the
Prospectus relating to the Institutional Service Class Shares (the "Service
Class Shares") dated January 2, 1997. To obtain a Prospectus, please call the
UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 4
Redemption of Shares....................................................... 4
Shareholder Services....................................................... 6
Investment Limitations..................................................... 7
Management of the Fund..................................................... 8
Investment Adviser......................................................... 11
Service and Distribution Plans............................................. 12
Portfolio Transactions..................................................... 15
Administrative Services.................................................... 16
Performance Calculations................................................... 16
General Information........................................................ 21
Appendix -- Description of Securities and Ratings.......................... A-1
Financial Statements.......................................................
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the NWQ Balanced and Value Equity Portfolios (the "Portfolios") as set forth
in the NWQ Prospectuses:
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long
as the terms, the structure and the aggregate amount of such loans are not in-
consistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a)
the borrower pledge and maintain with the Portfolio collateral consisting of
cash, an irrevocable letter of credit issued by a domestic U.S. bank or secu-
rities issued or guaranteed by the United States Government having a value at
all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the
loan be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term invest-
ments). As with other extensions of credit, there are risks of delay in recov-
ery or even loss of rights in the securities loaned if the borrower of the se-
curities fails financially. These risks are similar to the ones involved with
repurchase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
2
<PAGE>
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FOREIGN SECURITIES
Investors in the Portfolios should recognize that investing in foreign com-
panies through the purchase of American Depositary Receipts ("ADRs") involves
certain special considerations which are not typically associated with invest-
ing in U.S. companies. Since the securities of foreign companies are fre-
quently denominated in foreign currencies, investments may be affected favor-
ably or unfavorably by changes in currency rates and in exchange control regu-
lations, and may incur costs in connection with conversions between various
currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of
3
<PAGE>
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those coun-
tries.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Portfolios' investments. How-
ever, these foreign withholding taxes are not expected to have a significant
impact.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's Cus-
todian. The minimum initial investment required for each Portfolio is $2,500
with certain exceptions as may be determined from time to time by the officers
of the Fund. Other investment minimums are: initial IRA investment, $500; ini-
tial spousal IRA investment, $250; minimum additional investment for all ac-
counts, $100. An order received in proper form prior to the 4:00 p.m. close of
the New York Stock Exchange ("Exchange") will be executed at the price com-
puted on the date of receipt; and an order received not in proper form or af-
ter the 4:00 p.m. close of the Exchange will be executed at the price computed
on the next day the Exchange is open after proper receipt. The Exchange will
be closed on the following days: Presidents' Day, February 17, 1997; Good Fri-
day, March 28, 1997; Memorial Day, May 26, 1997; Independence Day, July 4,
1997; Labor Day, September 1, 1997; Thanksgiving Day, November 27, 1997;
Christmas Day, December 25, 1997; New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it or to fairly determine the
value of its assets, and
4
<PAGE>
(3) for such other periods as the Commission may permit. The Fund has made an
election with the Commission to pay in cash all redemptions requested by any
shareholder of record limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the net assets of the Fund at the beginning of such peri-
od. Such commitment is irrevocable without the prior approval of the Commis-
sion. Redemptions in excess of the above limits may be paid, in whole or in
part, in investment securities or in cash as the Directors may deem advisable;
however, payment will be made wholly in cash unless the Directors believe that
economic or market conditions exist which would make such a practice detrimen-
tal to the best interests of the Fund. If redemptions are paid in investment
securities, such securities will be valued as set forth in the Prospectus un-
der "Valuation of Shares" and a redeeming shareholder would normally incur
brokerage expenses if these securities were converted to cash.
No charge is made by a Portfolio for redemptions. Any redemption may be more
or less than the shareholder's initial cost depending on the market value of
the securities held by the Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
"CGFSC" from fraud, signature guarantees are required for certain redemptions.
Signature guarantees are required for (1) redemptions where the proceeds are
to be sent to someone other than the registered shareowner(s) or the regis-
tered address or (2) share transfer requests. The purpose of signature guaran-
tees is to verify the identity of the party who has authorized a redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institution is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
natures guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
5
<PAGE>
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Serv-
ices" in the NWQ Prospectuses:
EXCHANGE PRIVILEGE
Institutional Class Shares of each NWQ Portfolio may be exchanged for Insti-
tutional Class Shares of the other NWQ Portfolio and Service Class Shares of
each NWQ Portfolio may be exchanged for Service Class Shares of the other NWQ
Portfolio. In addition, Institutional Class Shares of each NWQ Portfolio may
be exchanged for any other Institutional Class Shares of a Portfolio included
in the UAM Funds which is comprised of the Fund and UAM Funds Trust. (See the
list of Portfolios of the UAM Funds -- Institutional Class Shares at the end
of the NWQ Portfolios -- Institutional Class Shares Prospectus.) Service Class
Shares of each NWQ Portfolio may be exchanged for any other Service Class
Shares of a Portfolio included in the UAM Funds which is comprised of the Fund
and UAM Funds Trust. (For those Portfolios currently offering Service Class
Shares, please call the UAM Funds Service Center.) Exchange requests should be
made by calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM
Funds Service Center, c/o Chase Global Funds Services Company, P.O. Box 2798,
Boston, MA 02208-2798. The exchange privilege is only available with respect
to Portfolios that are qualified for sale in the shareholder's state of resi-
dence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. (Eastern Time) will be processed as of the close of busi-
ness on the same day. Requests received after these times will be processed on
the next business day. Neither the Fund nor the CGFSC will be responsible for
the authenticity of the exchange instructions received by telephone. Exchanges
may also be subject to limitations as to amounts or frequency and to other re-
strictions established by the Board of Directors to assure that such exchanges
do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a
6
<PAGE>
Fund was also deemed to be a taxable event. It is likely, therefore, that a
capital gain or loss would be realized on an exchange between Portfolios; you
may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a written re-
quest to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered own-
ers and all stock certificates, if any, which are subject to the transfer. The
signature on the letter of request, the stock certificate or any stock power
must be guaranteed in the same manner as described under "Redemption of
Shares." As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectuses.
Whenever an investment limitation sets forth a percentage limitation on in-
vestment or utilization of assets, such limitation shall be determined immedi-
ately after and as a result of a Portfolio's acquisition of such security or
other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered
when determining whether the investment complies with a Portfolio's investment
limitations. A Portfolio's fundamental investment limitations cannot be
changed without approval by a "majority of the outstanding shares" (as defined
in the 1940 Act) of the Portfolio. Each Portfolio will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal
in real estate and may purchase and sell securities which are se-
cured by interests in real estate;
(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and (ii) by lending its portfolio se-
curities to banks, brokers, dealers and other financial institutions
so long as such loans are not inconsistent with the 1940 Act or the
rules and regulations or interpretations of the Commission thereun-
der;
(4) underwrite the securities of other issuers;
(5) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit a Portfolio from
(i) making any permitted borrowings, mortgages or pledges, or (ii)
entering into repurchase transactions;
7
<PAGE>
(6)purchase on margin or sell short;
(7) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(8) invest more than an aggregate of 15% of the net assets of the Portfo-
lio, determined at the time of investment, in securities subject to
legal or contractual restrictions on resale or securities for which
there are no readily available markets;
(9) invest for the purpose of exercising control over management of any
company; and
(10) write or acquire options or interests in oil, gas, mineral leases or
other mineral exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
<TABLE>
<C> <S>
JOHN T. BENNETT, JR. Director of the Fund, President of Squam Investment
College Road-RFD 3 Management Company, Inc. and Great Island Investment
Meredith, NH 03253 Company, Inc.; President of Bennett Management
Age: 67 Company from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief Executive
16 West Madison Street Officer of Broventure Company, Inc.; Chairman of the
Baltimore, MD 21201 Board of Chektec Corporation and Cyber Scientific,
Age: 47 Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Philadelphia
4000 Bell Atlantic Tower office of the law firm Dechert Price & Rhoads;
1717 Arch Street Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the Fund;
One International Place President, Chief Executive Officer and a Director of
Boston, MA 02110 United Asset Management Corporation; Director,
Age: 60 Partner or Trustee of each of the Investment
Companies of the Eaton Vance Group of Mutual Funds.
</TABLE>
8
<PAGE>
<TABLE>
<C> <S>
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief Investment
One Financial Center Officer of Dewey Square Investors Corporation since
Boston, MA 02111 1988; Director and Chief Executive Officer of H.T.
Age: 52 Investors, Inc., formerly a subsidiary of Dewey
Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice President
One International Place and Chief Financial Officer of United Asset Management
Boston, MA 02110 Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM Fund Services,
211 Congress Street Inc. and UAM Fund Distributors, Inc.; Vice President
Boston, MA 02110 of Operations, Development and Control of Fidelity
Age: 45 Investments in 1995; Treasurer of the Fidelity Group
of Mutual Funds from 1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice President of UAM
211 Congress Street Fund Services, Inc.; former Manager of Fund
Boston, MA 02110 Administration and Compliance of Chase Global Fund
Age: 32 Services Company from 1995 to 1996; formerly Senior
Manager of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and General
211 Congress Street Counsel of UAM Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Associate Attorney of Ropes & Gray
Age: 28 (a law firm) from 1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Chase Global Funds Services
Boston, MA 02108 Company; Senior Vice President, Secretary and General
Age: 41 Counsel of Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
As of December 31, 1996, the Directors and officers of the Fund owned less
than 1% of the Fund's outstanding shares.
9
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator, or CGFSC and receive no compensation from the Fund. The
following table shows aggregate compensation paid to each of the Fund's unaf-
filiated Directors by the Fund and total compensation paid by the Fund, UAM
Funds Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively
the "Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of a Portfolio, as noted.
NWQ Balanced Portfolio Institutional Class Shares: Nabank & Co., P.O. Box
2180, Tulsa, OK, 56%*; Campbell Company, Inc., Employees Retirement Trust,
Attn: Ana Gould, 1515 4th Avenue South, Suite A, Seattle, WA, 8.4%; Hartnat &
Co., Scottsdale Princess, P.O. Box 92800, Rochester, NY, 10.7%; Hartnat & Co.,
Princess Hotels/John F. Price, P.O. Box 92800, Rochester, NY, 9.4%; William
Park Joseph R. Ramrath, Trustee, FBO California Central Trust Bank Corp., Box
5024, Costa Mesa, CA, 5.5%*.
NWQ Balanced Portfolio Service Class Shares: Hartnat & Co., P.O. Box 4044,
Boston, MA, 27.7%*; Hartnat & Co., P.O. Box 4044, Boston, MA, 20%* and Hartnat
& Co., P.O. Box 4044, Boston, MA, 19.5%*; Hartnat & Co.,
10
<PAGE>
P.O. Box 92800, Rochester, NY, 15.1%*; Hartnat & Co., P.O. Box 92800, Roches-
ter, NY, 7.9%*; Hartnat & Co., P.O. Box 92800, Rochester, NY, 5.3%*.
NWQ Value Equity Portfolio Institutional Class Shares: Charles Schwab & Co.,
Inc., Special Custody Account for the Exclusive Benefit of Customers Reinvest
Account, 101 Montgomery Street, San Francisco, CA, 51.6%*; Nix, Mann and Asso-
ciates, Inc., Profit Sharing Plan and Trust, 1382 Peachtree Street, NE, Atlan-
ta, GA, 19.0%; William Park Joseph R. Ramrath, Trustee, FBO California Central
Bank Corp., FBO NWQ Value Equity, Box 5024, Costa Mesa, CA, 10.0%*; Brendan
Kennedy, c/o Tricoastal, 1212 Avenue of the Americas, New York, NY, 6.5%.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
NWQ Investment Management Company (the "Adviser") is a wholly-owned subsidi-
ary of UAM, a holding company incorporated in Delaware in December 1980 for
the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has ac-
quired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
11
<PAGE>
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, each Portfolio pays the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rates to
each Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
NWQ Balanced Portfolio................................................. 0.70%
NWQ Value Equity Portfolio............................................. 0.70%
</TABLE>
For the period from August 2, 1994 (date of commencement) to October 31,
1994, the NWQ Balanced Portfolio paid no advisory fees. During this period,
the Adviser voluntarily waived advisory fees of approximately $1,805. For the
fiscal years ended October 31, 1995 and 1996, the NWQ Balanced Portfolio paid
no advisory fees. During these years the Adviser voluntarily waived advisory
fees of approximately $20,000 and $80,598, respectively.
For the period from September 21, 1994 (date of commencement) to October 31,
1994, the NWQ Value Equity Portfolio paid no advisory fees. During this period
the Adviser voluntarily waived advisory fees of approximately $190. For the
fiscal years ended October 31, 1995 and 1996, the NWQ Value Equity Portfolio
paid no advisory fees. During this period the Adviser voluntarily waived advi-
sory fees of approximately $5,000 and $20,776, respectively.
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolios' Service Class Shares Prospectus, UAM Fund Dis-
tributors, Inc. (the "Distributor") may enter into agreements with broker-
dealers and other financial institutions ("Service Agents"), pursuant to which
they will provide administrative support services to Service Class sharehold-
ers who are their customers ("Customers") in consideration of the Fund's pay-
ment of 0.25% (on an annualized basis) of the average daily net asset value of
the Service Class Shares held by the Service Agent for the benefit of its Cus-
tomers. Such services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account record for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange
shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
12
<PAGE>
(g) issuing confirmations for transactions in the Fund's shares by share-
holders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting divi-
dend and other account options and opening any necessary custody ac-
counts;
(j) providing account maintenance and accounting support for all transac-
tions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder service must constitute a permissible non-banking activ-
ity in accordance with the then current regulations of, and interpre-
tations thereof by, the Board of Governors of the Federal Reserve
System, if applicable.
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Direc-
tors. Pursuant to the Service Plan, the Board of Directors reviews, at least
quarterly, a written report of the amounts expended under each agreement with
Service Agents and the purposes for which the expenditures were made. In addi-
tion, arrangements with Service Agents must be approved annually by a majority
of the Fund's Directors, including a majority of the Directors who are not
"interested persons" of the company as defined in the 1940 Act and have no di-
rect or indirect financial interest in such arrangements.
The Board of Directors has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is
a reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an effi-
cient manner. Any material amendment to the Fund's arrangements with Service
Agents must be approved by a majority of the Fund's Board of Directors (in-
cluding a majority of the disinterested Directors). So long as the arrange-
ments with Service Agents are in effect, the selection and nomination of the
members of the Fund's Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company will be committed to the discretion of
such non-interested Directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Distribu-
tion Plan for the Service Class Shares of the Fund (the "Distribution Plan").
The Distribution Plan permits the Fund to pay for certain distribution, promo-
tional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the Dis-
tribution Agreement, to pay a monthly fee to the Distributor for its services
and
13
<PAGE>
expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing adver-
tisements, sales literature and prospectuses and reports used for sales pur-
poses, compensating sales and marketing personnel, and paying distribution and
maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' aver-
age daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares, cur-
rently cannot exceed 0.50% of the average daily net assets represented by the
Service Class. While the current fee which will be payable under the Service
Plan and Distribution Plan has been set at 0.25% and 0.15%, respectively, the
Plans permit a full 0.75% on all assets to be paid at any time following ap-
propriate Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class
Shares will be borne by such persons without any reimbursement from such Clas-
ses. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for aid in pro-
viding administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Directors of the Fund, in-
cluding a majority of the Directors who are not "interested persons" (as de-
fined in the 1940 Act) of the Fund and who have no direct or indirect finan-
cial interest in the Plans or any related agreements, by vote cast in person
at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the re-
lated agreements must be approved annually by the Board of Directors in the
same manner, as specified above. The NWQ Portfolios Service Class Shares have
not been offered prior to the date of this Statement.
Each year the Directors must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or oth-
14
<PAGE>
ers relating to the Class may be terminated at any time without penalty by a
majority of those Directors who are not "interested persons" or by a majority
vote of the outstanding voting securities of the Class. Any amendment materi-
ally increasing the maximum percentage payable under the Plans must likewise
be approved by a majority vote of the relevant Class' outstanding voting secu-
rities, as well as by a majority vote of those Directors who are not "inter-
ested persons." Also, any other material amendment to the Plans must be ap-
proved by a majority vote of the Directors including a majority of the Direc-
tors of the Fund having no interest in the Plans. In addition, in order for
the Plans to remain effective, the selection and nomination of Directors who
are not "interested persons" of the Fund must be effected by the Directors who
themselves are not "interested persons" and who have no direct or indirect fi-
nancial interest in the Plans. Persons authorized to make payments under the
Plans must provide written reports at least quarterly to the Board of Direc-
tors for their review. The NASD has adopted amendments to its Rules of Fair
Practice relating to investment company sales charges. The Fund and the Dis-
tributor intend to operate in compliance with these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the bro-
ker effecting the transaction. It is not the Fund's practice to allocate bro-
kerage or effect principal transactions with dealers on the basis of sales of
shares which may be made through broker-dealer firms. However, the Adviser may
place portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios
for their clients. During the fiscal years ended, October 31, 1994, 1995 and
1996, the entire Fund paid brokerage commissions of approximately $2,402,000,
$2,983,000, and $2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
15
<PAGE>
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, CGFSC or its predecessor, Mutual Funds Service Company, pro-
vided certain administrative services to the Fund under an Administration
Agreement between the Fund and U.S. Trust Company of New York. During the fis-
cal years ended October 31, 1994, 1995 and 1996, administrative services fees
paid to the Administrator by the NWQ Balanced and NWQ Value Equity Portfolios
approximately totaled $6,339, $48,000 and $95,007 and $4,138, $44,000, and
$72,798, respectively. Of the fees paid during the year ended October 31,
1996, NWQ Balanced Portfolio paid $89,165 to CGFSC and $4,842 to UAMFSI, and
NWQ Value Equity Portfolio paid $72,122 to CGFSC and $678 to UAMFSI. The serv-
ices provided by the Administrator and the basis of the fees payable to the
Administrator are described in the Portfolios' Prospectuses.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolios may from time to time quote various performance figures to
illustrate the past performance of each class of the Portfolios. Performance
quotations by investment companies are subject to rules adopted by the Commis-
sion, which require the use of standardized performance quotations or, alter-
natively, that every non-standardized performance quotation furnished by each
class of the Portfolios be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by each class of the Portfolios to
compute or express performance follows.
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ment. The current yield of a Portfolio is determined by dividing the net in-
vestment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the re-
sult. Expenses accrued for the period include any fees charged to all share-
holders during the base period. Since Service Class Shares of the NWQ Portfo-
lios bear additional service and
16
<PAGE>
distribution expenses, the yield of the Service Class Shares of a Portfolio
will generally be lower than that of the Institutional Class Shares of the
same Portfolio.
A yield figure is obtained using the following formula:
Yield = 2[(a - b + 1)/6/ - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the peri-
od.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeem-
able value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis. Since Service Class Shares of the NWQ Port-
folios bear additional service and distribution expenses, the average annual
total return of the Service Class Shares of a Portfolio will generally be
lower than that of the Institutional Class Shares of the same Portfolio.
The average annual total return of the NWQ Balanced Portfolio Institutional
Class Shares and the NWQ Value Equity Portfolio Institutional Class Shares
from inception and for the one year period ended on the date of the Financial
Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR THROUGH YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 DATE
----------- --------------- ---------
<S> <C> <C> <C>
NWQ Balanced Portfolio Institutional
Class Shares....................... 13.68% 13.21% 8/2/94
NWQ Value Equity Portfolio
Institutional Class Shares......... 22.69% 19.06% 9/21/94
NWQ Balanced Portfolio Service Class
Shares............................. -- 8.89% 1/22/96
</TABLE>
These figures are calculated according to the following formula:
P(1 + T)n = ERV
17
<PAGE>
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the
1, 5 or 10 year periods (or fractional portion thereof).
Service Class Shares of the NWQ Value Equity Portfolio were not offered as
of October 31, 1996. Accordingly, no total return figures are available.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
18
<PAGE>
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) Lehman Brothers Government/Corporate Index -- is a combination of the
Government and Corporate Bond Indices. The Government Index includes
public obligations of the U.S. Treasury, issues of Government agen-
cies, 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 guar-
anteed by foreign or international governments and agencies. All is-
sues are investment grade (BBB) or higher, with maturities of at
least one year and an 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 ac-
crued income.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(o) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
19
<PAGE>
(p) Salomon Brothers 3 Month T-Bill Average -- the average return for all
Treasury bills for the previous three month period.
(q) Composite indices -- 60% Standard & Poor's 500 Stock Index, 30% Leh-
man LONG-TERM Treasury Bond and 10% U.S. Treasury Bills; 70% Standard
& Poor's 500 Stock Index and 30% NASDAQ Industrial Index; 35% Stan-
dard & Poor's 500 Stock Index and 65% Salomon Brothers High Grade
Bond Index; all stocks on the NASDAQ system exclusive of those traded
on an exchange, 65% Standard & Poor's 500 Stock Index and 35% Salomon
Brothers High Grade Bond Index, and 60% Standard & Poor's 500 Stock
Index, 30% Lehman Brothers Government/Corporate Index and 10% Salomon
Brothers 3 Month T-Bill Average.
(r) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(s) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(t) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger Invest-
ment Companies Service -- publications that rate fund performance over
specified time periods.
(u) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(w) Savings and Loan Historical Interest Rates -- as published by the
U.S. Savings & Loan League Fact Book.
(x) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in a Portfolio, that
the averages are generally unmanaged, and that the items included in the cal-
culations of such averages may not be identical to the formula used by a Port-
folio to calculate its performance. In addition, there can be no assurance
that a Portfolio will continue this performance as compared to such other av-
erages.
20
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of com-
mon stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders. The Directors of the
Fund may create additional Portfolios and classes of shares at a future date.
Both classes of shares of each Portfolio of the Fund, when issued and paid
for as provided for in the Prospectuses, will be fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Direc-
tors if they choose to do so. A shareholder is entitled to one vote for each
full share held (and a fractional vote for each fractional share held), then
standing in his name on the books of the Fund. Both Institutional Class and
Service Class Shares represent an interest in the same assets of a Portfolio
and are identical in all respects except that the Service Class Shares bear
certain expenses related to shareholder servicing and the distribution of such
shares, and have exclusive voting rights with respect to matters relating to
such distribution expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains. (See discussion under "Dividends, Capital Gains Dis-
tributions and Taxes" in the Prospectuses.) The amounts of any income divi-
dends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of the Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectuses.
21
<PAGE>
As set forth in the Prospectuses, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the respective Portfolio of the Fund at net as-
set value (as of the business day following the record date). This will remain
in effect until the Fund is notified by the shareholder in writing at least
three days prior to the record date that either the Income Option (income div-
idends in cash and capital gains distributions in additional shares at net as-
set value) or the Cash Option (both income dividends and capital gains distri-
butions in cash) has been elected. An account statement is sent to sharehold-
ers whenever an income dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived with
respect to its business of investing in such securities or currencies. In ad-
dition, gains realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of the Portfolio's an-
nual gross income.
The Portfolios will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Institutional Class Shares of the NWQ Port-
folios and the Financial Highlights for the respective periods presented which
appear in the Portfolios' 1996 Annual Report to Shareholders, and the report
thereon of Price Waterhouse LLP, independent accountants, also appearing
therein, are attached to this SAI.
22
<PAGE>
NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (53.9%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.4%)
Boeing Co. ................................................. 4,300 $ 410,113
Sundstrand Corp. ........................................... 5,800 233,450
United Technologies Corp.................................... 2,600 334,750
-----------
978,313
- --------------------------------------------------------------------------------
BASIC RESOURCES (3.1%)
Champion International Corp................................. 4,600 200,100
Cyprus Amax Minerals Co. ................................... 3,850 87,107
IMC Global, Inc. ........................................... 13,500 506,250
Weyerhaeuser Co. ........................................... 2,150 98,632
-----------
892,089
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (0.4%)
Dun & Bradstreet Corp....................................... 2,100 121,538
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (10.5%)
BW/IP, Inc.................................................. 925 12,488
Case Corp................................................... 6,600 306,900
Caterpillar, Inc............................................ 10,450 717,132
Cooper Industries, Inc...................................... 3,400 136,850
Deere & Co.................................................. 13,500 563,625
Foster Wheeler Corp......................................... 6,200 254,200
Ingersoll-Rand Co........................................... 10,700 445,388
Kennametal, Inc............................................. 3,000 102,000
Trinity Industries, Inc..................................... 5,000 173,125
York International Corp..................................... 5,950 287,832
-----------
2,999,540
- --------------------------------------------------------------------------------
CHEMICALS (3.9%)
Air Products & Chemical, Inc................................ 2,650 159,000
Dow Chemical Co............................................. 4,100 318,775
Du Pont (E.I.) de Nemours & Co.............................. 3,100 287,525
Grace (W.R.) & Co........................................... 6,300 333,900
-----------
1,099,200
- --------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE>
NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES (4.8%)
Black & Decker Corp........................................ 6,500 $ 242,938
Echlin, Inc................................................ 7,600 247,950
Exide Corp................................................. 9,550 248,300
General Motors Corp. ...................................... 7,550 406,756
Maytag Corp. .............................................. 12,000 238,500
----------
1,384,444
- -------------------------------------------------------------------------------
ELECTRONICS (2.7%)
Emerson Electric Co........................................ 4,500 400,500
General Electric Co........................................ 600 58,050
General Signal Corp........................................ 1,700 69,275
Grainger (W.W.), Inc....................................... 3,300 244,613
----------
772,438
- -------------------------------------------------------------------------------
ENERGY (5.5%)
Coastal Corp. ............................................. 1,050 45,150
Dresser Industries, Inc. .................................. 6,100 200,538
*Ensco International, Inc. ................................. 4,600 198,950
Halliburton Co............................................. 6,850 387,882
*McDermott (J.Ray) S.A...................................... 7,900 214,288
*Noble Drilling Corp. ...................................... 6,200 115,475
*Reading & Bates Corp....................................... 5,000 143,750
Tidewater, Inc............................................. 6,200 271,250
----------
1,577,283
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (9.1%)
Allstate Corp.............................................. 5,500 308,687
American International Group, Inc.......................... 2,050 222,681
Bank of New York Co., Inc.................................. 10,000 331,250
Bear Stearns Cos., Inc. ................................... 8,400 198,450
Chase Manhattan Corp....................................... 3,000 257,250
Comerica, Inc. ............................................ 2,800 148,750
General RE Corp............................................ 2,550 375,488
Highlands Insurance Group.................................. 145 2,864
National City Corp......................................... 9,925 430,497
Norwest Corp............................................... 7,500 329,062
----------
2,604,979
- -------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
HEALTH CARE (1.2%)
Columbia/HCA Healthcare Corp............................... 9,300 $ 332,475
- -------------------------------------------------------------------------------
METALS (2.0%)
*Alumax, Inc................................................ 4,900 157,412
*Bethlehem Steel Corp....................................... 3,200 26,000
Reynolds Metals Co......................................... 3,600 202,500
USX-US Steel Group, Inc. .................................. 6,750 183,938
----------
569,850
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (2.0%)
Loews Corp................................................. 4,600 380,075
Minnesota Mining & Manufacturing Co........................ 2,550 195,394
----------
575,469
- -------------------------------------------------------------------------------
TECHNOLOGY (2.9%)
AMP, Inc................................................... 2,850 96,544
Honeywell, Inc. ........................................... 1,400 86,975
Texas Instruments, Inc..................................... 7,450 358,531
Thomas & Betts Corp........................................ 6,700 283,913
----------
825,963
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.0%)
AT&T Corp.................................................. 2,900 101,138
GTE Corp................................................... 4,250 179,031
----------
280,169
- -------------------------------------------------------------------------------
TRANSPORTATION (1.4%)
Burlington Northern, Inc. ................................. 3,400 280,075
CSX Corp. ................................................. 3,000 129,375
----------
409,450
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $14,361,262)...................... 15,423,200
- -------------------------------------------------------------------------------
PREFERRED STOCKS (0.0%)
- -------------------------------------------------------------------------------
HEALTH CARE (0.0%)
Fresenius Medical Care AG (COST $79)........................ 800 104
- -------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE>
NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (10.9%)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES
6.125%, 5/31/97....................................... $ 600,000 $ 602,132
5.625%, 1/31/98....................................... 1,000,000 999,804
8.00%, 8/15/99........................................ 25,000 26,320
6.375%, 8/15/02....................................... 200,000 202,164
5.875%, 2/15/04....................................... 500,000 488,281
7.25%, 5/15/04........................................ 750,000 792,188
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $3,081,458)..... 3,110,889
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (36.6%)
- -------------------------------------------------------------------------------
U.S. TREASURY BILLS (18.8%)
**5.08%, 12/19/96...................................... 1,000,000 993,270
**5.21%, 4/10/97....................................... 2,000,000 1,954,934
**5.25%, 4/24/97....................................... 2,500,000 2,438,012
-----------
5,386,216
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (17.8%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $5,113,792
collateralized by $4,942,279 of various U.S. Treasury
Notes, 5.875%-7.75%, due 3/31/99-11/30/99, valued at
$5,113,012........................................... 5,113,000 5,113,000
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $10,499,219)........ 10,499,216
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.4%) (COST $27,942,018)(A)....... 29,033,409
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.4%)................... (410,418)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $28,622,991
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security.
** Interest rates disclosed for U.S. Treasury Bills represent effective yield
at October 31, 1996.
(a) The cost for federal income tax purposes was $27,942,018. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$1,091,391. This consisted of aggregate gross unrealized appreciation for
all securities of $1,320,182 and aggregate gross unrealized depreciation
for all securities of $228,791.
F-9
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.9%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (7.0%)
Boeing Co. .................................................. 800 $ 76,300
Sundstrand Corp. ............................................ 1,700 68,425
United Technologies Corp..................................... 650 83,688
----------
228,413
- --------------------------------------------------------------------------------
BASIC RESOURCES (4.1%)
Champion International Corp.................................. 1,200 52,200
IMC Global, Inc. ............................................ 1,050 39,375
Weyerhaeuser Co.............................................. 950 43,581
----------
135,156
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (16.3%)
BW/IP, Inc................................................... 225 3,038
Case Corp.................................................... 300 13,950
Caterpillar, Inc............................................. 2,025 138,966
Cooper Industries, Inc....................................... 1,450 58,362
Deere & Co................................................... 3,300 137,775
Foster Wheeler Corp.......................................... 300 12,300
Ingersoll-Rand Co............................................ 1,750 72,844
Kennametal, Inc.............................................. 1,100 37,400
Trinity Industries, Inc...................................... 625 21,641
York International Corp...................................... 800 38,700
----------
534,976
- --------------------------------------------------------------------------------
CHEMICALS (7.5%)
Air Products & Chemical, Inc................................. 1,650 99,000
Dow Chemical Co.............................................. 600 46,650
Du Pont (E.I.) de Nemours & Co............................... 500 46,375
Grace (W.R.) & Co............................................ 1,025 54,325
----------
246,350
- --------------------------------------------------------------------------------
CONSUMER DURABLES (7.8%)
Black & Decker Corp.......................................... 1,000 37,375
Echlin, Inc.................................................. 1,600 52,200
Exide Corp................................................... 1,450 37,700
</TABLE>
F-10
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER DURABLES--(CONTINUED)
General Motors Corp. ....................................... 1,675 $ 90,241
Maytag Corp. ............................................... 2,000 39,750
----------
257,266
- --------------------------------------------------------------------------------
ELECTRONICS (3.5%)
Emerson Electric Co......................................... 550 48,950
General Electric Co......................................... 175 16,931
General Signal Corp......................................... 800 32,600
Grainger (W.W.), Inc. ...................................... 200 14,825
----------
113,306
- --------------------------------------------------------------------------------
ENERGY (10.1%)
Coastal Corp. .............................................. 875 37,625
Dresser Industries, Inc. ................................... 2,025 66,572
*Ensco International, Inc. .................................. 1,400 60,550
Halliburton Co.............................................. 575 32,559
*McDermott (J.Ray) S.A....................................... 1,600 43,400
*Noble Drilling Corp. ....................................... 2,800 52,150
Tidewater, Inc.............................................. 900 39,375
----------
332,231
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (17.2%)
Allstate Corp............................................... 1,300 72,962
American International Group, Inc........................... 600 65,175
Bank of New York Co., Inc................................... 2,400 79,500
Bear Stearns Cos., Inc...................................... 1,400 33,075
Chase Manhattan Corp........................................ 700 60,025
General RE Corp............................................. 375 55,219
Highlands Insurance Group................................... 57 1,126
National City Corp. ........................................ 1,775 76,991
Norwest Corp................................................ 2,750 120,656
----------
564,729
- --------------------------------------------------------------------------------
HEALTH CARE (2.0%)
Columbia/HCA Healthcare Corp................................ 1,800 64,350
- --------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
METALS (5.7%)
*Alumax, Inc. .............................................. 1,775 $ 57,022
*Bethlehem Steel Corp. ..................................... 3,100 25,187
Reynolds Metals Co. ....................................... 900 50,625
USX-US Steel Group, Inc. .................................. 2,000 54,500
-----------
187,334
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (3.7%)
Loews Corp. ............................................... 600 49,575
Minnesota Mining & Manufacturing Co. ...................... 925 70,878
-----------
120,453
- --------------------------------------------------------------------------------
TECHNOLOGY (7.2%)
AMP, Inc. ................................................. 1,100 37,262
Honeywell, Inc. ........................................... 700 43,488
Texas Instruments, Inc. ................................... 2,200 105,875
Thomas & Betts Corp. ...................................... 1,200 50,850
-----------
237,475
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.0%)
AT&T Corp. ................................................ 925 32,260
GTE Corp. ................................................. 50 2,106
-----------
34,366
- --------------------------------------------------------------------------------
TRANSPORTATION (1.8%)
Burlington Northern, Inc. ................................. 525 43,247
CSX Corp. ................................................. 350 15,094
-----------
58,341
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,662,552)....................... 3,114,746
- --------------------------------------------------------------------------------
PREFERRED STOCKS (0.0%)
- --------------------------------------------------------------------------------
HEALTH CARE
Fresenius Medical Care AG (COST $20)....................... 225 29
- --------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.8%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due 11/1/96,
to be repurchased at $160,025, collateralized by $154,658
of various U.S. Treasury Notes, 5.875%-7.75%, due
3/31/99-11/30/99, valued at $160,000 (COST $160,000)..... $160,000 $ 160,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%) (COST $2,822,572)(A)............. 3,274,775
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)........................ 8,636
- -------------------------------------------------------------------------------
NET ASSETS (100%).......................................... $3,283,411
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $2,830,688. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$444,087. This consisted of aggregate gross unrealized appreciation for all
securities of $537,040 and aggregate gross unrealized depreciation for all
securities of $92,953.
F-13
<PAGE>
NWQ PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
NWQ NWQ VALUE
BALANCED EQUITY
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Cost................................... $27,942,018 $2,822,572
=========== ==========
Investments, at Value.................................. $29,033,409 $3,274,775
Cash................................................... 448 629
Interest Receivable.................................... 64,942 25
Receivable for Portfolio Shares Sold................... 43,962 3,155
Receivable for Investments Sold........................ 25,829 8,610
Dividends Receivable................................... 14,979 4,264
Receivable due from Investment Adviser................. 3,518 22,210
Other Assets........................................... 438 101
- -------------------------------------------------------------------------------
Total Assets.......................................... 29,187,525 3,313,769
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased...................... 485,450 --
Distribution and Service Fees Payable ................. 18,147 --
Payable for Portfolio Shares Redeemed.................. 15,209 --
Payable for Administrative Fees........................ 8,504 5,662
Payable for Custodian Fees............................. 2,976 1,585
Payable for Directors' Fees............................ 637 377
Other Liabilities...................................... 33,611 22,734
- -------------------------------------------------------------------------------
Total Liabilities..................................... 564,534 30,358
- -------------------------------------------------------------------------------
NET ASSETS.............................................. $28,622,991 $3,283,411
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital........................................ $27,361,173 $2,716,857
Undistributed Net Investment Income.................... 59,394 5,515
Accumulated Net Realized Gain.......................... 111,033 108,836
Unrealized Appreciation................................ 1,091,391 452,203
- -------------------------------------------------------------------------------
NET ASSETS.............................................. $28,622,991 $3,283,411
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES:
Net Assets............................................. $ 8,624,239 $3,283,411
Shares Issued and Outstanding ($0.001 par value) (Au-
thorized 25,000,000).................................. 696,290 232,434
Net Asset Value, Offering and Redemption Price Per
Share................................................. $ 12.39 $ 14.13
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES:
Net Assets............................................. $19,998,752 --
Shares Issued and Outstanding ($0.001 par value) (Au-
thorized 10,000,000).................................. 1,616,886 --
Net Asset Value, Offering and Redemption Price Per
Share................................................. $ 12.37 --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
NWQ PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
<TABLE>
<CAPTION>
NWQ NWQ
BALANCED VALUE EQUITY
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends......................... $ 119,123 $ 56,122
Interest.......................... 316,540 6,655
- --------------------------------------------------------------------------------
Total Income..................... 435,663 62,777
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees....................... $ 80,598 $ 20,776
Less: Fees Waived................ (80,598) -- (20,776) --
-------- --------
Administrative Fees--Note C....... 95,007 72,798
Audit Fees........................ 14,791 12,032
Registration and Filing Fees...... 28,701 24,957
Printing Fees..................... 17,134 12,019
Custodian Fees--Note D............ 7,185 4,573
Directors' Fees--Note G........... 2,614 2,249
Distribution and Service Plan
Fees--Note E:
Institutional Service Class...... 18,147 --
Other Expenses.................... 1,549 4,168
Fees Assumed by Adviser--Note B... (49,877) (102,159)
- --------------------------------------------------------------------------------
Total Expenses................... 135,251 30,637
Expense Offset--Note A............ (1,189) (953)
- --------------------------------------------------------------------------------
Net Expenses..................... 134,062 29,684
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.............. 301,601 33,093
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS... 111,335 108,836
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON IN-
VESTMENTS......................... 841,697 435,937
- --------------------------------------------------------------------------------
TOTAL NET GAIN ON INVESTMENTS...... 953,032 544,773
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULT-
ING FROM OPERATIONS............... $1,254,633 $577,866
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
NWQ BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................... $ 301,601 $ 91,602
Net Realized Gain....................................... 111,335 30,065
Net Change in Unrealized Appreciation/Depreciation...... 841,697 267,319
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations... 1,254,633 388,986
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class.................................... (178,657) (80,541)
Institutional Service Class............................ (80,539) --
Net Realized Gain--Institutional Class.................. (29,997) --
- ----------------------------------------------------------------------------------
Total Distributions.................................... (289,193) (80,541)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE I:
Institutional Class:
Issued--Regular........................................ 7,412,068 6,274,336
--In Lieu of Cash Distributions...................... 208,650 80,541
Redeemed............................................... (4,990,173) (2,913,538)
- ----------------------------------------------------------------------------------
Net Increase from Institutional Class Shares............ 2,630,545 3,441,339
- ----------------------------------------------------------------------------------
Institutional Service Class*:
Issued--Regular........................................ 21,033,336 --
--In Lieu of Cash Distributions...................... 80,539 --
Redeemed............................................... (1,420,979) --
- ----------------------------------------------------------------------------------
Net Increase from Institutional Service Class Shares.... 19,692,896 --
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........... 22,323,441 3,441,339
- ----------------------------------------------------------------------------------
Total Increase.......................................... 23,288,881 3,749,784
Net Assets:
Beginning of Period..................................... 5,334,110 1,584,326
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $59,394 and $16,225, respectively)........... $28,622,991 $5,334,110
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on January 22,
1996.
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.................................. $ 33,093 $ 10,679
Net Realized Gain...................................... 108,836 2,485
Net Change in Unrealized Appreciation/Depreciation..... 435,937 17,095
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations.. 577,866 30,259
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................................. (31,968) (6,943)
Net Realized Gain...................................... (2,209) --
- ----------------------------------------------------------------------------------
Total Distributions................................... (34,177) (6,943)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE I:
Issued--Regular........................................ 950,630 2,266,718
--In Lieu of Cash Distributions...................... 34,153 6,944
Redeemed............................................... (709,280) (86,058)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions.......... 275,503 2,187,604
- ----------------------------------------------------------------------------------
Total Increase......................................... 819,192 2,210,920
Net Assets:
Beginning of Period.................................... 2,464,219 253,299
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $5,515 and $4,114, respectively)............ $3,283,411 $2,464,219
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
INSTITUTIONAL CLASS SHARES CLASS SHARES
--------------------------------- ---------------------
YEARS ENDED
OCTOBER 31, AUGUST 2, 1994** JANUARY 22, 1996***
--------------- TO TO
1996 1995 OCTOBER 31, 1994 OCTOBER 31, 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.24 $ 9.84 $10.00 $ 11.57
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.31 0.32 0.06 0.21
Net Realized and
Unrealized Gain (Loss)
on Investments........ 1.21 1.40 (0.19) 0.78
- ---------------------------------------------------------------------------------
Total from Investment
Operations........... 1.52 1.72 (0.13) 0.99
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.30) (0.32) (0.03) (0.19)
Net Realized Gain...... (0.07) -- -- --
- ---------------------------------------------------------------------------------
Total Distributions... (0.37) (0.32) (0.03) (0.19)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 12.39 $11.24 $ 9.84 $ 12.37
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN+........... 13.68% 17.80% (1.30)% 8.60%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $ 8,624 $5,334 $1,584 $19,999
Ratio of Expenses to
Average Net Assets..... 1.01% 1.04% 1.00%* 1.41%*
Ratio of Net Investment
Income to Average Net
Assets................. 2.79% 3.30% 3.59%* 2.39%*
Portfolio Turnover
Rate................... 31% 31% 1% 31%
Average Commission Rate
#...................... $0.0717 N/A N/A $0.0717
- ---------------------------------------------------------------------------------
Voluntary Waived Fees
and Expenses Assumed by
the Advisor Per Share.. $ 0.14 $ 0.26 $ 0.21 $ 0.09
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ 1.00% 1.00% N/A 1.40%*
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
*** Initial offering of Institutional Service Class shares.
+ Total return would have been lower had the Adviser not waived and assumed
certain expenses during the periods.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose their average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 31, SEPTEMBER 21, 1994**
--------------- TO
1996 1995 OCTOBER 31, 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 11.65 $ 9.98 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................. 0.14 0.12 0.01
Net Realized and Unrealized Gain (Loss)
on Investments........................ 2.49 1.65# (0.03)
- ------------------------------------------------------------------------------
Total from Investment Operations...... 2.63 1.77 (0.02)
- ------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.................. (0.14) (0.10) --
Net Realized Gain...................... (0.01) -- --
- ------------------------------------------------------------------------------
Total Distributions................... (0.15) (0.10) --
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... $ 14.13 $11.65 $ 9.98
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL RETURN+........................... 22.69% 17.84% (0.20)%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)... $ 3,283 $2,464 $ 253
Ratio of Expenses to Average Net
Assets................................. 1.03% 1.21% 1.00%*
Ratio of Net Investment Income to
Average Net Assets..................... 1.11% 1.39% 1.36%*
Portfolio Turnover Rate................. 25% 4% 0%
Average Commission Rate##............... $0.0705 N/A N/A
- ------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses
Assumed by the Advisor Per Share....... $ 0.52 $ 0.82 $ 1.06
Ratio of Expenses to Average Net Assets
Including Expense Offsets.............. 1.00% 1.00% N/A
- ------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had the Advisor not waived and assumed
certain expenses during the periods.
# 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 in-
vestments for that period because of the timing of sales and repurchase of
Portfolio shares in relation to fluctuating market value of the investments
of the portfolio.
## For fiscal years beginning on or after September 1, 1995, a portfolio is re-
quired to disclose the average commission rate per share it paid for portfo-
lio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are regis-
tered under the Investment Company Act of 1940, as amended. The NWQ Balanced
Portfolio and NWQ Value Equity Portfolio (the "Portfolios"), portfolios of UAM
Funds, Inc., are diversified, open-end management investment companies. At Oc-
tober 31, 1996, the UAM Funds were composed of forty active portfolios. The fi-
nancial statements of the remaining portfolios are presented separately. The
Portfolios are authorized to offer two separate classes of shares--Institu-
tional Class Shares and Institutional Service Class Shares. As of October 31,
1996, only the NWQ Balanced Portfolio has issued Institutional Service Class
Shares. Both classes of shares have identical voting, dividend, liquidation and
other rights. The objectives of the NWQ Portfolios are as follows:
NWQ BALANCED PORTFOLIO seeks 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 the Adviser's opinion, are undervalued at the time
of purchase.
NWQ VALUE EQUITY PORTFOLIO seeks 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 the Adviser's opinion, are undervalued
at the time of purchase.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting poli-
cies are in conformity with generally accepted accounting principles. Such pol-
icies are consistently followed by the Portfolio in the preparation of its fi-
nancial statements. Generally accepted accounting principles may require man-
agement to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results may differ from those
estimates.
1. SECURITY VALUATION: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the mean of the bid and
asked prices. Price information on listed securities is taken from the ex-
change where the security is primarily traded. Over-the-counter and un-
listed equity securities are valued not exceeding the current asked prices
nor less than the current bid 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 deter-
mined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving repur-
chase 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
F-20
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
transaction exceeds one business day, the value of the collateral is moni-
tored 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.
Pursuant to an Exemptive Order issued by the Securities and Exchange Com-
mission, the UAM Funds may transfer their daily uninvested cash balances
into a joint trading account which invests in one or more repurchase agree-
ments. This joint repurchase agreement is covered by the same collateral
requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income 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. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
Permanent book and tax basis differences relating to shareholder distribu-
tions resulted in reclassifications as follows:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED NET
NET INVESTMENT REALIZED
NWQ PORTFOLIOS INCOME GAIN (LOSS)
-------------- -------------- -----------
<S> <C> <C>
Balanced.......................................... $764 $(764)
Value Equity...................................... 276 (276)
</TABLE>
Current year permanent book-tax differences are not included in ending un-
distributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
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 identifica-
tion method. Dividend income is recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Discounts and premiums on secu-
rities purchased are amortized using the effective yield basis 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 port-
folios 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 in-
creased 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 serv-
ices to the Portfolios at a fee calculated at an annual rate of 0.70% of each
F-21
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Portfolio's average daily net assets. The Adviser has voluntarily agreed to
waive a portion of its advisory fees and to assume expenses, if necessary, in
order to keep each Portfolio's total annual operating expenses, after the ef-
fect of expense offset arrangements, from exceeding 1.00% of average daily net
assets for each Portfolio's Institutional Class Shares and 1.40% of average
daily net assets for the NWQ Balanced Portfolio's Institutional Service Class
Shares until February 28, 1997.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.06% and 0.04% of average daily net assets for the NWQ Balanced
Portfolio and NWQ Value Equity Portfolio, respectively. Also effective April
15, 1996, the Administrator has entered into a Mutual Funds Service Agreement
with Chase Global Funds Services Company ("CGFSC"), an affiliate of The Chase
Manhattan Bank, under which CGFSC agrees to provide certain services, including
but not limited to, administration, fund accounting, dividend disbursing and
transfer agent services. Pursuant to the Mutual Funds Service Agreement, the
Administrator pays CGFSC a monthly fee. For the period April 15, 1996 to Octo-
ber 31, 1996, UAM Fund Services, Inc. earned the following amounts from the
Portfolios as Administrator and paid the following portion to CGFSC:
<TABLE>
<CAPTION>
ADMINISTRATION PORTION PAID
NWQ PORTFOLIOS FEES TO CGFSC
- -------------- -------------- ------------
<S> <C> <C>
Balanced............................................ $56,561 $51,719
Value Equity........................................ 41,135 40,457
</TABLE>
Prior to April 15, 1996, CGFSC served as the administrator to the UAM Funds and
AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net assets
in excess of $1 billion but less than $3 billion; plus 0.06% of the combined
aggregate net assets in excess of $3 billion. The fees were allocated among the
portfolios of the UAM Funds and AEW on the basis of their relative net assets
and were subject to a graduated minimum fee schedule per portfolio which rose
from $2,000 per month, upon inception of a portfolio, to $70,000 annually after
two years.
F-22
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For the period November 1, 1995 to April 15, 1996, CGFSC earned the following
amounts from the Portfolios as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
NWQ PORTFOLIOS FEES
- -------------- --------------
<S> <C>
Balanced......................................................... $38,446
Value Equity..................................................... 31,663
</TABLE>
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the "Bank"),
an affiliate of CGFSC, is custodian for the Portfolios' assets held in accor-
dance with the custodian agreement. For the period July 17, 1996 to October 31,
1996, the amount charged to the Portfolios by the Bank aggregated the follow-
ing:
<TABLE>
<CAPTION>
NWQ PORTFOLIOS CUSTODIAN FEES
- -------------- --------------
<S> <C>
Balanced......................................................... $2,104
Value Equity..................................................... 1,171
</TABLE>
As of October 31, 1996, all of these amounts are unpaid.
E. DISTRIBUTION AND SERVICE PLAN: UAM Fund Distributors, Inc. (the "Distribu-
tor"), a wholly-owned subsidiary of UAM, distributes the shares of the Portfo-
lios. The NWQ Balanced Portfolio has adopted a Distribution and Service Plan
(the "Plan") on behalf of the Service Class Shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Under the Plan, the NWQ Balanced Portfolio
may not incur distribution and service fees which exceed an annual rate of
0.75% of the NWQ Balanced Portfolio's net assets, however, the Board has cur-
rently limited aggregate payments under the Plan to 0.50% per annum of the NWQ
Balanced Portfolio's net assets. The NWQ Balanced Portfolio's Service Class
Shares are currently making payments for distribution fees at 0.15% of average
daily net assets. The NWQ Balanced Portfolio's Service Class Shares pays serv-
ice fees at an annual rate of 0.25% of the average daily value of Service Class
Shares owned by clients of such Service Organizations. The Distributor does not
receive any fee or other compensation with respect to the NWQ Value Equity
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:
<TABLE>
<CAPTION>
NWQ PORTFOLIOS PURCHASES SALES
- -------------- ----------- --------
<S> <C> <C>
Balanced................................................... $12,077,628 $620,301
Value Equity............................................... 1,034,425 711,763
</TABLE>
Purchases and sales of long-term U.S. Government securities were $3,395,977 and
$2,198,064, respectively, for NWQ Balanced Portfolio. There were no purchases
or sales of long-term U.S. Government securities for NWQ Value Equity Portfo-
lio.
G. DIRECTORS' FEE: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds and AEW, plus a quarterly retainer of $150
for each active portfolio of the UAM Funds and AEW, and reimbursement of ex-
penses incurred in attending Board meetings.
F-23
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
H. LINE OF CREDIT: The NWQ Balanced Portfolio, along with certain other portfo-
lios 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 Capital
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 its
average daily unused portion of the line of credit. During the year ended Octo-
ber 31, 1996, the Portfolio had no borrowings under the agreement.
I. OTHER: Transactions in capital shares for the Portfolios, by class, were as
follows:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
SHARES INSTITUTIONAL SERVICE CLASS SHARES
----------------------- ----------------------------------
YEAR ENDED YEAR ENDED JANUARY 22, 1996*
OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1996 1995 1996
----------- ----------- ----------------------------------
<S> <C> <C> <C>
NWQ BALANCED PORTFOLIO:
Shares Issued........... 625,426 577,931 1,729,243
In Lieu of Cash
Distributions.......... 17,597 7,594 6,660
Shares Redeemed......... (421,298) (271,931) (119,017)
-------- -------- ---------
Net Increase from
Capital Share
Transactions........... 221,725 313,594 1,616,886
======== ======== =========
NWQ VALUE EQUITY PORTFO-
LIO:
Shares Issued........... 72,988 192,799
In Lieu of Cash
Distributions.......... 2,614 623
Shares Redeemed......... (54,688) (7,281)
-------- --------
Net Increase from
Capital Share
Transactions........... 20,914 186,141
======== ========
</TABLE>
At October 31, 1996, the percentage of total shares outstanding held by record
shareholders owning 10% or greater of the aggregate total shares outstanding
for each Portfolio were:
<TABLE>
<CAPTION>
NO. OF
NWQ PORTFOLIOS SHAREHOLDERS % OWNERSHIP
- -------------- ------------ -----------
<S> <C> <C>
Balanced--Institutional Class.......................... 2 65.1%
Balanced--Institutional Service Class.................. 4 80.5%
Value Equity........................................... 3 81.2%
</TABLE>
At October 31, 1996, 10% of the NWQ Value Equity Portfolio's shares were bene-
ficially held by a related party of the Portfolio.
- --------
* Initial offering of Institutional Service Class Shares.
F-24
<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 assets and liabilities, includ-
ing the portfolios of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the NWQ Balanced Portfolio and the
NWQ Value Equity Portfolio (the "Portfolios"), Portfolios of the UAM Funds,
Inc., at October 31, 1996, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for the peri-
ods 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 accor-
dance 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 presenta-
tion. We believe that our audits, which included confirmation of securities at
October 31, 1996 by correspondence with the custodian and brokers and the ap-
plication 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 9, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
For the period ended October 31, 1996, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
35.8% and 69.9%, respectively, for NWQ Balanced Portfolio and NWQ Value Equity
Portfolio.
F-25
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
AAA -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating cate-
gories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier
3 indicates that the issue ranks at the lower end of the rating category.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
BAA -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
CAA -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
A-2
<PAGE>
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment and may
not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make "indefi-
nite and unlimited" drawings on the U.S. Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not guar-
anteed by the United States, but those institutions are protected by the dis-
cretionary authority of the U.S. Treasury to purchase certain amounts of their
securities to assist the institution in meeting its debt obligations. Finally,
other agencies and instrumentalities, such as the Farm Credit System and the
Federal Home Loan Mortgage Corporation, are federally chartered institutions
under Government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
III. COMMERCIAL PAPER
A Portfolio may invest in commercial paper (including variable amount master
demand notes) rated A-1 or better by S&P or Prime-1 by Moody's, or, if
unrated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. Commercial paper refers to short-term,
unsecured promissory notes issued by corporations to finance short-term credit
needs. Commercial paper is usually sold on a discount basis and has a maturity
at the time of issuance not exceeding nine months. Variable amount master de-
mand notes are demand obligations that permit the investment of fluctuating
amounts at varying market rates of interest pursuant to arrangement between
the issuer and a commercial bank acting as agent for the payees of such notes,
whereby both parties have the right to vary the amount of the outstanding in-
debtedness on the notes. Because variable amount master demand notes are di-
rect lending arrangements between a lender and a borrower, it is not generally
contemplated that such instru-
A-3
<PAGE>
ments will be traded, and there is no secondary market for these notes, al-
though they are redeemable (and thus immediately repayable by the borrower) at
face value, plus accrued interest, at any time. In connection with the Portfo-
lio's investment in variable amount master demand notes, the Adviser's invest-
ment management staff will monitor, on an ongoing basis, the earning power,
cash flow and other liquidity ratios of the issuer, and the borrower's ability
to pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's
industry or industries and the appraisal of speculative-type risks which may
be inherent in certain areas; (3) evaluation of the issuer's products in
relation to completion and customer acceptance; (4) liquidity; (5) amount and
quality of long term debt; (6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and the relationships which exist
with the issuer, and (8) recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may be increased or decreased periodically. Frequently,
dealers selling variable rate certificates of deposit to a Portfolio will
agree to repurchase such instruments, at the Portfolio's option, at par on or
near the coupon dates. The dealers' obligations to repurchase these instru-
ments are subject to conditions imposed by various dealers; such conditions
typically are the continued credit standing of the issuer and the existence of
reasonably orderly market conditions. The Portfolio is also able to sell vari-
able rate certificates of deposit in the secondary market. Variable rate cer-
tificates of deposit normally carry a higher interest rate than comparable
fixed rate certificates of deposit. A
A-4
<PAGE>
bankers' acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). The borrower is liable for
payment as well as the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Most acceptances have maturities of
six months or less and are traded in the secondary markets prior to maturity.
A-5
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
RICE, HALL, JAMES SMALL CAP PORTFOLIO
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
INSTITUTIONAL CLASS SHARES
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STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Fund" or the "Fund") for the
Rice, Hall, James Small Cap and Rice, Hall, James Small/Mid Cap Portfolios'
Institutional Class Shares dated January 3, 1997. To obtain the Prospectus,
please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
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PAGE
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Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 13
Shareholder Services....................................................... 14
Investment Limitations..................................................... 16
Management of the Fund..................................................... 17
Investment Adviser......................................................... 20
Portfolio Transactions..................................................... 21
Administrative Services.................................................... 22
Performance Calculations................................................... 22
General Information........................................................ 26
Appendix -- Description of Securities and Ratings.......................... A-1
Financial Statements.......................................................
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INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Rice, Hall, James Small Cap and Rice, Hall, James Small/Mid Cap Portfolios
(the "Portfolios") as set forth in the Rice, Hall, James Portfolios' Prospec-
tus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable depos-
its maintained in a banking institution for a specified period of time at a
stated interest rate. Time deposits maturing in more than seven days will not
be purchased by a Portfolio, and time deposits maturing from two business days
through seven calendar days will not exceed 10% of the total assets of a Port-
folio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by the funds de-
posited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
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Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper and A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, issued by a corporation having an outstanding unsecured debt
issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of the
U.S. Government and differ mainly in interest rates, maturities and dates of
issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include securi-
ties issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home
Administration, Federal Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennessee
Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
INVESTMENTS IN FOREIGN SECURITIES
Investors in the Portfolios should recognize that investing in foreign com-
panies involves certain special considerations which are not typically associ-
ated with investing in U.S. companies. Since the securities of foreign compa-
nies are frequently denominated in foreign currencies, the Portfolios may be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions be-
tween various currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of expropriation or confiscatory taxation, po-
litical or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
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Although the Portfolios will endeavor to achieve the most favorable execu-
tion costs in their portfolio transactions, fixed commissions on many foreign
stock exchanges are generally higher than negotiated commissions on U.S. ex-
changes.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Portfolios' investments. How-
ever, these foreign withholding taxes are not expected to have a significant
impact.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of each Portfolio may be affected favor-
ably or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and a Portfolio may incur costs in connection with con-
versions between various currencies. Each Portfolio will conduct their foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward foreign currency exchange contracts ("forward contracts") to pur-
chase or sell foreign currencies. A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no de-
posit requirement, and no commissions are charged at any stage for such
trades.
Each Portfolio may enter into forward contracts in several circumstances.
When a Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when a Portfolio anticipates the receipt
in a foreign currency of dividends or interest payments on a security which it
holds, a Portfolio may desire to "lock-in" the U.S. dollar price of the secu-
rity or the U.S. dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for a fixed amount of
dollars, for the purchase or sale of the amount of foreign currency involved
in the underlying transactions, such Portfolio will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period be-
tween the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.
Additionally, when a Portfolio anticipates that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it
may enter into a forward contract for a fixed amount of dollars, to sell the
amount of foreign currency approximating the value of some or all of such
Portfolio's securities denominated in such foreign currency. The precise
matching of the forward con-
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tract amounts and the value of the securities involved will not generally be
possible since the future value of securities in foreign currencies will
change as a consequence of market movements in the value of these securities
between the date on which the forward contract is entered into and the date it
matures. The projection of short-term currency market movement is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. The Portfolios do not intend to enter into such forward con-
tracts to protect the value of portfolio securities on a regular or continuous
basis. The Portfolios will not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate such Portfolio to deliver an amount of foreign currency in excess of
the value of such Portfolio securities or other assets denominated in that
currency.
Under normal circumstances, consideration of the prospect for currency pari-
ties will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward con-
tracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. The Fund's Custodian will place cash or liq-
uid securities into a segregated account of each Portfolio in an amount equal
to the value of each Portfolio's total assets committed to the consummation of
forward contracts. If the value of the securities placed in the segregated ac-
count declines, additional cash or securities will be placed in the account on
a daily basis so that the value of the account will be equal to the amount of
such Portfolio's commitments with respect to such contracts.
The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio
may either sell the security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same cur-
rency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Portfolio
is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters
into an offsetting contract for
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the purchase of the foreign currency, such Portfolio will realize a gain to
the extent that the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices in-
crease, such Portfolio would suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
Each Portfolio's dealings in forward contracts will be limited to the trans-
actions described above. Of course, the Portfolios are not required to enter
into such transactions with regard to their foreign currency-denominated secu-
rities. It also should be realized that this method of protecting the value of
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
FUTURES CONTRACTS
The Portfolios may enter into futures contracts for the purposes of hedging,
remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act
by the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agen-
cy.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Generally, margin deposits are structured as percentages (e.g., 5%)
of the market value of the contracts being traded. After a futures contract
position is opened, the value of the contract is marked to market daily. If
the futures contract price changes to the
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extent that the margin on deposit does not satisfy margin requirements, pay-
ment of additional "variation" margin will be required. Conversely, change in
the contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to
and from the futures broker for as long as the contract remains open. The
Portfolios expect to earn interest income on their margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed 5% of the liquidation value of each
Portfolio. The Portfolios will only sell futures contracts to protect securi-
ties they own against price declines or purchase contracts to protect against
an increase in the price of securities they intend to purchase. As evidence of
this hedging interest, each Portfolio expects that approximately 75% of its
futures contracts purchases will be "completed"; that is, equivalent amounts
of related securities will have been purchased or are being purchased by a
Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolios' exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While the Portfolios will incur commission expenses in both opening and
closing out future positions, these costs are lower than transaction costs in-
curred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
Each Portfolio will not enter into futures contract transactions to the ex-
tent that, immediately thereafter, the sum of its initial margin deposit on
open contracts exceeds 5% of the market value of its total assets. In addi-
tion, a Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would ex-
ceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
Each Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However,
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there can be no assurance that a liquid secondary market will exist for any
particular futures contract at any specific time. Thus, it may not be possible
to close a futures position. In the event of adverse price movements, a Port-
folio would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if a Portfolio has insufficient cash,
it may have to sell securities to meet daily margin requirements at a time
when it may be disadvantageous to do so. In addition, a Portfolio may be re-
quired to make delivery of the instruments underlying futures contracts it
holds. The inability to close futures positions also could have an adverse im-
pact on a Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in excess of
the amount invested in the contract. However, because the futures strategies
of each Portfolio is engaged in only for hedging purposes, the Adviser does
not believe that a Portfolio is subject to the risks of loss frequently asso-
ciated with futures transactions. A Portfolio would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying the futures con-
tracts have different maturities than such Portfolio's securities being
hedged. It is also possible that a Portfolio could lose money on futures con-
tracts and also experience a decline in value of portfolio securities. There
is also the risk of loss by a Portfolio of margin deposits in the event of
bankruptcy of a broker with whom such Portfolio has an open position in a
futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and, therefore, does not
limit potential losses because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive
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trading days, with little or no trading, thereby preventing prompt liquidation
of futures positions and subjecting some futures traders to substantial loss-
es.
OPTIONS
Each Portfolio may purchase and sell put and call options on futures con-
tracts for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of
the option purchased. Depending on the pricing of the option compared to ei-
ther the futures contract on which it is based or the price of the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. For example, there are significant dif-
ferences between the securities, futures and options markets that could result
in an imperfect correlation between these markets, causing a given transaction
not to achieve its objective. A decision as to whether, when, and how to use
options involves the exercise of skill and judgement by the Adviser, and even
a well-conceived transaction may be unsuccessful because of market behavior or
unexpected events.
OPTIONS ON FOREIGN CURRENCIES
Each Portfolio may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a de-
cline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminutions in the value of portfolio securities, a Portfolio may pur-
chase put options on the foreign currency. If the value of the currency does
decline, a Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securi-
ties to be acquired are denominated is projected, thereby increasing the cost
of such securities, a Portfolio may purchase call options thereon. The pur-
chase of such options could offset, at least partially, the effects of the ad-
verse movements in exchange rates. As in the case of other types of options,
however, the benefit to a Portfolio deriving from purchases of foreign cur-
rency options will be reduced by the amount of the premium and related trans-
action costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, a Portfolio could sustain losses on
transaction in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
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Each Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse fluctu-
ations in exchange rates it could, instead of purchasing a put option, write a
call option on the relevant currency. If the anticipated decline occurs, the
option will most likely not be exercised, and the diminution in value of port-
folio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an antici-
pated increase in the dollar cost of securities to be acquired, a Portfolio
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Portfolio to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will con-
stitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Portfolio would be required to purchase or sell the un-
derlying currency at a loss which may not be offset by the amount of the pre-
mium. Through the writing of options on foreign currencies, a Portfolio also
may be required to forego all or a portion of the benefits which might other-
wise have been obtained from favorable movements in exchange rates.
Each Portfolio intends to write covered call options on foreign currencies.
A call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without addi-
tional cash consideration (or for additional cash consideration held in a seg-
regated account by the Custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call option is also covered if a Portfolio
has a call on the same foreign currency and in the same principal amount as
the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written of (b) is greater than the
exercise price of the call written if the difference is maintained by the
Portfolio in cash or liquid securities in a segregated account with the Custo-
dian.
Each Portfolio also intends to write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign cur-
rency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which
a Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate.
In such circumstances, a Portfolio collateralizes the option by maintaining in
a segregated account with the Custodian, cash or liquid securities in an
amount not less than the value of the underlying foreign currency in U.S. dol-
lars marked to market daily.
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RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on con-
tract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although for-
eign currency options are also traded on certain national securities ex-
changes, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to the regulation of the Commission. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading en-
vironment, many of the protection afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over
a period of time. Although the purchase of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corpo-
ration ("OCC"), thereby reducing the risk of counterparty default. Further-
more, a liquid secondary market in options traded on a national securities ex-
change may be more readily available than in the over-the-counter market, po-
tentially permitting a Portfolio to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market de-
scribed above, as well as the risks regarding adverse market movements, mar-
gining of options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effect of other political and
economic events. In addition, exchange-traded options of foreign currencies
involve certain risks not presented by the over-the-counter market. For exam-
ple, exercise and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in applicable foreign
countries for this purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the orderly settle-
ment of foreign currency option exercises, or would result in undue burdens on
the OCC or its clearing member, impose special procedures
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on exercise and settlement, such as technical changes in the mechanics of de-
livery of currency, the fixing of dollar settlement prices or prohibitions, on
exercise.
In addition, futures contracts, options on futures contracts, forward con-
tracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (1) other complex foreign
political and economic factors, (2) lesser availability than in the United
States of data on which to make trading decisions, (3) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during non-
business hours in the United States, (4) the imposition of different exercise
and settlement terms and procedures and margin requirements than in the United
States, and (5) lesser trading volume.
FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND
FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging transac-
tions, each Portfolio is required for Federal income tax purposes to recognize
as income for each taxable year its net unrealized gains and losses on regu-
lated futures contracts as of the end of each taxable year as well as those
actually realized during the year. In most cases, any such gain or loss recog-
nized with respect to a regulated futures contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss without
regard to the holding period of the contract.
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from certain qualifying income, i.e., dividends, inter-
est, income derived from loans of securities and gains from the sale or other
disposition of stock, securities or foreign currencies, or other related in-
come, including gains from options, futures and forward contracts, derived
with respect to its business investing in stock, securities or currencies. Any
net gain realized from the closing out of futures contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement. Qualifica-
tion as a regulated investment company also requires that less than 30% of a
Portfolio's gross income be derived from the sale or other disposition of
stock, securities, options, futures or forward contracts (including certain
foreign currencies not directly related to the Fund's business of investing in
stock or securities) held less than three months. In order to avoid realizing
excessive gains on securities held for less than three months, a Portfolio may
be required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts which have been open for less than three months as
of the end of a Portfolio's taxable year, and which are recognized for tax
purposes, will not
12
<PAGE>
be considered gains on securities held for less than three months for the pur-
poses of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of a Portfolio's taxable year) on futures transac-
tions. Such distribution will be combined with distributions of capital gains
realized on a Portfolio's other investments, and shareholders will be advised
on the nature of the payment.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund and payment is received by the Fund's Custodian. The minimum
initial investment required for each Portfolio is $2,500 with certain excep-
tions as may be determined from time to time by the officers of the Fund.
Other investment minimums are: initial IRA investment, $500; initial spousal
IRA investment, $250; minimum additional investment for all accounts, $100. An
order received in proper form prior to the 4:00 p.m. close of the New York
Stock Exchange ("Exchange") will be executed at the price computed on the date
of receipt; and an order received not in proper form or after the 4:00 p.m.
close of the Exchange will be executed at the price computed on the next day
the Exchange is open after proper receipt. The Exchange will be closed on the
following days: Presidents' Day, February 17, 1997; Good Friday, March 28,
1997; Memorial Day, May 26, 1997; Independence Day, July 4, 1997; Labor Day,
September 1, 1997; Thanksgiving Day, November 27, 1997; Christmas Day, Decem-
ber 25, 1997; and New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts, such as employee benefit plans or under circumstances
where certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that either the Exchange or custodian bank is
closed or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder
13
<PAGE>
of record limited in amount during any 90-day period to the lesser of $250,000
or 1% of the net assets of the Fund at the beginning of such period. Such com-
mitment is irrevocable without the prior approval of the Commission. Redemp-
tions in excess of the above limits may be paid, in whole or in part, in in-
vestment securities or in cash as the Directors may deem advisable; however,
payment will be made wholly in cash unless the Directors believe that economic
or market conditions exist which would make such a practice detrimental to the
best interests of the Fund. If redemptions are paid in investment securities,
such securities will be valued as set forth in the Prospectus under "Valuation
of Shares" and a redeeming shareholder would normally incur brokerage expenses
if these securities were converted to cash.
No charge is made by a Portfolio for redemptions. Any redemption may be more
or less than the shareholder's initial cost depending on the market value of
the securities held by a Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
("CGFSC") from fraud, signature guarantees are required for certain redemp-
tions. Signature guarantees are required for (1) redemptions where the pro-
ceeds are to be sent to someone other than the registered shareowner(s) and/or
the registered address or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institution is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the Rice, Hall, James Portfolios' Prospectus:
14
<PAGE>
EXCHANGE PRIVILEGE
Institutional Class Shares of each Rice, Hall, James Portfolio may be ex-
changed for Institutional Class Shares of the other Rice, Hall, James Portfo-
lio. In addition, Institutional Class Shares of each Rice, Hall, James Portfo-
lio may be exchanged for any other Institutional Class Shares of a Portfolio
included in the UAM Funds which is comprised of the Fund and UAM Funds Trust.
(See the list of Portfolios of the UAM Funds -- Institutional Class Shares at
the end of the Prospectus.) Exchange requests should be made by calling the
Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Service Center,
c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798.
The exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sale commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. (Eastern Time) will be processed as of the close of busi-
ness on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor CGFSC, the Fund's Transfer Agent,
will be responsible for the authenticity of the exchange instructions received
by telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
or entity by making a written request to the Fund. The request should clearly
identify the account and number of shares to be transferred, and include the
signature of all
15
<PAGE>
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemp-
tion of Shares". As in the case of redemptions, the written request must be
received in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on in-
vestment or utilization of assets, such limitation shall be determined immedi-
ately after and as a result of a Portfolio's acquisition of such security or
other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered
when determining whether the investment complies with a Portfolio's investment
limitations. Investment limitations (1), (2), (3), (4) and (5) are classified
as fundamental. The Portfolios' fundamental investment limitations cannot be
changed without approval by a "majority of the outstanding shares" (as defined
in the 1940 Act) of each Portfolio. The Portfolios will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships, al-
though it may purchase and sell securities of companies which deal in
real estate and may purchase and sell securities which are secured by
interests in real estate;
(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and (ii) by lending its portfolio se-
curities to banks, brokers, dealers and other financial institutions
so long as such loans are not inconsistent with the 1940 Act or the
rules and regulations or interpretations of the Commission thereun-
der;
(4) underwrite the securities of other issuers;
(5) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii) enter-
ing into options, futures or repurchase transactions;
(6) invest in stock or bond futures and/or options on futures unless (i)
not more than 5% of the Portfolio's assets are required as deposit to
secure obligations under such futures and/or options on futures con-
tracts provided, however, that in the case of an option that is in-
the-money at the time of purchase, the in-the-money amount may be ex-
cluded in computing such 5% and (ii) not more than 20% of the Portfo-
lio's assets are invested in stock or bond futures and options;
16
<PAGE>
(7) purchase on margin or sell short except as specified in (6) above;
(8) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(9) invest for the purpose of exercising control over management of any
company.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years. As of December 31, 1996, the Di-
rectors and officers of the Fund owned less than 1% of the Fund's outstanding
shares.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennet Management Company from
1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec Cor-
Age: 47 poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square Invest-
Boston, MA 02111 ors Corporation since 1988; Director and
Age: 52 Chief Executive Officer of H.T. Investors,
Inc., formerly a subsidiary of Dewey
Square.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund Distribu-
Boston, MA 02110 tors, Inc.; Vice President of Operations,
Age: 45 Development and Control of Fidelity Invest-
ments in 1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street ident of UAM Fund Services, Inc.; former
Boston, MA 02110 Manager of Fund Administration and Compli-
Age: 32 ance of Chase Global Fund Services Company
from 1995 to 1996; formerly Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
Age: 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age: 41 President, Secretary and General Counsel of
Lelan, O'Brien, Rubenstein Associates, Inc.
from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
18
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator or CGFSC and receive no compensation from the Fund. The fol-
lowing table shows aggregate compensation paid to each of the Fund's unaffili-
ated Directors by the Fund and total compensation paid by the Fund, UAM Funds
Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively the
"Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,643 0 0 $30,500
Director
J. Edward Day........... $25,643 0 0 $30,500
Former Director
Philip D. English....... $25,643 0 0 $30,500
Director
William A. Humenuk...... $25,643 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of the Portfolios:
Rice, Hall, James Small Cap Portfolio: Charles Schwab & Co., Inc., FBO Rein-
vest Account, Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA,
9.0%*; Hartnet and Co., NANA Regional, Attn: 0173440 070, P.O. Box 92800,
Rochester, NY, 8.2%.
Rice, Hall, James Small/Mid Cap Portfolio: Juanita Whisenand, Trustee, FBO
Whisenand Family Trust, 2406 Vallecitos Court, La Jolla, CA, 26.8%*; Jean
Hahn, GST Exemption Trust under Trustee, Hahn Family Trust, P.O. Box 2009,
Rancho Santa Fe, CA, 19.7%*; Bank of America, Custodian, Helen A. Clarke & C.
Dixon Clarke Trustees, Clarke Family Trust, Mutual Fund Dept., P.O. Box 3577,
Termonlay Annex, Los Angeles, CA, 13.1%*; Mitchell Stuart Little and Stephanie
S. Little, Trustees, FBO Little Family Trust, P.O. Box 7249, Rancho Santa Fe,
CA, 5.9%*.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
19
<PAGE>
The persons or organizations owning 25% or more of the outstanding shares of
a Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have
the ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
Rice, Hall, James & Associates (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December, 1980, for the
purpose of acquiring and owning firms engaged primarily in institutional in-
vestment management. Since its first acquisition in August, 1983, UAM has ac-
quired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
PHILOSOPHY AND STYLE
RICE, HALL, JAMES SMALL CAP PORTFOLIO
The Adviser applies a value oriented approach to small capitalization growth
stocks. The Rice, Hall, James Small Cap Portfolio is constructed through bot-
tom up research where stocks selected must possess catalysts -- positive fun-
damental changes which the Adviser believes should lead to greater investor
recognition and, subsequently, higher stock prices. The Price Earnings ratios
of selected stocks are typically lower than the projected 3 to 5 year earnings
growth rates. Stocks are sold when they reach preset upside targets, violate
preset downside price limits or when a deterioration of the fundamentals or
the catalyst occur.
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
The Adviser practices a fundamentally driven bottom up research approach.
This approach focuses on identifying stocks of growth companies that are sell-
ing at a discount to the companies' projected earnings growth rates. Specifi-
cally, the Adviser requires that candidates for inclusion in the Portfolio
have price/earnings ratios that are lower than the 3 to 5 year projected earn-
ings growth rate. In addition, the stocks must possess catalysts, which are
defined by the Adviser as fundamental events that ultimately lead to increases
in revenue growth rates, expanding profit
20
<PAGE>
margins and/or increases in earnings growth rates that are generally not an-
ticipated by the market. Such events can include new product introductions or
applications, discovery of niche markets, new management, corporate or indus-
try restructures, regulatory change, end market expansion, etc. Most impor-
tantly, the Adviser must be convinced that such change will lead to greater
investor recognition and a subsequent rise in the stock prices within a 12 to
24 month period. Stocks are sold when they reach their upside target, violate
the present downside limit or when a deterioration of the fundamental assump-
tions or catalysts occurs.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: University of Kansas Endowment,
San Diego Society of Natural History, American Business Products, City of San
Diego and California Western School of Law.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, the Portfolios pay the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rate to
each Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Rice, Hall, James Small Cap Portfolio.................................. 0.75%
Rice, Hall, James Small/Mid Cap Portfolio.............................. 0.80%
</TABLE>
For the period from July 1, 1994 (commencement of operations) to October 31,
1994, the Rice, Hall, James Small Cap Portfolio paid advisory fees of $10,000
which the Adviser waived. For the fiscal years ended October 31, 1995 and
1996, the Portfolio paid advisory fees of approximately $85,000 and $197,797,
respectively. During this period, the Adviser voluntarily waived advisory fees
of approximately $15,000 and $0, respectively.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the bro-
ker effecting the transaction. It is not the
21
<PAGE>
Fund's practice to allocate brokerage or effect principal transactions with
dealers on the basis of sales of shares which may be made through broker-
dealer firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's Portfolios or who act as agents in the
purchase of shares of the Portfolios for their clients. During the fiscal
years ended October 31, 1994, 1995 and 1996, the entire Fund paid brokerage
commissions of approximately $2,402,000, $2,983,000 and $2,887,884 respective-
ly.
Some securities considered for investment by a Portfolio may also be appro-
priate for other clients served by the Adviser. If purchases or sales of secu-
rities consistent with the investment policies of a Portfolio and one or more
of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfo-
lios and clients in a manner deemed fair and reasonable by the Adviser. Al-
though there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
The Board of Directors of the Fund approved a new Fund Administration Agree-
ment, effective April 15, 1996, between UAM Fund Services, Inc., a wholly-
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Funds Service Agreement between UAM Fund Services, Inc. ("UAMFSI") and
CGFSC dated April 15, 1996. The services provided by UAMFSI and CGFSC and the
basis of the fees payable by the Fund under the Fund Administration Agreement
are described in the Portfolios' Prospectus. Prior to April 15, 1996, CGFSC or
its predecessor, Mutual Funds Services Company, provided certain administra-
tive services to the Fund under an Administration Agreement between the Fund
and U.S. Trust Company of New York. For the period from July 1, 1994 (com-
mencement of operation) to October 31, 1994 and for the fiscal years ended Oc-
tober 31, 1995 and 1996, administrative fees paid by Rice, Hall, James Small
Cap Portfolio totaled approximately $9,000, $52,000 and $88,251, respectively.
Of the fees paid during the year ended October 31, 1996, Rice, Hall, James
Small Cap Portfolio paid $81,427 to CGFSC and $6,824 to UAMFSI. The services
provided by the Administrator and the basis of the current fees payable to the
Administrator are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolios may from time to time quote various performance figures to
illustrate past performance. Performance quotations by investment companies
are
22
<PAGE>
subject to rules adopted by the Commission, which require the use of standard-
ized performance quotations or, alternatively, that every non-standardized
performance quotation furnished by the Fund be accompanied by certain stan-
dardized performance information computed as required by the Commission. Aver-
age annual compounded total return quotations used by the Fund are based on
the standardized methods of computing performance mandated by the Commission.
An explanation of the method used to compute or express performance follows.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeem-
able value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis.
The average annual total rates of return for the Institutional Class Shares
of the Rice, Hall, James Small Cap Portfolio from inception and for the one
year period ended on the date of the Financial Statements included herein are
as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR THROUGH
ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 DATE
----------- --------------- ---------
<S> <C> <C> <C>
Rice, Hall, James Small Cap Portfolio.... 19.43% 31.52% 7/1/94
</TABLE>
These figures are calculated according to the following formula:
P(1 +T )/n/ = ERV
where:
P
= a hypothetical initial payment of $1,000
T
= average annual total return
n
= number of years
ERV
= ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1,
5 or 10 year periods (or fractional portion thereof).
Institutional Class Shares of the Rice, Hall, James Small/Mid Cap Portfolio
were first offered as of November 1, 1996. Accordingly, no total return fig-
ures are available.
COMPARISONS
To help investors better evaluate how an investment in the Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial
23
<PAGE>
publications. Advertisements may also compare performance (as calculated
above) to performance as reported by other investments, indices and averages.
The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) S&P Midcap 400 Index -- consists of 400 domestic stocks chosen for
market size (medium market capitalization of $993 million as of Febru-
ary 1995), liquidity and industry group representation. It is a mar-
ket-weighted index with each stock affecting the index in proportion
to its market value.
(d) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(e) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(f) Lipper--Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis--measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(g) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(h) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
24
<PAGE>
(i) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(j) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(k) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass through securities.
(l) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(o) Russell 2000 Index -- consists of the smallest 2,000 companies in the
Russell 3000 Index, a U.S. equity index of the 3,000 large U.S. compa-
nies, with an average market capitalization of $1.74 billion.
(p) Russell Midcap Index -- consists of the smallest 800 companies in the
Russell 1000 Index, a U.S. equity index of the 1,000 largest companies
in the Russell 3000 Index, with an average capitalization of $1.96
billion.
(q) Composite indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(r) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(s) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(t) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
25
<PAGE>
Times, Global Investor, Wall Street Journal and Weisenberger Invest-
ment Companies Service -- publications that rate fund performance over
specified time periods.
(u) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates -- historical measure of yield, price and total return for com-
mon and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(w) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.
(x) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Portfolio, that
the averages are generally unmanaged, and that the items included in the cal-
culations of such averages may not be identical to the formula used by the
Portfolio to calculate its performance. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other aver-
ages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series ("Portfolios") or classes of
common stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of a Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and
26
<PAGE>
at the times that will avoid both income (including capital gains) taxes on it
and the imposition of the Federal excise tax on undistributed income and capi-
tal gains. (See discussion under "Dividends, Capital Gains Distributions and
Taxes" in the Prospectus.) The amounts of any income dividends or capital
gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of the Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of a Portfolio at net asset value (as of the busi-
ness day following the record date). This will remain in effect until the Fund
is notified by the shareholder in writing at least three days prior to the
record date that either the Income Option (income dividends in cash and capi-
tal gains distributions in additional shares at net asset value) or the Cash
Option (both income dividends and capital gains distributions in cash) has
been elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital
gains recognized by a Portfolio will be distributed to its investors without
need to offset (for Federal income tax purposes) such gains against any net
capital losses of another Portfolio.
FEDERAL TAXES
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived with
respect to its business of investing in such securities or currencies. In ad-
dition, gains realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of a Portfolio's an-
nual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
27
<PAGE>
FINANCIAL STATEMENTS
The Financial Statements of the Rice, Hall, James Small Cap Portfolio for
the fiscal year ended October 31, 1996 and the Financial Highlights for the
respective periods presented which appear in the Portfolio's 1996 Annual Re-
port to Shareholders and the report thereon of Price Waterhouse LLP, the
Fund's independent accountants, also appearing therein, are attached to this
SAI.
28
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (93.8%)
- --------------------------------------------------------------------------------
BANKS (10.6%)
*AmeriCredit Corp.......................................... 30,000 $ 570,000
Bank of Commerce/San Diego................................ 10,000 200,000
Cole Taylor Financial Group, Inc.......................... 25,000 750,000
Granite Financial, Inc.................................... 35,000 280,000
IMC Mortgage Co........................................... 10,000 370,000
*Jayhawk Acceptance Corp................................... 27,500 381,562
*Surety Capital Corp....................................... 100,000 456,250
UnionBancorp, Inc. ....................................... 48,000 564,000
-----------
3,571,812
- --------------------------------------------------------------------------------
BASIC RESOURCES (6.5%)
Harmon Industries, Inc.................................... 37,000 629,000
Layne, Inc. .............................................. 45,000 551,250
*Park-Ohio Industries...................................... 25,000 375,000
Universal Stainless & Alloy Products, Inc. ............... 30,000 247,500
*Whitehall Corp. .......................................... 10,000 390,000
-----------
2,192,750
- --------------------------------------------------------------------------------
CONSTRUCTION (2.0%)
Cavalier Homes, Inc....................................... 18,937 352,702
Diamond Home Services, Inc. .............................. 15,000 330,000
-----------
682,702
- --------------------------------------------------------------------------------
CONSUMER DURABLES (4.3%)
Keystone Automotive Industries, Inc....................... 45,000 590,625
RockShox, Inc............................................. 31,800 401,475
*TurboChef, Inc. .......................................... 40,000 445,000
-----------
1,437,100
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (1.1%)
Carson, Inc............................................... 10,000 162,500
Unimark Group, Inc........................................ 20,000 190,000
-----------
352,500
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (11.2%)
3-D Geophysical, Inc....................................... 18,000 $ 144,000
*Belden & Blake Corp........................................ 33,500 862,625
*Cairn Energy USA, Inc...................................... 75,000 778,125
Dreco Energy Services Ltd.--Series A....................... 28,500 748,125
HS Resources, Inc. ........................................ 57,000 855,000
Midcoast Energy Resources, Inc............................. 35,000 350,000
-----------
3,737,875
- --------------------------------------------------------------------------------
HEALTH CARE (14.6%)
*Alcide Corp................................................ 5,000 98,750
Algos Pharmaceutical Corp.................................. 3,000 37,500
Alkermes, Inc.............................................. 10,000 132,500
Alternative Living Services, Inc........................... 40,000 575,000
Andrx Corp................................................. 20,000 270,000
*Biomira, Inc............................................... 70,000 468,125
Cardiovascular Diagnostics, Inc............................ 25,000 106,250
Cohr, Inc.................................................. 17,000 416,500
Curative Health Services, Inc.............................. 20,000 455,000
Global Pharmaceutical Corp................................. 35,000 301,875
LanVision Systems, Inc..................................... 37,000 305,250
Life Medical Sciences, Inc................................. 40,000 205,000
Meridian Diagnostics, Inc.................................. 40,000 410,000
ResMed, Inc. .............................................. 30,000 487,500
Sterile Recoveries, Inc.................................... 20,000 285,000
Tri-Point Medical Corp..................................... 15,000 101,250
*UROHEALTH Systems, Inc., Class A........................... 22,000 217,250
-----------
4,872,750
- --------------------------------------------------------------------------------
INDUSTRIAL (8.1%)
*ABC Rail Products Corp..................................... 20,000 295,000
Advanced Lighting Technologies, Inc........................ 31,000 581,250
*Benchmark Electronics, Inc................................. 23,000 681,375
Bonded Motors, Inc......................................... 25,000 181,250
Excel Industries, Inc...................................... 27,000 408,375
*Intelect Communications Systems Ltd........................ 50,000 306,250
Meadow Valley Corp......................................... 70,000 253,750
-----------
2,707,250
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INSURANCE (4.9%)
Chartwell Re Corp........................................... 15,000 $ 380,625
E. W. Blanch Holdings, Inc.................................. 20,000 412,500
Meadowbrook Insurance Group, Inc............................ 10,000 255,000
Superior National Insurance Group, Inc...................... 50,000 593,750
-----------
1,641,875
- --------------------------------------------------------------------------------
RETAIL (8.5%)
CML Group, Inc............................................. 53,000 258,375
Garden Fresh Restaurant Corp............................... 28,000 259,000
*Kenneth Cole Productions, Inc., Class A.................... 25,000 412,500
Marks Bros. Jewelers, Inc.................................. 10,000 222,500
Piercing Pagoda, Inc....................................... 25,000 550,000
Rock Bottom Restaurants, Inc............................... 23,500 243,813
*Sports & Recreation, Inc................................... 20,000 172,500
Stage Stores, Inc.......................................... 40,000 730,000
-----------
2,848,688
- --------------------------------------------------------------------------------
SERVICES (7.0%)
*Daisytek International Corp................................ 7,000 267,750
Dynamex, Inc. ............................................. 50,000 537,500
Rental Service Corp........................................ 20,000 445,000
Source Services Corp....................................... 35,000 577,500
StaffMark, Inc............................................. 40,000 520,000
-----------
2,347,750
- --------------------------------------------------------------------------------
TECHNOLOGY (9.3%)
Affinity Technology Group, Inc............................. 25,000 181,250
*Boca Research, Inc......................................... 35,000 424,375
*Butler International, Inc.................................. 55,000 570,625
Cybex Computer Products Corp............................... 30,000 510,000
*Identix, Inc............................................... 40,000 325,000
*Insituform Technologies, Inc., Class A..................... 50,000 331,250
Qlogic Corp................................................ 30,000 461,250
*Southern Electronics Corp.................................. 20,000 187,500
TALX Corp................................................... 15,000 108,750
-----------
3,100,000
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (5.7%)
*Coherent Communications Systems Corp.................. 30,000 $ 581,250
*Comarco, Inc.......................................... 46,000 741,750
Metro One Telecommunications.......................... 26,400 257,400
*World Access, Inc..................................... 45,000 337,500
-----------
1,917,900
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $28,451,861).................................... 31,410,952
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.8%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $1,597,248,
collateralized by $1,543,677 of various U.S. Treasury
Notes, 5.875%-7.75%, due 3/31/99-11/30/99, valued at
$1,597,004 (COST $1,597,000)......................... $1,597,000 1,597,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.6%)
(COST $30,048,861) (A)................................ 33,007,952
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.4%)..................... 480,439
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $33,488,391
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
(a) The cost for federal income tax purposes was $30,049,810. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$2,958,142. This consisted of aggregate gross unrealized appreciation for
all securities of $4,346,870 and aggregate gross unrealized depreciation
for all securities of $1,388,728.
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost.............................................. $30,048,861
===========
Investments, at Value............................................. $33,007,952
Cash.............................................................. 464
Receivable for Investments Sold................................... 563,125
Receivable for Portfolio Shares Sold.............................. 68,841
Dividends Receivable.............................................. 1,510
Interest Receivable............................................... 248
Other Assets...................................................... 1,043
- -------------------------------------------------------------------------------
Total Assets..................................................... 33,643,183
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................. 90,150
Payable for Investment Advisory Fees.............................. 20,981
Payable for Administrative Fees................................... 8,159
Payable for Custodian Fees........................................ 5,753
Payable for Directors' Fees....................................... 691
Other Liabilities................................................. 29,058
- -------------------------------------------------------------------------------
Total Liabilities................................................ 154,792
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $33,488,391
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $27,348,382
Accumulated Net Realized Gain..................................... 3,180,918
Unrealized Appreciation........................................... 2,959,091
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $33,488,391
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value)
(Authorized 25,000,000)......................................... 2,128,582
Net Asset Value, Offering and Redemption Price Per Share.......... $ 15.73
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- ---------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest............................................................ $ 92,600
Dividends........................................................... 63,144
- ---------------------------------------------------------------------------------
Total Income....................................................... 155,744
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B.................................... 197,797
Administrative Fees--Note C......................................... 88,251
Registration and Filing Fees........................................ 21,202
Printing Fees....................................................... 18,773
Custodian Fees--Note D.............................................. 14,239
Audit Fees.......................................................... 12,286
Directors' Fees--Note G............................................. 2,958
Other............................................................... 7,264
- ---------------------------------------------------------------------------------
Total Expenses..................................................... 362,770
Expense Offset--Note A.............................................. (1,900)
- ---------------------------------------------------------------------------------
Net Expenses....................................................... 360,870
- ---------------------------------------------------------------------------------
NET INVESTMENT LOSS.................................................. (205,126)
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS..................................... 3,396,281
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS..................................................... 733,634
- ---------------------------------------------------------------------------------
TOTAL NET GAIN ON INVESTMENTS........................................ 4,129,915
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $3,924,789
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss.................................. $ (205,126) $ (84,315)
Net Realized Gain.................................... 3,396,281 3,474,879
Net Change in Unrealized Appreciation/Depreciation... 733,634 1,698,396
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations........................................ 3,924,789 5,088,960
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ -- (4,212)
In Excess of Net Investment Income................... -- (4,272)
Net Realized Gain.................................... (3,317,853) --
- --------------------------------------------------------------------------------
Total Distributions................................. (3,317,853) (8,484)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular...................................... 13,453,557 5,696,673
--In Lieu of Cash Distributions................ 3,273,715 8,484
Redeemed............................................. (2,755,914) (162,961)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 13,971,358 5,542,196
- --------------------------------------------------------------------------------
Total Increase....................................... 14,578,294 10,622,672
Net Assets:
Beginning of Period.................................. 18,910,097 8,287,425
- --------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $0 and $0, respectively)................. $33,488,391 $18,910,097
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued...................................... 865,521 458,928
In Lieu of Cash Distributions...................... 242,677 794
Shares Redeemed.................................... (171,457) (11,639)
- --------------------------------------------------------------------------------
936,741 448,083
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED JULY 1,
OCTOBER 31, 1994** TO
----------------- OCTOBER 31,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 15.87 $ 11.14 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)................ (0.10) (0.07) 0.01
Net Realized and Unrealized Gain............ 2.73 4.81 1.13
- -------------------------------------------------------------------------------
Total From Investment Operations........... 2.63 4.74 1.14
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....................... -- (0.01) --
In Excess of Net Investment Income.......... -- (0.00)# --
Net Realized Gain........................... (2.77) -- --
- -------------------------------------------------------------------------------
Total Distributions........................ (2.77) (0.01) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $ 15.73 $ 15.87 $11.14
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN................................. 19.43 % 42.59 %+ 11.40%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)........ $33,488 $18,910 $8,287
Ratio of Expenses to Average Net Assets...... 1.37 % 1.40 % 1.40%*
Ratio of Net Investment Income (Loss) to
Average Net Assets......................... (0.78)% (0.63)% 0.30%*
Portfolio Turnover Rate...................... 181 % 180 % 5%
Average Commission Rate##.................... $0.0509 N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses Assumed by
the Adviser Per Share...................... N/A $ 0.01 $ 0.05
Ratio of Expenses to Average Net Assets
Including Expense Offsets.................. 1.37 % 1.40 % N/A
- -------------------------------------------------------------------------------
</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.
# Value is less than 0.01 per share.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The Rice, Hall,
James Small Cap Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc.,
is a diversified, open-end management investment company. At October 31, 1996,
the UAM Funds were composed of forty active portfolios. The financial state-
ments of the remaining portfolios are presented separately. The objective of
the Rice, Hall, James Small Cap Portfolio is to provide maximum capital appre-
ciation, consistent with reasonable risk to principal by investing primarily
in small market capitalization companies.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: 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 valua-
tion is made or, if no sale occurred on such day, at the bid price on such
day. Price information on listed securities is taken from the exchange
where the security is primarily traded. Over-the-counter and unlisted se-
curities are valued not exceeding the current asked prices nor less than
the current bid prices. Short-term investments that have remaining maturi-
ties 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 secu-
rities 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 qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to
F-12
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
liquidate the collateral and apply the proceeds in satisfaction of the ob-
ligation. In the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income 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. These dif-
ferences are primarily due to differing book and tax treatments of net op-
erating losses.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications of $205,126 to increase net operat-
ing losses, with a decrease to accumulated net realized gain of $205,126.
Current year permanent book-tax differences are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the financial highlights.
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. Ex-
penses which cannot be directly attributed are apportioned among the port-
folios 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 as-
sets. Custodian fees for the Portfolio have been increased to include ex-
pense offsets for custodian balance credits.
F-13
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Rice, Hall, James & Associates (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at a fee calculated at an annual rate of 0.75% of
average daily net assets. The Adviser has voluntarily agreed to waive a por-
tion of its advisory fees and to assume expenses, if necessary, in order to
keep the Portfolio's total annual operating expenses, after the effect of ex-
pense offset arrangements, from exceeding 1.40% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.04% of average daily net assets of the
Portfolio. Also effective April 15, 1996, the Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the period April 15, 1996 to October 31, 1996, UAM Fund Services,
Inc. earned $54,066 from the Portfolio as Administrator of which $47,242 was
paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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 mil-
lion 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
F-14
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
assets in excess of $1 billion but less than $3 billion; plus 0.06% of the
combined aggregate net assets in excess of $3 billion. The fees were allocated
among the portfolios of the UAM Funds and AEW on the basis of their relative
net assets and were subject to a graduated minimum fee schedule per portfolio
which rose from $2,000 per month, upon inception of a portfolio, to $70,000
annually after two years. For the period November 1, 1995 to April 15, 1996,
CGFSC earned $34,185 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolio's assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolio by the Bank aggregated
$4,122, all of which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $54,572,752 and sales of $44,756,659 of investment securi-
ties other than long-term U.S. Government and short-term securities. There
were no purchases or sales of long-term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to partici-
pate in a $100 million unsecured line of credit with several banks. Borrowings
will be made solely to temporarily finance the repurchase of Capital 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 its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolio had no borrowings under the agreement.
F-15
<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 assets and liabilities, in-
cluding the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of Rice, Hall, James Small Cap
Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc., at October 31,
1996, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial high-
lights (hereafter referred to as "financial statements") are the responsibil-
ity 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 reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements, assessing the ac-
counting 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, 1996 by cor-
respondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, pro-
vide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
For the year ended October 31, 1996, the percentage of dividends that qual-
ify for the 70% dividend received deduction for corporate shareholders is
1.1%.
F-16
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of its
highest bond ratings: Aaa--judged to be the best quality; carry the smallest
degree of investment risk: Aa--judged to be of high quality by all standards;
A--possess many favorable investment attributes and are to be considered as
higher medium grade obligations; Baa--considered as lower medium grade obliga-
tions, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its high-
est bond ratings: AAA--highest grade obligations; possess the ultimate degree
of protection as to principal and interest; AA--also qualify as high grade ob-
ligations, and in the majority of instances differs from AAA issues only in
small degree; A--regarded as upper medium grade; have considerable investment
strength but are not entirely free from adverse effects of changes in economic
and trade conditions. Interest and principal are regarded as safe; BBB--re-
garded as borderline between definitely sound obligations and those where the
speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the GNMA are, in effect,
backed by the full faith and credit of the United States through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase
A-1
<PAGE>
certain amounts of their securities to assist the institution in meeting its
debt obligations. Finally, other agencies and instrumentalities, such as the
Farm Credit System and the FHLMC, are federally chartered institutions under
Government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolios may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with a Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's
industry or industries and the appraisal of speculative-type risks which may
be inherent in certain areas; (3) evaluation of the issuer's products in
A-2
<PAGE>
relation to completion and customer acceptance; (4) liquidity; (5) amount and
quality of long term debt; (6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by the management of issuer of obliga-
tions which may be present or may arise as a result of public interest ques-
tions and preparations to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolios will agree to
repurchase such instruments, at the Portfolios' option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolios are also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment as well as the bank which uncondi-
tionally guarantees to pay the draft at its face amount on the maturity date.
Most acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, a Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S.
A-3
<PAGE>
In addition, with respect to certain foreign countries, there is the possibil-
ity of expropriation or confiscatory taxation, political or social instabili-
ty, or diplomatic developments which could affect U.S. investments in those
countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Fund's Portfolios. However,
these foreign withholding taxes are not expected to have a significant impact.
A-4
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
SAMI PREFERRED STOCK INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
SAMI Preferred Stock Income Portfolio's Institutional Class Shares dated Janu-
ary 3, 1997. To obtain a Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 8
Shareholder Services....................................................... 9
Investment Limitations..................................................... 10
Management of the Fund..................................................... 11
Investment Adviser......................................................... 14
Portfolio Transactions..................................................... 14
Administrative Services.................................................... 15
Performance Calculations................................................... 16
General Information........................................................ 20
Financial Statements....................................................... 22
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following discussion supplements the discussion of the investment objec-
tive and policies of the SAMI Preferred Stock Income Portfolio (the "Portfo-
lio") as set forth in the Portfolio's Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other
2
<PAGE>
currencies, (ii) in the case of U.S. banks, it is a member of the Federal De-
posit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury, These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
RISKS PARTICULAR TO THE PUBLIC UTILITIES INDUSTRY
The public utilities industries are subject to various uncertainties, in-
cluding: difficulty in obtaining adequate returns on invested capital; fre-
quent difficulty in obtaining approval of rate increases by public service
commissions; increased costs, delays and restrictions as a result of environ-
mental considerations; difficulty and delay in securing financing of large
construction projects; difficulties of the capital markets in absorbing util-
ity debt and equity securities; difficulties in obtaining fuel for electric
generation at reasonable prices; difficulty in obtaining natural gas for re-
sale; special risks associated with the construction and operation of nuclear
power generating facilities, including technical and cost factors of such con-
struction and operation and the possibility of imposition of additional gov-
ernmental requirements for construction and operation; and the effects of en-
ergy conservation and the effects of regulatory changes, such as the possible
adverse effects on profits of recent increased competition among telecommuni-
cations companies and the uncertainties resulting from such companies' diver-
sification into new domestic and international businesses, as well as agree-
ments by many such companies linking future rate increases to inflation or
other factors not directly related to the actual operating profits of the en-
terprise.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts, options and options on
futures contracts for the purposes of hedging, remaining fully invested and
reducing trans
3
<PAGE>
actions costs. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are
traded on national futures exchanges. Futures exchanges and trading are regu-
lated under the Commodity Exchange Act by the Commodity Futures Trading Com-
mission ("CFTC"), a U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. The Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do
4
<PAGE>
not exceed five percent of the liquidation value of a Portfolio. A Portfolio
will only sell futures contracts to protect securities it owns against price
declines or purchase contracts to protect against an increase in the price of
securities it intends to purchase. As evidence of this hedging interest, the
Portfolio expects that approximately 75% of its futures contracts purchases
will be "completed"; that is, equivalent amounts of related securities will
have been purchased or are being purchased by the Portfolio upon sale of open
futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While the Portfolio will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolio will not enter into futures contract transactions to the ex-
tent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. The Portfo-
lio's outstanding obligations to purchase securities under these contracts may
be 100% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Portfolio has insuf-
ficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close futures positions also
could have an adverse impact on the Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contracts would result
in a total loss of the margin deposit, before any
5
<PAGE>
deduction for the transaction costs, if the account were then closed out. A
15% decrease would result in a loss equal to 150% of the original margin de-
posit if the contract were closed out. Thus, a purchase or sale of a futures
contract may result in excess of the amount invested in the contract. However,
because the futures strategies of the Portfolio are engaged in only for hedg-
ing purposes, the Adviser does not believe that the Portfolio is subject to
the risks of loss frequently associated with futures transactions. The Portfo-
lio would presumably have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying financial instrument and
sold it after the decline.
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures con-
tracts have different maturities than the portfolio securities being hedged.
It is also possible that the Portfolio could lose money on futures contracts
and also experience a decline in value of portfolio securities. There is also
the risk of loss by the Portfolio of margin deposits in the event of bank-
ruptcy of a broker with whom the Portfolio has an open position in a futures
contract.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging transac-
tions, the Portfolio is required for Federal income tax purposes to recognize
as income for each taxable year its net unrealized gains and losses on regu-
lated futures contracts as of the end of the year as well as those actually
realized during the year. In most cases any gains or loss recognized with re-
spect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or losses, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are in-
tended to hedge against a change in the value of securities held by the Port-
folio may affect the holding period of such securities and, consequently, the
nature of the gain or loss on such securities upon disposition.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986,
6
<PAGE>
as amended (the "Code"), at least 90% of its gross income for a taxable year
must be derived from qualifying income: i.e., dividends, interest, income de-
rived from loans of securities, and gains from the sale of securities of for-
eign currencies, or other income derived with respect to its business invest-
ing in such securities or currencies. In addition, gains realized on the sale
or other disposition of securities held for less than three months must be
limited to less than 30% of the Portfolio's annual gross income. It is antici-
pated that any net gain realized from the closing out of futures contracts
will be considered a gain from the sale of securities and therefore will be
qualifying income for purposes of the 90% requirement. In order to avoid real-
izing excessive gains on securities held for less than three months, the Port-
folio may be required to defer the closing out of futures contracts beyond the
time when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on futures contracts, which have been open for less than
three months as of the end of the Portfolio's fiscal year and which are recog-
nized for tax purposes, will not be considered gains on securities held for
less than three months for the purposes of the 30% test.
The Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures trans-
actions. Such distribution will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased without a sales commission, at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required for each Portfolio is $2,500 with certain excep-
tions as may be determined from time to time by the officers of the Fund. An
order received in proper form prior to the 4:00 p.m. close of the New York
Stock Exchange (the "Exchange") will be executed at the price computed on the
date of receipt; and an order received not in proper form or after the 4:00
p.m. close of the Exchange will be executed at the price computed on the next
day the Exchange is open after proper receipt. The Exchange will be closed on
the following days: Presidents' Day, February 17, 1997; Good Friday, March 28,
1997; Memorial Day, May 26, 1997; Independence Day, July 4, 1997; Labor Day,
September 1, 1997; Thanksgiving Day, November 27, 1997; Christmas Day, Decem-
ber 25, 1997; New Year's Day, January 1, 1998.
The Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such
7
<PAGE>
as employee benefit plans or under circumstances where certain economies can
be achieved in sales of the Portfolio's shares.
REDEMPTION OF SHARES
REDEMPTIONS
The Portfolio may suspend redemption privileges or postpone the date of pay-
ment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for
the Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Direc-
tors may deem advisable; however, payment will be made wholly in cash unless
the Directors believe that economic or market conditions exist which would
make such a practice detrimental to the best interests of the Fund. If redemp-
tions are paid in investment securities, such securities will be valued as set
forth in the Prospectus under "Valuation of Shares" and a redeeming share-
holder would normally incur brokerage expenses if these securities were con-
verted to cash.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES -- To protect your account, the Fund and Chase Global
Funds Services Company (the "Administrator") from fraud, signature guarantees
are required for certain redemptions. The purpose of signature guarantees is
to verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required in connection with (1) all redemp-
tions when the proceeds are to be paid to someone other than the registered
owner(s) and/or registered address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from the transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital
of at least $100,000. Credit unions must be
8
<PAGE>
authorized to issue signature guarantees. Signature guarantees will be ac-
cepted from any eligible guarantor institution which participates in a signa-
ture guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Serv-
ices" in the SAMI Preferred Stock Income Portfolio Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of the Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds -- Institutional Class Shares at the end of the Prospectus.) Ex-
change requests should be made by calling the Fund (1-800-638-7983) or by
writing to the UAM Funds, UAM Funds Service Center, c/o Chase Global Funds
Services Company, P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege
is only available with respect to Portfolios that are qualified for sale in
the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. (Eastern Time) will be processed as of the close of busi-
ness on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be respon-
sible for the authenticity of the exchange instructions received by telephone.
Exchanges may also be subject to limitations as to amounts or frequency, and
to other restrictions established by the Board of Directors to assure that
such exchanges do not disadvantage the Fund and its shareholders.
9
<PAGE>
For Federal income tax purposes an exchange between Portfolio is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person by mak-
ing a written request to the Fund. The request should clearly identify the ac-
count and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemp-
tion of Shares". As in the case of redemptions, the written request must be
received in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The SAMI Preferred Stock Income Portfolio is subject to the following re-
strictions, which are non-fundamental, and which may be changed by the Fund's
Board of Directors upon reasonable notice to investors. Investment limitation
(3) is classified as fundamental. The Portfolio's fundamental investment limi-
tation cannot be changed without approval by a "majority of the outstanding
shares" (as defined in the 1940 Act) of the Portfolio. These restrictions sup-
plement the investment objective and policies set forth in the Portfolio's
Prospectus. The Portfolio will not:
(1) invest in commodities, except for hedging, liquidity and related pur-
poses as provided in the Prospectus and herein;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii) enter-
ing into options, futures or repurchase transactions;
(4) purchase on margin or sell short;
(5) purchase or retain securities of an issuer if those Officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(6) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% of the total assets of the Portfolio, determined at the
time of
10
<PAGE>
investment, in securities subject to legal or contractual restrictions
on resale and for which there are no readily available markets, in-
cluding repurchase agreements having maturities of more than seven
days (until further notice, as an undertaking for state securities
registration purposes in Wisconsin, the Portfolio will limit such in-
vestments to 5% or less of its total assets, determined at the time of
investment);
(7) invest for the purpose of exercising control over management of any
company;
(8) acquire any securities of companies within one industry, other than
the utilities industry, if, as a result of such acquisition, more than
25% of the value of the Portfolio's total assets would be invested in
securities of companies within such industry; provided, however, that
there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
or instruments issued by U.S. banks when the Portfolio adopts a tempo-
rary defensive position; and
(9) write or acquire options or interests in oil, gas or other mineral ex-
ploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
Age: 67 President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec
Age: 47 Corporation and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
NORTON H. REAMER* Director, President and Chairman of the
One International Place Fund; President, Chief Executive Officer
Boston, MA 02110 and a Director of United Asset Management
Age: 60 Corporation; Director, Partner or Trustee
of each of the Investment Companies of
the Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square In-
Boston, MA 02111 vestors Corporation since 1988; Director
Age: 52 and Chief Executive Officer of H.T. In-
vestors, Inc., formerly a subsidiary of
Dewey Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place President and Chief Financial Officer of
Boston, MA 02110 United Asset Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund Distrib-
Boston, MA 02110 utors, Inc.; Vice President of Opera-
Age: 45 tions, Development and Control of Fidel-
ity Investments in 1995; Treasurer of the
Fidelity Group of Mutual Funds from 1991
to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice
211 Congress Street President of UAM Fund Services, Inc.;
Boston, MA 02110 former Manager of Fund Administration and
Age: 32 Compliance of Chase Global Fund Services
Company from 1995 to 1996; formerly
Senior Manager of Deloitte & Touche LLP
from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services,
Boston, MA 02110 Inc. and UAM Fund Distributors, Inc.; As-
Age: 28 sociate Attorney of Ropes & Gray (a law
firm) from 1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of
Boston, MA 02108 Chase Global Funds Services Company;
Age: 41 Senior Vice President, Secretary and
General Counsel of Lelan, O'Brien,
Rubenstein Associates, Inc. from November
1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
As of December 31, 1996, the Directors and officers of the Fund owned less than
1% of the Fund's outstanding shares.
12
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
or the Administrator and receive no compensation from the Fund. The following
table shows aggregate compensation paid to each of the Fund's unaffiliated Di-
rectors by the Fund and total compensation paid by the Fund, UAM Funds Trust
and AEW Commercial Mortgage Securities Fund, Inc. (collectively the "Fund Com-
plex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX PAID
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT TO DIRECTORS
--------------- --------------- ------------------- ---------------- ------------------- ---
<S> <C> <C> <C> <C> <C>
John T. Bennett, Jr. ... $ 25,463 0 0 $30,500
Director
J. Edward Day........... $ 25,463 0 0 $30,500
Former Director
Philip D. English....... $ 25,463 0 0 $30,500
Director
William A. Humenuk...... $ 25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996 the following persons or organizations owned of rec-
ord or beneficially 5% or more of the shares of the Portfolio:
Kansas City Power & Light Company, Kansas City, MO, 28.8%; Intercoast Capi-
tal Company, Wilmington, DE, 17.9%; Bank of America Illinois, FBO Sisters of
St. Francis Health Svc. Inc., Retirement Trust dated 01/01/76, Los Angeles,
CA, 15.9%; and Intercoast Capital Company, Wilmington, DE, 13.1%. M Life In-
surance Company, Attn: Larlyn Lacro, 205 SE Spokane St., Portland, OR, 11.1%;
KLT Investments Inc., 1201 Walnut 21st Fl., Kansas City, MO, 5%.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
The persons or organizations owning 25% or more of the outstanding shares of
the Portfolio may be presumed to control (as that term is defined in the 1940
Act) the Portfolio. As a result, those persons or organizations could have the
ability to vote a majority of the shares of the Portfolio on any matter re-
quiring the approval of shareholders of the Portfolio.
13
<PAGE>
INVESTMENT ADVISER
CONTROL OF ADVISER
Spectrum Asset Management, Inc. (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional in-
vestment management. Since its first acquisition in August 1983, UAM has ac-
quired or organized approximately 45 wholly-owned affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to re-
tain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
PHILOSOPHY AND STYLE
The Adviser has been managing diversified hedged preferred stock portfolios
for major institutional investors since 1987. Focused exclusively on preferred
stocks, Spectrum's three senior executives have a total of nearly 50 years of
experience in this specialized market. The firm uses sophisticated, proprie-
tary pricing and hedging models, in addition to the expertise of its invest-
ment professionals, to develop strategies which take advantage of market inef-
ficiencies and opportunities while mitigating the effect of interest rate
movements on the capital value of the Portfolio.
ADVISORY FEES
For the fiscal years ended October 31, 1994, 1995, and 1996, the Portfolio
paid advisory fees of $535,000, $385,000, and $173,576, respectively. During
the year ended October 31, 1996, the Advisor voluntarily waived advisory fees
of approximately $60,615.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the lowest
rate available when the Adviser believes it is reasonable to do so in light of
the value of the research, statistical, and pricing services provided by the
broker effecting the transaction. It is not the Fund's practice to allocate
brokerage or principal business on the basis of sales of
14
<PAGE>
shares which may be made through broker-dealer firms. However, the Adviser may
place portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios
for their clients. During the fiscal years ended October 31, 1994, 1995 and
1996 the entire Fund paid brokerage commissions of approximately $2,402,000,
$2,983,000 and $2,887,884, respectively.
The Portfolio may place a portion of its portfolio transactions with the Ad-
viser, which is a registered broker. Transactions placed with the Adviser are
subject to procedures adopted and supervised by the Board of Directors. For
the fiscal years ended October 31, 1994, 1995 and 1996, the entire Fund paid
commissions of approximately $177,000, $58,000 and $21,000, respectively, to
the Adviser for transactions placed through its brokerage facilities.
Some securities considered for investment by the Portfolio may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI"), and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, Chase Global Funds Services Company or its predecessor, Mutual
Funds Service Company, provided certain administrative services to the Fund
under an Administration Agreement between the Fund and U.S. Trust Company of
New York.
During the fiscal years ended October 31, 1994, 1995 and 1996, administra-
tive services fees paid to the Administrator by the SAMI Preferred Stock In-
come Portfolio totaled $90,000, $78,000 and $85,405, respectively. Of the fees
paid during the year ended October 31, 1996, the Portfolio paid $74,344 to
CGFSC and $11,061 to UAMFSI. The services provided by the Administrator and
the basis of the fees payable to the Administrator are described in the Port-
folio's Prospectus.
15
<PAGE>
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures to il-
lustrate past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used to compute or express performance
follows.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5, and 10 year periods
that would equate an initial hypothetical $1,000 investment to its ending re-
deemable value. The calculation assumes that all dividends and distributions
are reinvested when paid. The quotation assumes the amount was completely re-
deemed at the end of each 1, 5 and 10 year period and the deduction of all ap-
plicable Fund expenses on an annual basis. The average annual total rates of
return for the SAMI Preferred Stock Income Portfolio from inception and for
the one year period ended on the date of the Financial Statements included
herein, are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR THROUGH YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 DATE
----------- --------------- ---------
<S> <C> <C> <C>
SAMI Preferred Stock Income Portfolio.... 8.17% 4.73% 6/23/92
</TABLE>
These figures were calculated according to the following formula:
P(1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or
10 year periods (or fractional portion thereof).
YIELD
Current yield reflects the income per share earned by the Portfolio's in-
vestment.
16
<PAGE>
The current yield of the Portfolio is determined by dividing the net invest-
ment income per share earned during a 30-day base period by the maximum offer-
ing price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the base period. The yield for the SAMI Preferred Stock Income Portfo-
lio for the 30-day period ended October 31, 1995 was 5.84%.
This figure was obtained using the following formula:
a - b
Yield = 2[(----- + 1)/6/-1]
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period
TAXABLE EQUIVALENT YIELD
In addition to its standardized performance quotations, the SAMI Preferred
Stock Income Portfolio may from time to time quote a non-standardized perfor-
mance figure for taxable equivalent yield. Taxable equivalent yield represents
the return that a corporate tax-paying investor qualifying for the 70% divi-
dends received deduction would need to earn on a fully taxable investment in
order to achieve an equivalent after-tax yield during a specified time period.
For the twelve months ended October 31, 1996, the SAMI Preferred Stock Income
Portfolio's taxable equivalent yield was . This figure was calculated using
the following formula:
A Given Quarter = [(DI X (1 - CT X DRD)/(1 - CT)) + (I-E) + Net Realized and
Unrealized Capital Gains]
-----------------------------------------------------------------
Average Net Assets During Quarter
Taxable Equivalent Yield = [(Q1 + 1) X(Q2 + 1) X (Q3 + 1) X (Q4 + 1)] -- 1
where:
DI = dividend income from domestic equity securities subject to the
dividends received deduction for qualifying investors,
CT = corporate income tax rate,
DRD = dividends received deduction,
I = interest and dividend income not subject to the dividends re-
ceived deduction,
E = expenses and fees incurred during the period,
Q1 = 1st Quarter,
Q2 =2nd Quarter,
Q3 =3rd Quarter, and
Q4 =4th Quarter.
17
<PAGE>
The formula used to derive taxable equivalent yield is in accordance with
the acceptable methods set forth by the Association of Investment Management
and Research ("AIMR").
COMPARISONS
To help investors better evaluate how an investment in the Portfolio might
satisfy their investment objective, advertisements regarding the Fund may dis-
cuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated
above) to performance as reported by other investments, indices and averages.
The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -- re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe. Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
18
<PAGE>
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency issues
and mortgage pass through securities.
(k) Salomon 1-3 Year Treasury 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.
(l) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(o) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(p) Composite indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
19
<PAGE>
Times, Global Investor, Wall Street Journal and Weisenberger Invest-
ment Companies Service -- publications that rate fund performance over
specified time periods.
(t) Consumer Price Index (or cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates -- historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(v) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. In addition, there can be no assur-
ance that the Fund will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be addressed to the Fund at UAM Funds Service Center,
c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798.
The Fund's Articles of Incorporation, as amended, authorize the Directors to
issue 3,000,000,000 shares of common stock, $.001 par value. The Board of Di-
rectors has the power to designate one or more series (Portfolios) or classes
of common stock and to classify or reclassify any unissued shares with respect
to such Portfolios, without further action by shareholders.
20
<PAGE>
The shares of each Portfolio of the Fund, when issued and paid for as pro-
vided for in its Prospectus, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative vot-
ing rights, which means that the holders of more than 50% of the shares voting
for the election of Directors can elect 100% of the Directors if they choose
to do so. A shareholder is entitled to one vote for each full share held (and
a fractional vote for each fractional share held), then standing in his or her
name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of a Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in each Prospectus). The amounts of any income dividends or
capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of the Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in each Prospectus.
As set forth in each Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the Portfolio at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
FEDERAL TAXES
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from
21
<PAGE>
loans of securities, and gains from the sale of securities or foreign curren-
cies, or other income derived with respect to its business of investing in
such securities or currencies. In addition, gains realized on the sale or
other disposition of securities held for less than three months must be lim-
ited to less than 30% of the Portfolio's annual gross income.
The Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes. Shareholders will
be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the SAMI Preferred Stock Income Portfolio for
the fiscal period ended October 31, 1996 and the Financial Highlights for the
respective periods presented, which appear in the Portfolio's 1996 Annual Re-
port to Shareholders, and the report thereon of Price Waterhouse LLP, indepen-
dent accountants, also appearing therein, are on the following pages.
22
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (97.1%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (10.8%)
BankAmerica Corp., Series K, 8.375%......................... 20,000 $ 520,000
Chase Manhattan Corp.-New, Series M, 8.40%.................. 10,000 261,250
Fleet Financial Group, Inc., Series VI, 6.75%............... 10,000 501,250
Household International, Series 92-A, 8.25%................. 43,000 1,171,750
Morgan Stanley Group, Inc., 7.75%........................... 5,000 262,500
Republic NY Corp., Series C, $1.94.......................... 10,300 260,590
---------
2,977,340
- -------------------------------------------------------------------------------
INDUSTRIAL (3.1%)
Ford Motor Co., Series B, 8.25%............................. 31,700 859,863
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.7%)
McDonald's Corp., Series E, 7.72%........................... 17,700 457,987
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.8%)
GTE Florida, Inc., Series A, $1.25.......................... 10,750 204,519
- -------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (80.7%)
Alabama Power Co., 4.52%.................................... 4,465 311,434
Alabama Power Co., 6.40%.................................... 13,600 327,828
Appalachian Power Co., 7.80%................................ 3,500 370,125
Atlantic City Electric Co., 4.75%........................... 8,800 611,600
Baltimore Gas & Electric Co., 6.99%......................... 11,000 1,157,750
Central Illinois Light Co., 5.85%........................... 10,000 1,012,500
Empire District Electric Co., 8.125%........................ 115,365 1,211,333
Florida Power & Light Co., Series U, 6.75%.................. 11,000 1,150,875
Georgia Power Co., $4.92.................................... 6,210 465,905
Gulf Power Co., 5.16%....................................... 1,638 125,962
Hawaiian Electric Co., Series R, 8.75%...................... 5,270 554,668
Indiana Michigan Power Co., 6.875%.......................... 5,000 526,250
Indianapolis Power & Light Co., 8.20%....................... 7,310 741,965
Jersey Central Power & Light Co., 8.65%..................... 2,500 261,875
Kentucky Utility Co., 6.53%................................. 12,330 1,246,871
Montana Power Co., $6.875................................... 10,500 1,084,125
NICOR, Inc., 4.48%.......................................... 28,000 1,106,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (CONTINUED)
Pacific Enterprises, Inc., $4.36.......................... 21,130 $1,420,993
Phillips Gas Co., Series A, 9.32%......................... 44,340 1,152,840
PSI Energy Co., 6.875%.................................... 11,900 1,246,525
Public Service Electric & Gas Co., 4.08%.................. 14,615 906,495
Puget Sound Power & Light Co., 4.84%...................... 3,200 255,200
Southern California Edison Co., 4.24%..................... 76,300 1,266,580
Southern California Edison Co., 6.05%..................... 5,000 498,750
Union Electric Co., $4.56................................. 15,800 1,102,050
UtiliCorp United, Inc., $2.05............................. 2,200 56,210
Virginia Electric & Power Co., $7.05...................... 7,500 796,875
Wisconsin Power & Light Co., 4.76%........................ 6,300 472,657
WPS Resources Corp., 6.88%................................ 7,500 774,375
----------
22,216,616
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $25,290,776) 26,716,325
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
CONTRACTS
- --------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED PUT OPTIONS (0.4%)
- --------------------------------------------------------------------------------
*U.S. Treasury Bond expiring 3/1/97, strike price $108.... 10 9,062
*U.S. Treasury Bond expiring 3/1/97, strike price $110.... 2 2,906
*U.S. Treasury Bond expiring 3/1/97, strike price $112.... 38 85,500
- --------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS
(COST $108,997).......................................... 97,468
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.9%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.9%)
Chase Securities, Inc., 5.58% dated 10/31/96, due 11/1/96,
to be repurchased at $255,040, collateralized by
$246,486 of various U.S. Treasury Notes, 5.875%-7.75%,
due 3/31/99-11/30/99, valued at $255,000
(COST $255,000)......................................... $255,000 $ 255,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.4%)
(COST $25,654,773)(A).................................... 27,068,793
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.6%)........................ 459,169
- --------------------------------------------------------------------------------
NET ASSETS (100%).......................................... $27,527,962
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
(a) The cost for federal income tax purposes was $25,654,773. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$1,414,020. This consisted of aggregate gross unrealized appreciation for
all securities of $1,468,766 and aggregate gross unrealized depreciation
for all securities of $54,746.
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................. $25,654,773
===========
Investments, at Value............................................ $27,068,793
Cash............................................................. 917
Margin Deposit on Futures Contracts.............................. 400,000
Dividends Receivable............................................. 161,661
Other Assets..................................................... 1,177
- -------------------------------------------------------------------------------
Total Assets.................................................... 27,632,548
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Daily Variation Margin on Futures.................... 53,031
Payable for Investment Advisory Fees............................. 9,448
Payable for Administrative Fees.................................. 7,119
Payable for Custodian Fees....................................... 2,643
Payable for Directors' Fees...................................... 698
Other Liabilities................................................ 31,647
- -------------------------------------------------------------------------------
Total Liabilities............................................... 104,586
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $27,527,962
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $34,065,466
Undistributed Net Investment Income.............................. 155,978
Accumulated Net Realized Loss.................................... (7,469,566)
Unrealized Appreciation.......................................... 776,084
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $27,527,962
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000).................................................... 2,946,997
Net Asset Value, Offering and Redemption Price Per Share......... $ 9.34
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 2,332,441
Interest................................................ 106,435
- --------------------------------------------------------------------------------
Total Income........................................... 2,438,876
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............................................. $234,191
Less: Fees Waived...................................... (60,615) 173,576
--------
Administrative Fees--Note C............................. 85,405
Printing Fees........................................... 24,194
Registration and Filing Fees............................ 17,554
Audit Fees.............................................. 12,857
Custodian Fees--Note D.................................. 7,567
Directors' Fees--Note G................................. 3,034
Legal Fees.............................................. 2,767
Other Expenses.......................................... 7,216
- --------------------------------------------------------------------------------
Total Expenses......................................... 334,170
Expense Offset--Note A.................................. (755)
- --------------------------------------------------------------------------------
Net Expenses........................................... 333,415
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................... 2,105,461
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments............................................. 813,992
Futures................................................. (234,255)
- --------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS)........................... 579,737
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments............................................. (544,896)
Futures................................................. 465,000
- --------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION.............................. (79,896)
- --------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS..... 499,841
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 2,605,302
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 2,105,461 $ 3,867,442
Net Realized Gain (Loss)............................ 579,737 (6,100,707)
Net Change in Unrealized Appreciation/Depreciation.. (79,896) 5,514,224
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations....................................... 2,605,302 3,280,959
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (2,176,090) (4,279,000)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular..................................... 4,747,638 4,051,752
--In Lieu of Cash Distributions................... 1,740,608 4,248,750
Redeemed............................................ (13,178,408) (64,734,168)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions....... (6,690,162) (56,433,666)
- ----------------------------------------------------------------------------------
Total Decrease...................................... (6,260,950) (57,431,707)
Net Assets:
Beginning of Period................................. 33,788,912 91,220,619
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $155,978 and $226,607,
respectively)..................................... $ 27,527,962 $ 33,788,912
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 515,084 443,571
In Lieu of Cash Distributions....................... 191,511 465,772
Shares Redeemed..................................... (1,428,353) (7,063,332)
- ----------------------------------------------------------------------------------
(721,758) (6,153,989)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JUNE 23,
YEARS ENDED OCTOBER 31, 1992** TO
------------------------------------ OCTOBER 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 9.21 $ 9.29 $ 9.98 $ 10.09 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income..... 0.58 0.67 0.60 0.60 0.14
Net Realized and
Unrealized Gain (Loss).. 0.14 (0.08) (0.71) (0.07) 0.03
- -------------------------------------------------------------------------------
Total From Investment
Operations............. 0.72 0.59 (0.11) 0.53 0.17
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income..... (0.59) (0.67) (0.58) (0.61) (0.08)
In Excess of Net Realized
Gain.................... -- -- -- (0.03) --
- -------------------------------------------------------------------------------
Total Distributions...... (0.59) (0.67) (0.58) (0.64) (0.08)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................... $ 9.34 $ 9.21 $ 9.29 $ 9.98 $ 10.09
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN............... 8.17%+ 6.67% (1.15)% 5.47%+ 1.70%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands).............. $27,528 $33,789 $91,221 $49,671 $23,904
Ratio of Expenses to
Average Net Assets....... 0.99% 0.98% 0.89% 0.82% 0.97%*
Ratio of Net Investment
Income to Average Net
Assets................... 6.26% 7.03% 6.45% 6.10% 6.36%*
Portfolio Turnover Rate.... 77% 44% 65% 144% 16%
Average Commission Rate #.. $0.0302 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share........ $ 0.02 N/A N/A $ 0.01 $ 0.02
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets.................. 0.99% 0.98% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain expenses not been waived and
expenses assumed during the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The SAMI Pre-
ferred Stock Income Portfolio (the "Portfolio"), a portfolio of UAM Funds,
Inc., is a diversified, open-end management investment company. At October 31,
1996, the UAM Funds were composed of forty active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the SAMI Preferred Stock Income Portfolio is to provide a high level of
dividend income consistent with capital preservation.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: Exchange listed preferred securities for which
market quotations are readily available may be valued at the last quoted
sales price as of the close of business on the day the valuation is made
by the primary exchange on which the securities are traded. Under proce-
dures approved by the Board of Directors, fixed income securities and most
fixed-dividend preferred securities are valued according to the broadest
and most representative market which will ordinarily be the over-the-
counter market or if there is no actively quoted market price, the securi-
ties may be valued based on a matrix system which considers such factors
as security prices, yields and maturities. Short-term investments that
have remaining maturities of sixty days or less at time of purchase are
valued at amortized cost, if it approximates market value. The value of
other assets and securities for which no quotations are readily available
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 qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
At October 31, 1996, the Portfolio had available $8,119,031 of capital
loss carryover for Federal income tax purposes, which will expire October
31, 2003. For the year ended October 31, 1996, the Portfolio utilized cap-
ital loss carryovers for Federal income tax purposes of $1,123,458.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
F-10
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. FUTURES AND OPTIONS CONTRACTS: The Portfolio may use futures and op-
tions contracts to hedge against changes in the values of securities the
Portfolio owns or expects to purchase. The Portfolio may also write cov-
ered options on securities it owns or in which it may invest to increase
its current returns.
The potential risk to the Portfolio is that the change in value of
futures and options contracts may not correspond to the change in value of
the hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is unable
to perform.
Futures contracts are valued at the quoted daily settlement prices es-
tablished by the exchange on which they trade. Exchange traded options are
valued at the last sale price, or if no sales are reported, the last bid
price for purchased options and the last ask price for written options.
The Portfolio had the following futures contracts open at October 31,
1996:
<TABLE>
<CAPTION>
NET UNREALIZED
NUMBER OF AGGREGATE EXPIRATION APPRECIATION
CONTRACTS CONTRACTS FACE VALUE DATE (DEPRECIATION)
--------- --------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury Long
Bond.................. 119 $13,447,000 December 1996 $(552,469)
U.S. Treasury 10 Year
Note.................. 25 2,740,625 December 1996 (85,467)
---------
$(637,936)
=========
</TABLE>
F-11
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income monthly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles.
6. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date. Interest income is recognized on the accrual basis. Discounts and
premiums on securities purchased are amortized using the effective yield
basis 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 ap-
portioned among the portfolios of the UAM Funds and AEW Commercial Mort-
gage Securities Fund, Inc. ("AEW"), an affiliated closed-end management
investment company, based on their relative net assets. Custodian fees for
the Portfolio have been increased to include expense offsets for custodian
balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Spectrum Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory serv-
ices to the Portfolio at 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, if necessary, in order to keep the Port-
folio's total annual operating expenses, after the effect of expense offset ar-
rangements, from exceeding 0.99% of average daily net assets.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the
F-12
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
combined aggregate net assets; plus 0.05% of the combined aggregate net assets
in excess of $3 billion. The fees are allocated among the portfolios of the UAM
Funds and AEW on the basis of their relative net assets and are subject to a
graduated minimum fee schedule per portfolio which rises from $2,000 per month,
upon inception of a portfolio, to $70,000 annually after two years. For portfo-
lios with more than one class of shares, the minimum annual fee increases to
$90,000. In addition, the Administrator receives a Portfolio-specific monthly
fee of 0.06% of average daily net assets of the Portfolio. Also effective April
15, 1996, the Administrator has entered into a Mutual Funds Service Agreement
with Chase Global Funds Services Company ("CGFSC"), an affiliate of The Chase
Manhattan Bank, under which CGFSC agrees to provide certain services, including
but not limited to, administration, fund accounting, dividend disbursing and
transfer agent services. Pursuant to the Mutual Funds Service Agreement, the
Administrator pays CGFSC a monthly fee. For the period April 15, 1996 to Octo-
ber 31, 1996, UAM Fund Services, Inc. earned $51,355 from the Portfolio as Ad-
ministrator of which $40,294 was paid to CGFSC for their services.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net assets
in excess of $1 billion but less than $3 billion; plus 0.06% of the combined
aggregate net assets in excess of $3 billion. The fees were allocated among the
portfolios of the UAM Funds and AEW on the basis of their relative net assets
and were subject to a graduated minimum fee schedule per portfolio which rose
from $2,000 per month, upon inception of a portfolio, to $70,000 annually after
two years. For the period November 1, 1995 to April 15, 1996, CGFSC earned
$34,050 from the Portfolio as Administrator.
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the "Bank"),
an affiliate of CGFSC, is custodian for the Portfolio's assets held in accor-
dance with the custodian agreement. For the period July 17, 1996 to October 31,
1996, the amount charged to the Portfolio by the bank aggregated $1,830, all of
which is unpaid at October 31, 1996.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F-13
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
F. PURCHASES AND SALES: For the year ended October 31, 1996, the Portfolio
made purchases of $23,859,288 and sales of $26,913,454 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases or sales of long-term U.S. Government securities.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. CONCENTRATION OF CREDIT: The Portfolio invests primarily in preferred and
fixed income securities in the utilities industry. The Portfolio is more sus-
ceptible to economic factors adversely affecting the utilities industry than
portfolios that are not concentrated in this industry to the same extent.
I. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating portfolio based on its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolio had no borrowings under the agreement.
J. OTHER: At October 31, 1996, 87.5% of total shares outstanding were held by
5 record shareholders owning 10% or greater of the aggregate total shares out-
standing.
The Portfolio placed a portion of its portfolio transactions with the Advis-
er, which is a registered broker/dealer. The commissions paid to the Adviser
for the year ended October 31, 1996 amounted to $20,605. For the year ended Oc-
tober 31, 1996 the Adviser waived a portion of its commissions, amounting to
$11,745 for the Portfolio.
F-14
<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 assets and liabilities, includ-
ing the portfolio of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SAMI Preferred Stock Income Port-
folio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October 31,
1996, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial high-
lights (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 stan-
dards which require that we plan and perform the audit to obtain reasonable as-
surance about whether the financial statements are free of material misstate-
ment. 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, 1996 by correspondence with
the custodians and brokers and the application of alternative auditing proce-
dures where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
For the year ended October 31, 1996, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
100.0%.
F-15
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
AAA -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
BAA -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
A-1
<PAGE>
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies the numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indi-
cates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or minus
sign, which is used to show relative standing within the major rating catego-
ries except in the AAA, CC, C, CI and D categories.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instru-
A-2
<PAGE>
mentalities which have been established or sponsored by the United States Gov-
ernment.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make "indefi-
nite and unlimited" drawings on the U.S. Treasury, if needed, to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not guar-
anteed by the United States, but those institutions are protected by the dis-
cretionary authority of the U.S. Treasury to purchase certain amounts of their
securities to assist the institution in meeting its debt obligations. Finally,
other agencies and instrumentalities, such as the Farm Credit System and the
Federal Home Loan Mortgage Corporation, are federally chartered institutions
under government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolio may invest in commercial paper (including variable amount mas-
ter demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by S&P.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not ex-
ceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally
A-3
<PAGE>
contemplated that such instruments will be traded, and there is no secondary
market for these notes, although they are redeemable (and thus immediately re-
payable by the borrower) at face value, plus accrued interest, at any time. In
connection with the Portfolio's investment in variable amount master demand
notes, the Adviser's investment management staff will monitor, on an ongoing
basis, the earning power, cash flow and other liquidity ratios of the issuer,
and the borrower's ability to pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's in-
dustry or industries and the appraisal of speculative-type risks which may be
inherent in certain areas; (3) evaluation of the issuer's products in relation
to completion and customer acceptance; (4) liquidity; (5) amount and quality
of long term debt; (6) trend of earnings over a issuer; (7) financial strength
of a parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such obliga-
tions.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers; such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolio is also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A bankers'
A-4
<PAGE>
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods). The borrower is liable for pay-
ment as well as the bank which unconditionally guarantees to pay the draft at
its face amount on the maturity date. Most acceptances have maturities of six
months or less and are traded in the secondary markets prior to maturity.
A-5
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
SIRACH PORTFOLIOS
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
Sirach Portfolios' Institutional Class Shares dated January 3, 1997 and the
Prospectus relating to the Sirach Strategic Balanced, Growth, Special Equity
and Equity Portfolios' Institutional Service Class Shares (the "Service Class
Shares") dated January 3, 1997. To obtain a Prospectus, please call the UAM
Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 7
Shareholder Services....................................................... 8
Investment Limitations..................................................... 10
Management of the Fund..................................................... 12
Investment Adviser......................................................... 16
Service and Distribution Plans............................................. 17
Portfolio Transactions..................................................... 20
Administrative Services.................................................... 21
Performance Calculations................................................... 21
General Information........................................................ 27
Financial Statements....................................................... 29
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Sirach Strategic Balanced, Fixed Income, Growth, Short-Term Reserves, Spe-
cial Equity and Equity Portfolios (the "Portfolios') as set forth in the
Sirach Portfolios' Prospectuses:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed above.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other
2
<PAGE>
currencies, (ii) in the case of U.S. banks, it is a member of the Federal De-
posit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each
Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit Banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FUTURES CONTRACTS
The Sirach Fixed Income Portfolio may enter into futures contracts, options,
and options on futures contracts for the purposes of remaining fully invested
and reducing transactions costs. Futures contracts provide for the future sale
by one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. Futures con-
tracts which are standardized as to maturity date and underlying financial in-
strument are traded on national futures exchanges. Futures exchanges and trad-
ing are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying"
a contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
3
<PAGE>
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed 5% of the liquidation value of a
Portfolio. The Portfolio will only sell futures contracts to protect securi-
ties it owns against price declines or purchase contracts to protect against
an increase in the price of securities it intends to purchase. As evidence of
this hedging interest, the Portfolio expects that approximately 75% of its
futures contracts purchases will be "completed"; that is, equivalent amounts
of related securities will have been purchased or are being purchased by the
Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While the Portfolio will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
4
<PAGE>
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Sirach Fixed Income Portfolio will not enter into futures contract
transactions to the extent that, immediately thereafter, the sum of its ini-
tial margin deposits on open contracts exceeds 5% of the market value of its
total assets. In addition, the Portfolio will not enter into futures contracts
to the extent that its outstanding obligations to purchase securities under
these contracts would exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Sirach Fixed Income Portfolio would continue to be required to make daily
cash payments to maintain its required margin. In such situations, if the
Portfolio has insufficient cash, it may have to sell Portfolio securities to
meet daily margin requirements at a time when it may be disadvantageous to do
so. In addition, the Portfolio may be required to make delivery of the instru-
ments underlying futures contracts it holds. The inability to close options
and futures positions also could have an adverse impact on the Portfolio's
ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contracts would result
in a total loss of the margin deposit, before any deduction for the transac-
tion costs, if the account were then closed out. A 15% decrease would result
in a loss equal to 150% of the original margin deposit if the contract were
closed out. Thus, a purchase or sale of a futures contract may result in ex-
cess of the amount invested in the contract. However, because the futures
strategies of the Portfolio is engaged in only for hedging purposes, the Ad-
viser does not believe that the Portfolio is subject to the risks of loss fre-
quently associated with futures transactions. The Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures con-
tracts have different maturities than the Portfolio securities being hedged.
It is also possible that the Portfolio could lose money on futures contracts
and also experience a
5
<PAGE>
decline in value of Portfolio securities. There is also the risk of loss by
the Portfolio of margin deposits in the event of bankruptcy of a broker with
whom the Portfolio has an open position in a futures contract or related op-
tion.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging transac-
tions, the Portfolio is required for Federal income tax purposes to recognize
as income for each taxable year its net unrealized gains and losses on regu-
lated futures contracts as of the end of the year as well as those actually
realized during the year. In most cases, any gain or loss recognized with re-
spect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are in-
tended to hedge against a change in the value of securities held by the Port-
folio may affect the holding period of such securities and, consequently, the
nature of the gain or loss on such securities upon disposition.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income: i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or foreign currencies, or other income derived with respect to its
business of investing in such securities or currencies. In addition, gains re-
alized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of the Portfolio's annual gross in-
come. It is anticipated that any net gain realized from the closing out of
futures contracts will be considered a gain from the sale of securities and
therefore will be qualifying income for purposes of the 90% requirement. In
order to avoid realizing excessive gains on securities held for less than
three months, the Portfolio may be required to defer the closing out of
futures contracts beyond the time when it would otherwise be advantageous to
do so. It is anticipated that unrealized gains on futures contracts, which
have been open for less than three months as of the end of the Portfolio's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities held for less than three months for the purposes of the
30% test.
6
<PAGE>
The Sirach Fixed Income Portfolio will distribute to shareholders annually
any net capital gains which have been recognized for Federal income tax pur-
poses (including unrealized gains at the end of the Portfolio's fiscal year)
on futures transactions. Such distributions will be combined with distribu-
tions of capital gains realized on the Portfolio's other investments, and
shareholders will be advised on the nature of the payments.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's Cus-
todian. The minimum initial investment required is $2,500 with certain excep-
tions as may be determined from time to time by officers of the Fund. Other
investment minimums are: initial IRA investment, $500; initial spousal IRA in-
vestment, $250; minimum additional investment for all accounts, $100. An order
received in proper form prior to the 4:00 p.m. close of the New York Stock Ex-
change ("Exchange") will be executed at the price computed on the date of re-
ceipt; and an order received not in proper form or after the 4:00 p.m. close
of the Exchange will be executed at the price computed on the next day the Ex-
change is open after proper receipt. The Exchange will be closed on the fol-
lowing days: Presidents' Day, February 17, 1997; Good Friday, March 28, 1997;
Memorial Day, May 26, 1997; Independence Day, July 4, 1997; Labor Day, Septem-
ber 1, 1997; Thanksgiving Day, November 27, 1997; Christmas Day, December 25,
1997; New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interest of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such
7
<PAGE>
commitment is irrevocable without the prior approval of the Commission. Re-
demptions in excess of the above limits may be paid in whole or in part, in
investment securities or in cash, as the Directors may deem advisable; howev-
er, payment will be made wholly in cash unless the Directors believe that eco-
nomic or market conditions exist which would make such a practice detrimental
to the best interests of the Fund. If redemptions are paid in investment secu-
rities, such securities will be valued as set forth in the Prospectus under
"Valuation of Shares" and a redeeming shareholder would normally incur broker-
age expenses if these securities were converted to cash.
No charge is made by the Portfolios for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolios.
SIGNATURE GUARANTEES -- To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account. Sig-
nature guarantees are required in connection with (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) or reg-
istered address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the Portfolios' Prospectuses:
8
<PAGE>
EXCHANGE PRIVILEGE
Institutional Class Shares of each Sirach Portfolio may be exchanged for In-
stitutional Class Shares of the other Sirach Portfolios and Service Class
Shares of each Sirach Portfolio may be exchanged for Service Class Shares of
the other Sirach Portfolios. In addition, Institutional Class Shares of each
Sirach Portfolio may be exchanged for any other Institutional Class Shares of
a Portfolio included in the UAM Funds which is comprised of the Fund and UAM
Funds Trust. (See the list of Portfolios of the UAM Funds -- Institutional
Class Shares at the end of the Sirach Portfolios -- Institutional Class Shares
Prospectus.) Service Class Shares of the Sirach Strategic Balanced, Growth,
Special Equity and Equity Portfolios may be exchanged for any other Service
Class Shares of a Portfolio included in the UAM Funds which is comprised of
the Fund and UAM Funds Trust. (For those Portfolios currently offering Service
Class Shares, please call the UAM Funds Service Center.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM
Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O.
Box 2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are qualified for sale in a shareholder's state of
residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder, and the reg-
istration of the two accounts will be identical. Requests for exchanges re-
ceived prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed
on the next business day. Neither the Fund nor CGFSC will be responsible for
the authenticity of the exchange instructions received by telephone. Exchanges
may also be subject to limitations as to amounts or frequency and to other re-
strictions established by the Fund's Board of Directors to assure that such
exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want
9
<PAGE>
to consult your tax adviser for further information in this regard. The ex-
change privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a written re-
quest to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered own-
ers and all stock certificates, if any, which are subject to the transfer. The
signature on the letter of request, the stock certificate or any stock power
must be guaranteed in the same manner as described under "Redemption of
Shares". As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectuses.
Whenever an investment limitation sets forth a percentage limitation on in-
vestment or utilization of assets, such limitation shall be determined immedi-
ately after and as a result of a Portfolio's acquisition of such security or
other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered
when determining whether the investment complies with the Portfolio's invest-
ment limitations.
Each Portfolio is subject to the following limitations which are fundamental
policies and may not be changed without the approval of the lesser of: (1) at
least 67% of the voting securities of a Portfolio present at a meeting if the
holders of more than 50% of the outstanding voting securities of a Portfolio
are present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of a Portfolio. Each Portfolio will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships, al-
though it may purchase or sell securities of companies which deal in
real estate and may purchase and sell securities which are secured by
interests in real estate;
(3) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer;
(4) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
(5) borrow money, except (i) from banks and as a temporary measure for
extraordinary or emergency purposes or (ii) except in connection with
reverse repurchase agreements provided that (i) and (ii) in combina-
tion
10
<PAGE>
do not exceed 33 1/3% of the Portfolios' total assets (10% for the
Sirach Special Equity Portfolio) (including the amount borrowed) less
liabilities (exclusive of borrowings);
(6) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of a Portfolio's
total assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities or instruments issued by U.S. banks
when a Portfolio adopts a temporary defensive position;
(7) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and policies, or entering into repur-
chase agreements, subject to the limitation described in (d) below
and (ii) by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or inter-
pretations of the Commission thereunder; and
(8) underwrite the securities of other issuers;
(9) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into options and futures (for the Sirach Fixed Income Portfolio) or
repurchase transactions;
The following limitations are fundamental policies of the Sirach Special Eq-
uity Portfolio and non-fundamental policies of the Sirach Strategic Balanced,
Sirach Growth, Sirach Fixed Income, Sirach Short-Term Reserves and Equity
Portfolios. Each of the Portfolios will not:
(a) purchase on margin or sell short;
(b) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment advisor owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(c) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(d) invest more than an aggregate of 10% of the net assets of the Portfo-
lio (15% for the Sirach Strategic Balanced, Sirach Growth, Sirach
Fixed Income, Sirach Short-Term Reserves and Equity Portfolios), de-
termined at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there are
no readily available markets, including repurchase agreements having
maturities of more than seven days;
11
<PAGE>
(e) invest for the purpose of exercising control over management of any
company;
(f) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) continuous opera-
tions consisting of less than three years; and
(g) write or acquire options or interests in oil, gas, mineral leases or
other mineral exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years. As of December 31, 1996, the Di-
rectors and officers of the Fund owned less than 1% of the Fund's outstanding
shares.
<TABLE>
<S> <C>
JOHN T. BENNETT, JR. College Director of the Fund; President of Squam
Road -- RFD 3 Meredith, NH 03253 Investment Management Company, Inc. and
Age 67 Great Island Investment Company, Inc.;
President of Bennett Management Company
from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief
16 West Madison Street Baltimore, Executive Officer of Broventure Company,
MD 21201 Age 47 Inc.; Chairman of the Board of Chektec Cor-
poration and Cyber Scientific, Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Phila-
4000 Bell Atlantic Tower delphia office of the law firm Dechert
1717 Arch Street Price & Rhoads; Director, Hofler Corp.
Philadelphia, PA 19103
Age 54
NORTON H. REAMER* Director, President and Chairman of the
One International Place Boston, MA Fund; President, Chief Executive Officer
02110 Age 60 and a Director of United Asset Management
Corporation; Director, Partner or Trustee
of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief
One Financial Center Boston, MA Investment Officer of Dewey Square Invest-
02111 ors Corporation since 1988; Director and
Age 52 Chief Executive Officer of H.T. Investors,
Inc., formerly a subsidiary of Dewey
Square.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
12
<PAGE>
<TABLE>
<S> <C>
WILLIAM H. PARK* Vice President of the Fund; Executive Vice
One International Place Boston, President and Chief Financial Officer of
MA 02110 United Asset Management Corporation.
Age 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM
211 Congress Street Boston, MA Fund Services, Inc. and UAM Fund Distribu-
02110 tors, Inc.; Vice President of Operations,
Age 45 Development and Control of Fidelity Invest-
ments in 1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice Pres-
211 Congress Street Boston, MA ident of UAM Fund Services, Inc.; former
02110 Manager of Fund Administration and Compli-
Age 32 ance of Chase Global Fund Services Company
from 1995 to 1996; formerly Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund, Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc., Associate
Age 28 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company; Senior Vice
Age 41 President, Secretary and General Counsel of
Leland, O'Brien, Rubinstein Associates,
Inc., from November 1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
or Chase Global Funds Services Company and receive no compensation from the
Fund. The following table shows aggregate compensation paid to each of the
Fund's unaffiliated Directors by the Fund and total compensation paid by the
Fund, UAM Funds Trust and AEW Commercial
13
<PAGE>
Mortgage Securities Fund, Inc. (collectively the "Fund Complex") in the fiscal
year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day ... Former $25,463 0 0 $30,500
Director
Philip D. English ...... $25,463 0 0 $30,500
Director
William A. Humenuk ..... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of a Portfolio, as noted.
Sirach Strategic Balanced Portfolio Institutional Class Shares: South Bay
Hotel Employees & Restaurant Employees Pension Plan, c/o United Administrative
Services, P.O. Box 5057, San Jose, CA, 7.9%; Alaska Bricklayers Retirement
Plan, 407 Denali Street, Anchorage, AK, 7.8%; Hartnat & Co., VECO, P.O. Box
4044, Boston, MA, 7%*; Wendel & Co., Tractor & Equipment, c/o The Bank of New
York, Mutual Fund Section, P.O. Box 1066, Wall Street Station, New York, NY,
5.5%; U.S. Bank of Washington, Trustee, FBO King County Medical Blue Shield
401(k), c/o U.S. Bank of Oregon, Trust Mutual Funds, P.O. Box 3168, Portland,
OR, 5.4%*; National Bank of Alaska, FBO Flight Crew Members Employed by
Markair Retirement Plan, P.O. Box 100600, Anchorage, AK, 5.3%*; Huntington
Bank, Inc., Trustee, FBO Diocese of Covington and Other Participating Employ-
ers, Pen and Investment Plan, P.O. Box 712, Attn: Robert Munninghoff, Coving-
ton, KY, 5.0%*.
Sirach Fixed Income Portfolio Institutional Class Shares: Ciri Foundation,
2600 Cordova Street, Anchorage, AK, 25.8%; Seattle First National Bank, Custo-
dian Conner Development, P.O. Box 3577, Terminal Annex, Los Angeles, CA,
15.9%*; Hartnat & Co., VECO, P.O. Box 4044, Boston, MA, 10%*; Robert D.
Duggan, 2900 One Union Square, Seattle, WA, 6%; Mithun Partners, Inc., Retire-
ment Plan, 414 Olive Way, Suite 500, Seattle, WA, 6.6%; Bruce A. Nordstrom,
1501 Fifth Avenue, Seattle, WA, 6.6%; Hartnet & Co., FBO Catholic Healthcare
West Sisters of Mercy, P.O. Box 92800, Rochester, NY, 5.1%*.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
14
<PAGE>
Sirach Growth Portfolio Institutional Class Shares: BOB & Co., c/o Bank of
Boston, P.O. Box 1809, Boston, MA, 10.7%; Wendel & Co., Tractor & Equipment,
P.O. Box 1066, Wall Street Station, New York, NY, 10.7%; Hartnat & Co., VECO,
P.O. Box 4044, Boston, MA, 8.9%*; U.S. Bank of Washington Trustee for King
Count Medical Blue Shield 401(k), c/o U.S. Bank of Oregon, P.O. Box 3168,
Portland, OR, 7.7%*; H.D. Bader & Co., No. S, c/o Foley & Lardner, 777 East
Wisconsin Avenue, #3500, Milwaukee, WI, 5.9%; So. Alaska Carpenters Defined
Contribution Pension Plan, Anchorage, AK, 5.6% and H.D. Bader & Co., No. E,
c/o Foley & Lardner, 777 East Wisconsin Avenue, #3500, Milwaukee, WI, 5.3%;
Foundation of the University of Medicine & Dentistry of New Jersey, University
Heights, 30 Bergan Street, Newark, NJ, 5.2%.
Sirach Short-Term Reserves Portfolio Institutional Class Shares: So. Alaska
Carpenters Defined Contribution Pension Plan, P.O. Box 241266, Anchorage, AK,
43%; Wendel & Co., c/o The Bank of New York, P.O. Box 1066, Wall Street Sta-
tion, New York, NY, 18.6%; Hartnat & Co., Trustee, VECO, P.O. Box 4044, Bos-
ton, MA, 17%; and U.S. Bank of Washington, Trustee, King County Medical Blue
Shield 401(k), c/o U.S. Bank of Oregon, P.O. Box 3168, Portland, OR, 7.3%*.
Sirach Special Equity Portfolio Institutional Class Shares: The Chase Man-
hattan Bank, Trustee, Boeing Co. Voluntary Invest Plan, 3 Chase Metrotech Cen-
ter, 6th floor, Brooklyn, NY, 5.9%*; Pitt & Co/Northrup Grummam, Attn: Russ
Stamey, BT Services Tennessee, Inc., 648 Grassmere Park Rd., Nashville, TN,
5.7%.
Sirach Equity Portfolio Institutional Class Shares: U.S. Bank of Washington
NA, Trustee, FBO Lane Powell Spears Lubersky, c/o Trust Mutual Funds, P.O. Box
3168, Seattle, WA, 67%; William Park Joseph R. Ramrath, Trustee, FBO UAM, FBO
Sirach Profit Sharing Trust, Sirach Capital Management, 3323 One Union SQ, Se-
attle, WA, 11.9*%; Tillamook Country Smoker Inc., Pension Plan, P.O. Box 3120,
Bay City, WA, 10.8%.
Sirach Growth Portfolio Service Class Shares: Hartnat, Co., HOAG Memorial
Hospital, P.O. Box 92800, Rochester, NY, 37.4%; Hartnat & Co., HOAG Memorial,
Conservative Collective, P.O. Box 92800, Rochester, NY, 23.4%; Hartnat & Co.,
HOAG Memorial Hospital, Aggressive Collective, P.O. Box 92800, Rochester, NY,
13.7%; Hartnat & Co., HOAG Memorial Hospital, Moderate Collective, P.O. Box
92800, Rochester, NY, 13.7%; Hartnat & Co., Allied Waste, P.O. Box 92800,
Rochester, NY, 6.2%.
Sirach Special Equity Portfolio Service Class Shares: Hartnat & Co., Commu-
nity Bank, P.O. Box 92800, Rochester, NY, 75.5%; Hartnat & Co., Community
Bank, P.O. Box 92800, Rochester, NY, 23.6%.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
15
<PAGE>
The persons or organizations listed above as owning 25% or more of the out-
standing shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or organi-
zations could have the ability to vote a majority of the shares of the Portfo-
lio on any matter requiring the approval of shareholders of such Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
Sirach Capital Management, Inc. (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional in-
vestment management. Since its first acquisition in August 1983, UAM has ac-
quired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their own
firm name, with their own leadership and individual investment philosophy and
approach. Each UAM Affiliated Firm manages its own business independently on a
day-to-day basis. Investment strategies employed and securities selected by
UAM Affiliated Firms are separately chosen by each of them.
PHILOSOPHY AND STYLE
The Adviser specializes in identifying and investing in growth-oriented se-
curities which have demonstrated strong earnings acceleration and what the Ad-
viser judges to be strong relative price strength and value. The Adviser em-
phasizes disciplined security selection in all asset classes. As equity ana-
lysts, the Adviser monitors a large list of companies which have passed an
initial screening process. The Adviser's investment objective is to identify
the point at which a good company is becoming a good investment, purchase the
stock at a fair value, and then to identify when that good investment period
is coming to an end. To achieve the objective of identifying good investments,
the Adviser uses a disciplined equity selection process that is built on a
number of buying tests. To identify when a good investment period is changing,
the Adviser uses disciplined selling tests. Capital protection is an integral
part of the Adviser's investment management objective.
In managing fixed income portfolios, the Adviser regularly assesses monetary
policy, inflation expectations, economic trends and capital market flows and
then establishes a duration target and maturity structure. Sector weightings
are determined by business cycle analysis, relative valuation and expected in-
terest rate volatility. The Adviser also screens for mispriced securities em-
phasizing both in-
16
<PAGE>
cremental yield and potential price performance. Before any security is pur-
chased, a thorough credit and fundamental analysis is done.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: Boeing, Honda of America, Nes-
tle and United Technologies.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Portfolios'
Investment Advisory Agreements, each Portfolio pays the Adviser an annual fee,
in monthly installments, calculated by applying the following annual percent-
age rates to the Portfolios' average daily net assets for the month:
<TABLE>
<S> <C>
Sirach Strategic Balanced Portfolio.................................... 0.65%
Sirach Fixed Income Portfolio.......................................... 0.65%
Sirach Growth Portfolio................................................ 0.65%
Sirach Short-Term Reserves Portfolio................................... 0.40%
Sirach Special Equity Portfolio........................................ 0.70%
Sirach Equity Portfolio................................................ 0.65%
</TABLE>
For the years ended October 31, 1994, 1995 and 1996, the Sirach Special Eq-
uity Portfolio paid advisory fees of approximately $3,501,000, $3,571,000 and
$3,404,812, respectively, to the Adviser. For the period from December 1, 1993
(commencement of operations) to October 31, 1994 and for the years ended Octo-
ber 31, 1995 and 1996, the Sirach Strategic Balanced, Sirach Fixed Income,
Sirach Growth and Sirach Short-Term Reserves Portfolios paid advisory fees of
approximately $584,000, $617,000 and $578,683; $0, $6,000 and $0; $502,000,
$595,000 and 793,566; and $5,000, $11,000 and $0, respectively. During the pe-
riod from July 1, 1996 (initial offering) to October 31, 1996, Sirach Equity
Portfolio paid advisory fees of $0. During the period from December 1, 1993 to
October 31, 1994 and for the years ended October 31, 1995 and 1996, the Ad-
viser voluntarily waived advisory fees of approximately $77,000, $82,000 and
$105,292; and $78,000, $76,000 and $66,747 for the Sirach Fixed Income and
Sirach Short-Term Reserves Portfolios, respectively. During the year ended Oc-
tober 31, 1996, the Adviser voluntarily waived advisory fees of approximately
$4,898 for the Equity Portfolio.
17
<PAGE>
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolios' Service Class Shares Prospectus, UAM Fund Dis-
tributors, Inc. (the "Distributor") may enter into agreements with broker-
dealers and other financial institutions ("Service Agents"), pursuant to which
they will provide administrative support services to Service Class sharehold-
ers who are their customers ("Customers") in consideration of the Fund's pay-
ment of 0.25 of 1% (on an annualized basis) of the average daily net asset
value of the Service Class Shares held by the Service Agent for the benefit of
its Customers. Such services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account record for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by share-
holders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting divi-
dend and other account options and opening any necessary custody ac-
counts;
(j) providing account maintenance and accounting support for all transac-
tions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder service must constitute a permissible non-banking activity
in accordance with the then current regulations of, and interpreta-
tions thereof by, the Board of Governors of the Federal Reserve Sys-
tem, if applicable.
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Direc-
tors. Pursuant to the Service Plan, the Board of Directors reviews, at least
quarterly, a written report of the amounts expended under each agreement with
Service Agents and the purposes for which the expenditures were made. In addi-
tion, arrangements with Service Agents must be approved annually by a majority
of the Fund's Direc-
18
<PAGE>
tors, including a majority of the Directors who are not "interested persons"
of the company as defined in the 1940 Act and have no direct or indirect fi-
nancial interest in such arrangements.
The Board of Directors has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is
a reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an effi-
cient manner. Any material amendment to the Fund's arrangements with Service
Agents must be approved by a majority of the Fund's Board of Directors (in-
cluding a majority of the disinterested Directors). So long as the arrange-
ments with Service Agents are in effect, the selection and nomination of the
members of the Fund's Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company will be committed to the discretion of
such non-interested Directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Distribu-
tion Plan for the Service Class Shares of the Fund (the "Distribution Plan").
The Distribution Plan permits the Fund to pay for certain distribution, promo-
tional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the Dis-
tribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing adver-
tisements, sales literature and prospectuses and reports used for sales pur-
poses, compensating sales and marketing personnel, and paying distribution and
maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' aver-
age daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares, cur-
rently cannot exceed 0.50% of the average daily net assets represented the
Service Class. While the current fee which will be payable under the Service
Plan has been set at 0.25%, the Plan permits a full 0.75% on all assets to be
paid at any time following appropriate Board approval.
19
<PAGE>
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class
Shares will be borne by such persons without any reimbursement from such clas-
ses. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for aid in pro-
viding administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Directors of the Fund, in-
cluding a majority of the Directors who are not "interested persons" (as de-
fined in the 1940 Act) of the Fund and who have no direct or indirect finan-
cial interest in the Plans or any related agreements, by vote cast in person
at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the re-
lated agreements must be approved annually by the Board of Directors in the
same manner, as specified above.
Each year the Directors must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested per-
sons" or by a majority vote of the outstanding voting securities of the Class.
Any amendment materially increasing the maximum percentage payable under the
Plans must likewise be approved by a majority vote of the relevant Class' out-
standing voting securities, as well as by a majority vote of those Directors
who are not "interested persons." Also, any other material amendment to the
Plans must be approved by a majority vote of the Directors including a major-
ity of the Directors of the Fund having no interest in the Plans. In addition,
in order for the Plans to remain effective, the selection and nomination of
Directors who are not "interested persons" of the Fund must be effected by the
Directors who themselves are not "interested persons" and who have no direct
or indirect financial interest in the Plans. Persons authorized to make pay-
ments under the Plans must provide written reports at least quarterly to the
Board of Directors for their review. The NASD has adopted amendments to its
Rules of Fair Practice relating to investment company sales charges. The Fund
and the Distributor intend to operate in compliance with these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best
20
<PAGE>
execution with respect to all transactions for the Portfolios. In doing so, a
Portfolio may pay higher commission rates than the lowest rate available when
the Adviser believes it is reasonable to do so in light of the value of the
research, statistical, and pricing services provided by the broker effecting
the transaction. It is not the Fund's practice to allocate brokerage or effect
principal transactions with dealers on the basis of sales of shares which may
be made through broker-dealer firms. However, the Adviser may place portfolio
orders with qualified broker-dealers who recommend the Fund's Portfolios or
who act as agents in the purchase of shares of the Portfolios for their cli-
ents. During the fiscal years ended, October 31, 1994, 1995 and 1996, the en-
tire Fund paid brokerage commissions of approximately $2,402,000, $2,983,000
and $2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolios and one
or more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolios and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in each Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Funds Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAM
Funds Services, Inc. and Chase Global Funds Services Company. The services
provided by UAMFSI and CGFSC and the basis of the fees payable by the Fund un-
der the Fund Administration Agreement are described in the Portfolios' Pro-
spectuses. Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds
Service Company, provided certain administrative services to the Fund under an
Administration Agreement between the Fund and U.S. Trust Company of New York.
During the fiscal years ended October 31, 1994, 1995 and 1996, administrative
services fees paid by the Sirach Special Equity Portfolio totaled approxi-
mately $586,000, $605,000, and $617,933, respectively. During the period from
December 1, 1993 to October 31, 1994 and during the fiscal years ended October
31, 1995 and 1996, administrative services fees paid by the Sirach Strategic
Balanced, Sirach Fixed Income, Sirach Growth and Sirach Short-Term Reserves
Portfolios totaled approximately $116,000, $120,000, and $133,890; $27,000,
$60,000, and $85,627; $95,000, $111,000, and $159,310; and $29,000, $57,000,
and $77,351, respectively. During the period from July 1, 1996 (com
21
<PAGE>
mencement of operations) to October 31, 1996, the Sirach Equity Portfolio paid
administrative fees of $9,454. Of the fees paid during the year ended October
31, 1996, Sirach Equity Portfolio paid $9,168 to CGFSC and $286 to UAMFSI;
Sirach Fixed Income Portfolio paid $81,754 to CGFSC and $3,873 to UAMFSI;
Sirach Growth Portfolio paid $131,653 to CGFSC and $27,651 to UAMFSI; Sirach
Special Equity Portfolio paid $511,951 to CGFSC and $105,982 to UAMFSI; Sirach
Short-Term Reserves Portfolio paid $73,908 TO CGFSC and $3,443 to UAMFSI; and
Sirach Strategic Balanced Portfolio paid $106,742 to CGFSC and $27,143 to
UAMFSI. The services provided by the Administrator and the basis of the cur-
rent fees payable to the Administrator are described in the Portfolios' Pro-
spectuses.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to illus-
trate past performance of each class of the Fund's Portfolios.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by each class of the Fund be accompanied by certain standardized
performance information computed as required by the Commission. Total return
quotations used by each class of the Fund are based on the standardized meth-
ods of computing performance mandated by the Commission. An explanation of
those and other methods used by each class of the Fund to compute or express
performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5, and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis. Since Service Class Shares of the Sirach Strategic Bal-
anced, Growth and Special Equity Portfolios bear additional service and dis-
tribution expenses, the average annual total return of the Service Class
Shares of a Portfolio will generally be lower than that of the Institutional
Class Shares of the same Portfolio.
The average annual total rates of return of the Institutional Class Shares
of the Sirach Special Equity Portfolio from inception and for the one and five
year periods ended on the date of the Financial Statements included herein and
the average annual total rates of return of the Institutional Class Shares of
the Sirach Fixed Income, Sirach Growth, Sirach Short-Term Reserves and Sirach
Strategic Balanced Portfolios from inception and for the one year period ended
on the date of the Financial Statements included herein are as follows:
22
<PAGE>
<TABLE>
<CAPTION>
SINCE INCEPTION
THROUGH
ONE YEAR FIVE YEARS YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 1996 DATE
----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
Sirach Special Equity
Portfolio Institutional
Class Shares.............. 23.62% 16.12% 16.80% 10/2/89
Sirach Fixed Income
Portfolio Institutional
Class Shares ............. 4.21% -- 4.72% 12/1/93
Sirach Growth Portfolio
Institutional Class
Shares.................... 24.52% -- 13.51% 12/1/93
Sirach Short-Term Reserves
Portfolio Institutional
Class Shares ............. 5.12% -- 4.86% 12/1/93
Sirach Strategic Balanced
Portfolio Institutional
Class Shares ............. 15.13% -- 9.80% 12/1/93
Sirach Equity Portfolio
Institutional Class
Shares.................... -- -- 9.80% 7/1/96
Sirach Special Equity
Portfolio Service Class
Shares.................... -- -- 8.65% 3/22/96
Sirach Growth Portfolio
Service Class Shares...... -- -- 9.87% 3/22/96
</TABLE>
These figures are calculated according to the following formula:
P(1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
Service Class Shares of the Sirach Strategic Balanced and Equity Portfolios
were not offered as of October 31, 1996. Accordingly, no total return figures
are available.
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ments. The current yield of the Sirach Short-Term Reserves and Fixed Income
Portfolios is determined by dividing the net investment income per share
earned
23
<PAGE>
during a 30-day base period by the maximum offering price per share on the
last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.
The yield for the Sirach Short-Term Reserves Portfolio and Sirach Fixed Income
Portfolio for the 30-day period ended October 31, 1996 was 4.90% and 6.11%,
respectively.
This figure was obtained using the following formula:
Yield = 2[(a - b + 1)/6/ - 1]
-----
cd
WHERE:
a --dividends and interest earned during the period
b --expenses accrued for the period (net of reimbursements)
c --the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d --the maximum offering price per share on the last day of the period.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) S&P Midcap 400 Index -- consists of 400 domestic stocks chosen for
market size (medium market capitalization of $993 million as of Feb-
ruary 1995), liquidity and industry group representation. It is a
market-weighted index with each stock affecting the index in propor-
tion to its market value.
24
<PAGE>
(d) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(e) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(f) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average cur-
rent yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(g) Morgan Stanley Capital International EAFE Index and World Index--re-
spectively, arithmetic, market value-weighted averages of the perfor-
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securi-
ties listed on the stock exchanges of these continents, including
North America.
(h) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(i) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Gov-
ernment National Mortgage Association.
(j) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is
a value-weighted, total return index, including approximately 800 is-
sues with maturities of 12 years or greater.
(k) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced invest-
ment grade corporate bonds rated BBB or better, U.S. Treasury/agency
issues and mortgage passthrough securities.
(l) Lehman Brothers Government/Corporate Index -- is an unmanaged index
composed of a combination of the Government and Corporate Bond Indi-
ces. 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 interna-
tional governments and agencies. All issues are investment grade
(BBB) or higher, with maturities of at least one year and outstanding
par value of
25
<PAGE>
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
(m) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(n) Lehman Brothers Intermediate Government/Corporate Index -- is an un-
managed index composed of a combination of the Government and Corpo-
rate 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 interna-
tional governments and agencies. Any security downgraded during the
month is held in the index until month-end and then removed. All re-
turns are market value weighted inclusive of accrued income.
(o) Salomon Brothers 3-Month Treasury Bill Index -- is a return equiva-
lent of yield averages of the last three 3-Month Treasury Bill is-
sues.
(p) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(q) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(r) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(s) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and
65% Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond In-
dex.
(t) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
26
<PAGE>
(u) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(v) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- pub-
lications that rate fund performance over specified time periods.
(w) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(x) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates -- historical measure of yield, price and total return for com-
mon and small company stock, long-term government bonds, U.S. Trea-
sury bills and inflation.
(y) Savings and Loan Historical Interest Rates -- as published in the
U.S. Savings & Loan League Fact Book.
(z) Lehman Brothers Aggregate Index -- is a 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.
(aa) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. In addition, there can be no assur-
ance that the Fund will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
27
<PAGE>
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to UAM Funds, Inc. The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at the UAM Funds Service Center,
c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798.
The Fund's Articles of Incorporation, as amended, authorize the Directors to
issue 3,000,000,000 shares of common stock, $.001 par value. The Board of Di-
rectors has the power to designate one or more series (Portfolios) or classes
of common stock and to classify or reclassify any unissued shares with respect
to such Portfolios, without further action by shareholders. The Directors of
the Fund may create additional Portfolios and classes of shares at a future
date.
Both classes of shares of a Portfolio, when issued and paid for as provided
for in the Prospectuses, will be fully paid and nonassessable, have no prefer-
ence as to conversion, exchange, dividends, retirement or other features and
have no preemptive rights. The shares of the Fund have noncumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held), then standing in his or her
name on the books of the Fund. Both Institutional Class and Service Class
Shares represent an interest in the same assets of a Portfolio and are identi-
cal in all respects except that the Service Class Shares bear certain expenses
related to shareholder servicing and the distribution of such shares, and have
exclusive voting rights with respect to matters relating to such distribution
expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of a Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Prospectuses). The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of the Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectuses.
As set forth in the Prospectuses, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of a Portfolio at net asset value (as of the busi-
ness day following the record date). This will remain in effect until the Fund
is notified by the share-
28
<PAGE>
holder in writing at least three days prior to the record date that either the
Income Option (income dividends in cash and capital gains distributions in ad-
ditional shares at net asset value) or the Cash Option (both income dividends
and capital gains distributions in cash) has been elected. An account state-
ment is sent to shareholders whenever an income dividend or capital gains dis-
tribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital
gains recognized by a Portfolio will be distributed to its investors without
need to offset (for Federal income tax purposes) such gains against any net
capital losses of another Portfolio.
FEDERAL TAXES
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must
be limited to less than 30% of a Portfolio's annual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Institutional Class Shares of the Sirach
Strategic Balanced, Sirach Growth, Sirach Fixed Income, Sirach Short-Term Re-
serves, Sirach Special Equity and Sirach Equity Portfolios and the Financial
Highlights for the respective periods presented, which appear in the Portfo-
lios' 1996 Annual Report to Shareholders, and the report thereon of Price
Waterhouse LLP, independent accountants, also appearing therein, are attached
to this SAI.
29
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.4%)
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE (21.7%)
*Accent Software International Ltd........................ 73,750 $ 580,781
*CBT Group plc ADR........................................ 154,300 8,544,363
Citrix Systems, Inc...................................... 65,200 3,586,000
Clarify, Inc............................................. 63,800 3,074,362
*Cognos, Inc.............................................. 342,800 10,712,500
*Compuware Corp........................................... 202,800 10,748,400
*Electronics Arts, Inc.................................... 154,450 5,782,222
GT Interactive Software Corp............................. 176,400 3,340,575
*Hyperion Software Corp................................... 102,200 2,088,712
*Inso Corp................................................ 107,500 5,280,938
*McAfee Associates, Inc................................... 165,050 7,520,091
*Meridian Data, Inc....................................... 231,600 1,737,000
*Rational Software Corp................................... 178,400 6,812,650
Siebel Systems, Inc...................................... 80,750 4,375,641
*Structural Dynamics Research Corp........................ 525,300 9,291,244
*Tecnomatix Technologies Ltd.............................. 166,400 2,912,000
*Veritas Software Corp.................................... 186,050 9,442,037
------------
95,829,516
- --------------------------------------------------------------------------------
ENERGY (2.0%)
*Noble Drilling Corp...................................... 183,750 3,422,344
Transocean Offshore, Inc.................................. 88,900 5,622,925
------------
9,045,269
- --------------------------------------------------------------------------------
ENVIRONMENTAL (5.5%)
*Tetra Tech, Inc.......................................... 303,250 6,823,125
*United Waste Systems, Inc................................ 307,400 10,528,450
*U.S. Filter Corp......................................... 203,800 7,031,100
------------
24,382,675
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (9.8%)
Amresco, Inc............................................. 140,300 2,937,531
Countrywide Credit Industries, Inc....................... 188,000 5,358,000
*Envoy Corp............................................... 206,400 7,636,800
*Imperial Credit Industries, Inc.......................... 394,860 7,082,801
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--(CONTINUED)
*Olympic Financial Ltd.................................... 323,300 $ 5,132,388
Southern Pacific Funding Corp............................ 170,800 5,380,200
The Money Store, Inc..................................... 370,900 9,643,400
------------
43,171,120
- --------------------------------------------------------------------------------
HEALTH CARE (13.4%)
Amisys Managed Care Systems.............................. 148,900 2,261,419
Curative Health Services, Inc............................ 307,900 7,081,700
ESC Medical Systems Ltd.................................. 103,800 2,880,450
*Pediatrix Medical Group Inc.............................. 122,700 4,831,313
*PhyCor, Inc.............................................. 291,337 8,976,821
PhyMatrix Corp........................................... 356,000 5,851,750
*Physician Sales & Service, Inc........................... 367,500 7,763,437
*Renal Treatment Centers, Inc............................. 208,600 5,580,050
*Sofamor Danek Group, Inc................................. 170,000 4,675,000
*Total Renal Care Holdings, Inc........................... 240,400 9,375,600
------------
59,277,540
- --------------------------------------------------------------------------------
INSURANCE (2.3%)
American Bankers Insurance Group, Inc.................... 160,900 7,703,087
*American Travellers Corp................................. 64,800 2,223,450
------------
9,926,537
- --------------------------------------------------------------------------------
MANUFACTURING (0.6%)
Hexcel Corp.............................................. 133,000 2,427,250
- --------------------------------------------------------------------------------
METALS (0.5%)
Titanium Metals Corp..................................... 78,200 2,419,313
- --------------------------------------------------------------------------------
PAPER & PACKAGING (0.3%)
American Pad & Paper Co.................................. 63,100 1,183,125
- --------------------------------------------------------------------------------
PHARMACEUTICALS (7.3%)
*Biochem Pharmaceuticals, Inc............................. 216,400 9,237,575
*Dura Pharmaceuticals, Inc................................ 233,300 8,078,012
*Express Scripts, Inc., Class A........................... 171,000 4,809,375
*Gilead Sciences, Inc..................................... 188,600 4,373,163
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
PHARMACEUTICALS (7.3%)--(CONTINUED)
*Medicis Pharmaceutical Corp., Class A.................... 75,650 $ 3,801,413
*Sequus Pharmaceuticals, Inc.............................. 136,100 1,905,400
------------
32,204,938
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (0.6%)
Sunstone Hotel Investors, Inc............................ 254,400 2,734,800
- --------------------------------------------------------------------------------
RETAIL (3.4%)
*CDW Computer Centers, Inc................................ 112,400 7,053,100
*Gadzooks, Inc............................................ 92,400 2,702,700
*Just For Feet, Inc....................................... 203,650 5,307,628
------------
15,063,428
- --------------------------------------------------------------------------------
SERVICES (12.6%)
*ABR Information Services, Inc............................ 39,600 2,727,450
*Accustaff, Inc........................................... 441,300 11,749,613
*Apollo Group Inc., Class A............................... 90,600 2,468,850
*Corporate Express, Inc................................... 278,000 9,121,875
META Group, Inc.......................................... 127,800 3,977,775
Outdoor Systems, Inc..................................... 79,200 3,524,400
*Robert Half International, Inc........................... 184,700 7,411,086
TeleSpectrum Worldwide, Inc.............................. 87,100 1,486,144
Universal Outdoor Holdings, Inc.......................... 164,200 4,792,588
*US Office Products Co.................................... 299,800 8,619,250
------------
55,879,031
- --------------------------------------------------------------------------------
TECHNOLOGY (4.9%)
*Actel Corp............................................... 144,500 2,555,844
*APAC Teleservices, Inc................................... 53,900 2,479,400
*Chips & Technologies Inc................................. 25,600 507,200
*S3 Inc................................................... 180,800 3,390,000
Sykes Enterprises, Inc................................... 105,000 4,830,000
*Trident Microsystems, Inc................................ 25,600 510,400
*Videoserver, Inc......................................... 99,600 4,687,425
*VLSI Technology Inc...................................... 153,800 2,653,050
------------
21,613,319
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (7.9%)
*ADC Telecommunications, Inc............................. 187,300 $ 12,818,344
*Comverse Technology, Inc................................ 214,200 7,470,225
*DSP Communications, Inc................................. 26,700 1,017,937
*Natural Microsystems Corp............................... 70,000 3,683,750
Ortel Corp. ............................................ 124,800 2,613,000
Saville Systems Ireland plc............................. 174,800 7,527,325
-------------
35,130,581
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (4.3%)
Abercrombie & Fitch Co., Class A........................ 130,300 2,866,600
Designer Holdings Ltd. ................................. 254,700 4,871,138
*Nautica Enterprises, Inc. .............................. 367,200 11,245,500
-------------
18,983,238
- --------------------------------------------------------------------------------
TRANSPORTATION (1.3%)
Atlantic Coast Airlines, Inc. .......................... 236,800 2,442,000
*Mesa Air Group, Inc. ................................... 300,700 2,819,062
Reno Air, Inc. ......................................... 79,800 566,081
-------------
5,827,143
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $348,085,160)..................................... 435,098,823
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.2%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.2%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/01/96 to be repurchased at $18,723,902,
collateralized by $18,095,914 of various U.S.
Treasury Notes, 5.875%-7.75%, due 3/31/99-
11/30/99, valued at $18,721,044 (COST
$18,721,000)..................................... $18,721,000 $ 18,721,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.6%)
(COST $366,806,160) (A)........................... 453,819,823
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-2.6%).......... (11,486,506)
- ------------------------------------------------------------------------------
NET ASSETS (100%)................................... $442,333,317
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
ADR --American Depositary Receipt.
(a) The cost for federal income tax purposes was $367,559,872. At October
31, 1996, net unrealized appreciation for all securities based on tax
cost was $86,259,951. This consisted of aggregate gross unrealized
appreciation for all securitiesof $111,803,256 and aggregate gross
unrealized depreciation for all securities of $25,543,305.
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (85.0%)
- --------------------------------------------------------------------------------
BANKS (6.3%)
BankAmerica Corp.......................................... 31,500 $ 2,882,250
Chase Manhattan Corp...................................... 17,300 1,483,475
Citicorp Bank............................................. 11,199 1,108,701
First Bank System, Inc.................................... 30,400 2,006,400
Washington Federal, Inc. ................................. 63,484 1,527,584
------------
9,008,410
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.0%)
ConAgra, Inc.............................................. 35,300 1,760,588
CPC International, Inc. .................................. 14,400 1,135,800
------------
2,896,388
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (1.4%)
AlliedSignal, Inc......................................... 30,200 1,978,100
- --------------------------------------------------------------------------------
CHEMICALS (1.3%)
Praxair, Inc.............................................. 43,200 1,911,600
- --------------------------------------------------------------------------------
CONSUMER STAPLES (2.9%)
Clorox Co................................................. 11,500 1,254,937
Gillette Co............................................... 21,600 1,614,600
Procter & Gamble Co....................................... 13,500 1,336,500
------------
4,206,037
- --------------------------------------------------------------------------------
ELECTRONICS (6.6%)
*Atmel Corp. .............................................. 68,500 1,742,469
General Electric Co....................................... 35,100 3,395,925
Honeywell, Inc. .......................................... 39,800 2,472,575
Thermo Electron Corp. .................................... 51,150 1,866,975
------------
9,477,944
- --------------------------------------------------------------------------------
ENERGY (4.6%)
Halliburton Co. .......................................... 21,200 1,200,450
Mobil Corp. .............................................. 18,200 2,124,850
Tidewater, Inc............................................ 38,500 1,684,375
Williams Cos., Inc. ...................................... 29,500 1,541,375
------------
6,551,050
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENVIRONMENTAL (0.6%)
*United Waste Systems, Inc................................ 24,900 $ 852,825
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (6.7%)
Capital One Financial Corp............................... 44,100 1,372,613
Equifax, Inc............................................. 44,800 1,332,800
Household International, Inc............................. 11,200 991,200
Merrill Lynch & Co....................................... 16,100 1,131,025
MGIC Investment Corp..................................... 25,800 1,770,525
SunAmerica, Inc.......................................... 40,900 1,533,750
The Money Store, Inc..................................... 54,500 1,417,000
------------
9,548,913
- --------------------------------------------------------------------------------
HEALTH CARE (4.7%)
*Boston Scientific Corp................................... 21,300 1,158,188
Cardinal Health, Inc..................................... 10,500 824,250
Columbia/HCA Healthcare Corp............................. 70,100 2,506,075
Tenent Healthcare Corp................................... 110,600 2,308,775
------------
6,797,288
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.2%)
Black & Decker Corp...................................... 46,600 1,741,675
- --------------------------------------------------------------------------------
INSURANCE (5.1%)
American International Group, Inc........................ 27,800 3,019,775
Travelers, Inc........................................... 39,000 2,115,750
UNUM Corp................................................ 33,500 2,106,313
------------
7,241,838
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (2.8%)
Hilton Hotels Corp....................................... 47,900 1,454,962
Marriott International, Inc.............................. 27,100 1,541,313
McDonald's Corp.......................................... 22,400 994,000
------------
3,990,275
- --------------------------------------------------------------------------------
MISCELLANEOUS (1.3%)
Tyco International Ltd................................... 38,100 1,890,713
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (1.6%)
Hewlett-Packard Co. ..................................... 22,700 $ 1,001,637
Xerox Corp. ............................................. 26,400 1,224,300
------------
2,225,937
- --------------------------------------------------------------------------------
PHARMACEUTICALS (6.7%)
Abbott Laboratories...................................... 27,351 1,384,644
*Amgen, Inc............................................... 40,500 2,483,156
Johnson & Johnson........................................ 23,400 1,152,450
Merck & Co., Inc. ....................................... 18,500 1,371,312
Pfizer, Inc.............................................. 24,900 2,060,475
Schering-Plough Corp. ................................... 18,900 1,209,600
------------
9,661,637
- --------------------------------------------------------------------------------
RETAIL (11.9%)
Albertson's, Inc......................................... 73,200 2,516,250
CUC International, Inc................................... 42,000 1,029,000
Gap, Inc. ............................................... 56,700 1,644,300
Home Depot, Inc. ........................................ 57,300 3,137,175
*Price/Costco, Inc........................................ 206,100 4,083,356
*Safeway, Inc............................................. 35,200 1,509,200
*Staples, Inc............................................. 98,000 1,837,500
Walgreen Co. ............................................ 34,200 1,291,050
------------
17,047,831
- --------------------------------------------------------------------------------
SERVICES (5.7%)
*Ceridian Corp. .......................................... 16,100 798,962
*Corporate Express, Inc................................... 34,200 1,122,187
Electronic Data Systems Corp............................. 26,100 1,174,500
First Data Corp. ........................................ 20,850 1,662,788
Paychex, Inc............................................. 27,000 1,535,625
Service Corp. International.............................. 68,000 1,938,000
------------
8,232,062
- --------------------------------------------------------------------------------
TECHNOLOGY (4.4%)
*Cisco Systems, Inc. ..................................... 31,900 1,971,819
*Microsoft Corp., Inc. ................................... 12,000 1,647,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
TECHNOLOGY--(CONTINUED)
*Oracle Corp. ............................................. 32,950 $ 1,394,197
*Parametric Technology Co. ................................ 26,500 1,293,531
------------
6,307,297
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.8%)
Lucent Technologies, Inc. ................................ 34,300 1,612,100
*Newbridge Networks Corp................................... 32,000 1,012,000
------------
2,624,100
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (0.9%)
*Nautica Enterprises, Inc. ................................ 44,000 1,347,500
- --------------------------------------------------------------------------------
TRANSPORTATION (1.6%)
Illinois Central Corp. ................................... 69,550 2,251,681
- --------------------------------------------------------------------------------
UTILITIES (2.9%)
FPL Group, Inc............................................ 52,000 2,392,000
Sprint Corp............................................... 44,000 1,727,000
------------
4,119,000
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $107,160,973)....................................... 121,910,101
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ----------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (15.7%)
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT (15.7%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due
11/1/96, to be
repurchased at $22,451,479, collateralized by
$21,698,471 of various U.S. Treasury Notes,
5.875%-7.75%, due 3/31/99-11/30/99, valued at
$22,448,053 (COST $22,448,000)..................$22,448,000.$.22,448,000
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS (100.7%)
(COST $129,608,973) (A)......................... 144,358,101
- ----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-0.7%)........ (939,290)
- ----------------------------------------------------------------------------
NET ASSETS (100%)................................. $143,418,811
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
(a) The cost for federal income tax purposes was $129,820,253. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$14,537,848. This consisted of aggregate gross unrealized appreciation for
all securities of $15,752,686 and aggregate gross unrealized depreciation
for all securities of $1,214,838.
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (49.4%)
- --------------------------------------------------------------------------------
BANKS (4.4%)
BankAmerica Corp........................................... 10,000 $ 915,000
Chase Manhattan Corp....................................... 6,500 557,375
Citicorp Bank.............................................. 6,051 599,049
First Bank System, Inc..................................... 13,000 858,000
Washington Federal, Inc.................................... 31,551 759,193
-----------
3,688,617
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.2%)
ConAgra, Inc............................................... 10,750 536,156
CPC International, Inc. ................................... 5,500 433,813
-----------
969,969
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (0.6%)
AlliedSignal, Inc.......................................... 7,400 484,700
- --------------------------------------------------------------------------------
CHEMICALS (0.6%)
Praxair, Inc............................................... 10,450 462,412
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.6%)
Clorox Co. ................................................ 2,000 218,250
Gillette Co................................................ 7,100 530,725
Procter & Gamble Co........................................ 6,050 598,950
-----------
1,347,925
- --------------------------------------------------------------------------------
ELECTRONICS (3.5%)
*Atmel Corp. ............................................... 19,500 496,031
General Electric Co. ...................................... 12,500 1,209,375
Honeywell, Inc. ........................................... 9,500 590,188
Thermo Electron Corp. ..................................... 17,050 622,325
-----------
2,917,919
- --------------------------------------------------------------------------------
ENERGY (2.6%)
Halliburton Co............................................. 9,000 509,625
Mobil Corp................................................. 6,500 758,875
Tidewater, Inc............................................. 10,000 437,500
Williams Cos., Inc......................................... 9,500 496,375
-----------
2,202,375
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENVIRONMENTAL (0.4%)
*United Waste Systems, Inc. ................................ 10,200 $ 349,350
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (3.8%)
Capital One Financial Corp................................. 16,000 498,000
Equifax, Inc............................................... 13,000 386,750
Household International, Inc. ............................. 2,500 221,250
Merrill Lynch & Co. ....................................... 6,000 421,500
MGIC Investment Corp. ..................................... 7,500 514,687
SunAmerica, Inc............................................ 20,500 768,750
The Money Store, Inc....................................... 14,300 371,800
-----------
3,182,737
- --------------------------------------------------------------------------------
HEALTH CARE (2.3%)
*Boston Scientific Corp..................................... 6,000 326,250
Cardinal Health, Inc. ..................................... 3,300 259,050
Columbia/HCA Healthcare Corp. ............................. 18,375 656,906
Tenent Healthcare Corp..................................... 32,000 668,000
-----------
1,910,206
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (0.7%)
Black & Decker Corp........................................ 14,900 556,887
- --------------------------------------------------------------------------------
INSURANCE (2.5%)
American International Group, Inc.......................... 9,000 977,625
Travelers, Inc............................................. 10,500 569,625
UNUM Corp. ................................................ 9,000 565,875
-----------
2,113,125
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.8%)
Hilton Hotels Corp......................................... 18,000 546,750
Marriott International, Inc. .............................. 9,500 540,313
McDonald's Corp............................................ 9,900 439,312
-----------
1,526,375
- --------------------------------------------------------------------------------
MISCELLANEOUS (0.6%)
Tyco International Ltd. ................................... 10,000 496,250
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (0.9%)
Hewlett-Packard Co. ....................................... 5,800 $ 255,925
Xerox Corp. ............................................... 10,500 486,938
-----------
742,863
- --------------------------------------------------------------------------------
PHARMACEUTICALS (4.5%)
Abbott Laboratories........................................ 10,549 534,043
*Amgen, Inc. ............................................... 14,500 889,031
Johnson & Johnson.......................................... 10,400 512,200
Merck & Co., Inc. ......................................... 7,450 552,231
Pfizer, Inc. .............................................. 5,100 422,025
Schering-Plough Corp. ..................................... 13,800 883,200
-----------
3,792,730
- --------------------------------------------------------------------------------
RETAIL (6.8%)
Albertson's, Inc. ......................................... 25,300 869,688
CUC International, Inc. ................................... 14,000 343,000
Gap, Inc. ................................................. 21,000 609,000
Home Depot, Inc. .......................................... 18,000 985,500
*Price/Costco, Inc. ........................................ 63,600 1,260,075
*Safeway, Inc. ............................................. 14,500 621,688
*Staples, Inc. ............................................. 32,500 605,312
Walgreen Co. .............................................. 10,500 396,375
-----------
5,690,638
- --------------------------------------------------------------------------------
SERVICES (3.7%)
*Ceridian Corp. ............................................ 5,000 248,125
*Corporate Express, Inc. ................................... 15,600 511,875
Electronic Data Systems Corp. ............................. 9,800 441,000
First Data Corp. .......................................... 8,400 669,900
Paychex, Inc. ............................................. 9,650 548,844
Service Corp. International................................ 22,500 641,250
-----------
3,060,994
- --------------------------------------------------------------------------------
TECHNOLOGY (3.0%)
*Cisco Systems, Inc. ....................................... 14,000 865,375
*Microsoft Corp., Inc. ..................................... 5,250 720,891
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TECHNOLOGY--(CONTINUED)
*Oracle Corp. ......................................... 12,500 $ 528,906
*Parametric Technology Corp. .......................... 7,500 366,094
-----------
2,481,266
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.2%)
Lucent Technologies, Inc. ............................ 10,500 493,500
*Newbridge Networks Corp. ............................. 16,000 506,000
-----------
999,500
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (0.6%)
*Nautica Enterprises, Inc. ............................ 15,800 483,875
- -------------------------------------------------------------------------------
TRANSPORTATION (0.7%)
Illinois Central Corp. ............................... 18,500 598,938
- -------------------------------------------------------------------------------
UTILITIES (1.4%)
FPL Group, Inc. ...................................... 16,000 736,000
Sprint Corp. ......................................... 10,500 412,125
-----------
1,148,125
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $34,571,821).................................... 41,207,776
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (14.4%)
- -------------------------------------------------------------------------------
BANKS (4.1%)
++BBV International Financial Ltd. (Cayman) 6.212%,
1/15/05............................................. $ 800,000 805,710
Capital One Bank 8.625%, 1/15/97..................... 1,050,000 1,056,311
First USA Bank 6.125%, 10/30/97...................... 800,000 802,064
Merita Bank Ltd. 5.913%, 12/1/05..................... 750,000 747,000
-----------
3,411,085
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (3.3%)
Excel Paralubes Funding Corp.
7.125%, 11/1/11...................................... $1,050,000 $ 1,055,072
Occidential Petroleum Corp.
11.125%, 6/1/19...................................... 750,000 856,875
Transcontinental Gas Pipe Line Corp.
8.125%, 1/15/97...................................... 875,000 878,281
-----------
2,790,228
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.7%)
Time Warner Entertainment
8.375%, 3/15/23...................................... 1,375,000 1,400,781
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.3%)
Paine Webber Group, Inc. 6.39%, 9/22/97................ 1,000,000 1,002,440
Salomon Inc., Medium Term Note, Series D
7.25%, 8/18/97....................................... 900,000 908,802
-----------
1,911,242
- -------------------------------------------------------------------------------
INDUSTRIAL (1.1%)
News America Holdings 7.75%, 12/1/45................... 950,000 895,375
- -------------------------------------------------------------------------------
INSURANCE (0.9%)
Zurich Reinsurance Centre Holdings, Inc.
7.125%, 10/15/23..................................... 800,000 736,000
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.0%)
TCI Communications, Inc.
7.875%, 2/15/26...................................... 1,075,000 898,969
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $12,143,185)...... 12,043,680
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (7.1%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (2.4%)
8.125%, 8/15/19........................................ 1,725,000 1,997,619
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- ------------------------------------------------------------------------------
U.S. TREASURY NOTES (4.7%)
7.875%, 11/15/04................................... $1,675,000 $ 1,838,279
5.875%, 11/15/05................................... 1,850,000 1,790,282
6.875%, 5/15/06.................................... 300,000 310,722
-------------
3,939,283
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $5,797,749).. 5,936,902
- ------------------------------------------------------------------------------
AGENCY SECURITIES (5.0%)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION (1.7%)
6.50%, 1/1/26 Pool #D67614......................... 1,451,481 1,390,700
- ------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (3.3%)
7.00%, 5/15/24 Pool #376510........................ 2,775,943 2,723,027
- ------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES
(COST $4,005,656)................................. 4,113,727
- ------------------------------------------------------------------------------
ASSET BACKED SECURITIES (4.2%)
- ------------------------------------------------------------------------------
++Airplanes Pass Through Trust, Series 1, Class A4,
6.003%, 3/15/19.................................. 925,000 930,550
Banc One Auto Grantor Trust, Series 1996-A, Class A
6.10%, 10/15/02.................................. 744,424 747,275
Capita Equipment Receivables Trust, Series 1996-1,
Class B 6.57%, 3/15/01........................... 850,000 853,847
Metris Master Trust, Series 1996-1, Class A 6.45%,
2/20/02.......................................... 1,000,000 1,006,366
- ------------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES (COST $3,518,651)..... 3,538,038
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (8.1%)
- -------------------------------------------------------------------------------
Citicorp Mortgage Securities, Inc., Series 1993-13,
Class A2 PAC (11)
6.00%, 11/25/08...................................... $ 898,000 $ 892,277
Federal National Mortgage Association:
Series 1995-11, Class A, Structured Collateral PO
PAC(11) Zero
Coupon, 1/25/24..................................... 1,000,000 766,250
Series 1996-28, Class A, Structured Collateral 7.00%,
9/25/23............................................. 625,000 604,687
Morgan Stanley Capital Corp. I, Series C, Class 4
9.00%, 5/1/16........................................ 849,501 905,960
Norwest Asset Securities Corp., Series 1996-1, Class
A11 7.50%, 8/25/26................................... 1,100,000 1,053,168
Prudential Home Mortgage Securities Co., Series 1992-
39, Class A4 PAC(11) 6.20%, 12/25/07................. 1,000,000 995,295
Salomon Brothers Mortgage Securities VII, Series 1996-
2, Class A2 7.50%, 5/25/26........................... 642,248 650,208
Salomon Brothers Mortgage Securities VII, Series 1996-
LB2, Class A2
6.75%, 10/25/26...................................... 900,000 904,500
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $6,642,046)..................................... 6,772,345
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (2.2%)
- -------------------------------------------------------------------------------
Hydro-Quebec 7.50%, 4/1/16............................. 950,000 960,688
Province de Quebec 11.00%, 6/15/15..................... 750,000 872,812
- -------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $1,838,484)........ 1,833,500
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (11.0%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (11.0%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $9,196,425,
collateralized by $8,887,983 of various U.S. Treasury
Notes, 5.875%-7.75% due 3/31/99-11/30/99, valued at
$9,195,022 (COST $9,195,000).......................... $9,195,000 $ 9,195,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.4%)
(COST $77,712,592) (A)............................... 84,640,968
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-1.4%)............. (1,210,958)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $83,430,010
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
++Variable/floating rate security--rate disclosed is as of October 31, 1996.
*Non-Income Producing Security.
PAC--Planned Amortization Class.
PO--Principal Only.
(a) The cost for federal income tax purposes was $77,851,936. At October
31, 1996, net unrealized appreciation for all securities based on tax
cost was $6,789,032. This consisted of aggregate gross unrealized
appreciation for all securities of $7,372,428 and aggregate gross
unrealized depreciation for all securitiesof $583,396.
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (42.5%)
- ------------------------------------------------------------------------------
BANKS (6.8%)
++BBV International Financial Ltd. (Cayman) 6.212%,
1/15/05............................................. $ 400,000 $ 402,855
Capital One Bank 8.625%, 1/15/97...................... 525,000 528,155
Merita Bank Ltd. 5.913%, 12/1/05...................... 350,000 348,600
-----------
1,279,610
- ------------------------------------------------------------------------------
ENERGY (6.5%)
Excel Paralubes Funding Corp.
7.125%, 11/1/11...................................... 550,000 552,656
Occidential Petroleum Corp.
11.125%, 6/1/19...................................... 250,000 285,625
Transcontinental Gas Pipe Line Corp.
8.125%, 1/15/97...................................... 375,000 376,406
-----------
1,214,687
- ------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (3.1%)
Time Warner Entertainment
8.375%, 3/15/23...................................... 575,000 585,781
- ------------------------------------------------------------------------------
FINANCIAL SERVICES (10.5%)
Comdisco, Inc. 7.82%, 2/5/97.......................... 300,000 301,581
Lehman Brothers Holdings, Inc.
7.625%, 6/15/97...................................... 315,000 318,333
Lehman Brothers Holdings, Inc.
8.875%, 11/1/98...................................... 225,000 235,688
Lehman Brothers Holdings, Inc.
7.625%, 6/1/06....................................... 300,000 305,625
Salomon, Inc. 5.20%, 1/20/97.......................... 400,000 399,516
Salomon Inc., Medium Term Note, Series D
7.25%, 8/18/97....................................... 400,000 403,912
-----------
1,964,655
- ------------------------------------------------------------------------------
INDUSTRIAL (2.0%)
News America Holdings 7.75%, 12/1/45.................. 400,000 377,000
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
INSURANCE (6.8%)
Liberty Mutual 7.875%, 10/15/26........................ $ 500,000 $ 506,875
Nationwide Mutual Insurance
7.50%, 2/15/24....................................... 425,000 410,656
Zurich Reinsurance Centre Holdings, Inc. 7.125%,
10/15/23............................................. 400,000 368,000
-----------
1,285,531
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.0%)
TCI Communications, Inc.
7.875%, 2/15/26...................................... 450,000 376,313
- -------------------------------------------------------------------------------
UTILITIES (4.8%)
System Energy Resources 7.28%, 8/1/99.................. 400,000 405,500
Potomac Capital, Medium Term Note 6.19%, 4/28/97....... 500,000 501,025
-----------
906,525
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $7,971,886)....... 7,990,102
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (22.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (7.9%)
8.125%, 8/15/19........................................ 1,275,000 1,476,501
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (14.5%)
5.75%, 9/30/97......................................... 475,000 476,140
8.50%, 2/15/00......................................... 600,000 644,820
7.875%, 11/15/04....................................... 825,000 905,421
5.875%, 11/15/05....................................... 725,000 701,597
-----------
2,727,978
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $4,106,080)...... 4,204,479
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
AGENCY SECURITIES (5.8%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION (2.1%)
6.50%, 1/1/26 Pool #D67614............................. $ 418,223 $ 400,710
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (3.7%)
7.00%, 5/15/24 Pool #376510............................ 699,628 686,291
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES
(COST $1,066,255)..................................... 1,087,001
- -------------------------------------------------------------------------------
ASSET BACKED SECURITIES (6.8%)
- -------------------------------------------------------------------------------
++Airplanes Pass Through Trust, Series 1, Class A4,
6.003%, 3/15/19....................................... 375,000 377,250
Banc One Auto Grantor Trust, Series 1996-A, Class A
6.10%, 10/15/02...................................... 223,327 224,183
Capital Equipment Receivables Trust, Series 1996-1,
Class B 6.57%, 3/15/01............................... 275,000 276,245
Metris Master Trust, Series 1996-1, Class A 6.45%,
2/20/02.............................................. 400,000 402,546
- -------------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES (COST $1,273,045)......... 1,280,224
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (14.4%)
- -------------------------------------------------------------------------------
Citicorp Mortgage Securities, Inc., Series 1996-13,
Class A2 PAC(11)
6.00%, 11/25/08...................................... 400,000 397,451
Federal National Mortgage Association:
Series 1995-11, Class A, Structured Collateral PO
PAC(11)
Zero Coupon, 1/25/24................................ 325,000 249,031
Series 1996-28, Class A, Structured Collateral 7.00%,
9/25/23............................................. 300,000 290,250
Morgan Stanley Capital Corp. I, Series C, Class 4
9.00%, 5/1/16........................................ 339,800 362,384
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED)
- -------------------------------------------------------------------------------
Norwest Asset Securities Corp., Series 1996-1, Class
A11 7.50%, 8/25/26................................... $ 450,000 $ 430,841
Prudential Home Mortgage Securities Co., Series 1992-
39, Class A4 PAC(11) 6.20%, 12/25/07................. 400,000 398,118
Salomon Brothers Mortgage Securities VII, Series 1996-
2, Class A2
7.50%, 5/25/26....................................... 272,469 275,846
Salomon Brothers Mortgage Securities VII, Series 1996-
LB2, Class A2
6.75%, 10/25/26...................................... 300,000 301,500
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $2,656,095)..................................... 2,705,421
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (3.4%)
- -------------------------------------------------------------------------------
Province de Quebec 11.00%, 06/15/15.................... 225,000 261,844
Quebec Province 7.125%, 2/09/24........................ 400,000 381,000
- -------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $647,827).......... 642,844
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-32
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.6%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.6%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $1,062,165, collater-
alized by $1,026,540 of various U.S. Treasury
Notes, 5.875%-7.75% due 3/31/99-11/30/99, valued at
$1,062,003
(COST $1,062,000).................................. $1,062,000 $ 1,062,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(COST $18,783,188)(A)............................... 18,972,071
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-0.9%)............ (168,752)
- ------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $18,803,319
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/floating rate security--rate disclosed is as of October 31,
1996.
PAC--Planned Amortization Class.
PO--Principal Only.
(a) The cost for federal income tax purposes was $18,855,779. At October 31,
1996, net unrealized appreciation for all securities based on tax cost
was $116,292. This consisted of aggregate gross unrealized appreciation
for all securities of $205,040 and aggregate gross unrealized
depreciation for all securities of $88,748.
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (58.3%)
- -------------------------------------------------------------------------------
BANKS (15.9%)
Capital One Bank 8.625%, 1/15/97....................... $ 725,000 $ 729,357
Capital One Bank 8.33%, 2/10/97........................ 200,000 201,458
First USA Bank 8.1%, 2/21/97........................... 250,000 251,875
First USA Bank 6.125%, 10/30/97........................ 500,000 501,290
Security Pacific Corp. 7.75%, 12/1/96.................. 300,000 300,494
++Union Planters Corp. 5.562%, 1/15/97.................. 500,000 500,000
-----------
2,484,474
- -------------------------------------------------------------------------------
ENERGY (2.1%)
Transcontinental Gas Pipe Line Corp. 8.125%, 1/15/97... 325,000 326,219
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (26.3%)
Associates Corp. of North America, Series E 8.85%,
2/21/97............................................... 500,000 504,885
Advanta Corp. 5.125%, 11/15/96......................... 600,000 599,759
Alco Capital Resources 8.07%, 6/6/97................... 500,000 506,405
Beneficial Corp. 7.20%, 2/21/97........................ 500,000 502,415
Comdisco, Inc. 7.82%, 2/5/97........................... 700,000 703,689
General Motors Acceptance Corp.
7.625%, 2/28/97....................................... 500,000 503,220
Lehman Brothers Holdings, Inc.
8.375%, 4/1/97........................................ 300,000 303,126
Salomon, Inc. 5.20%, 1/20/97........................... 500,000 499,395
-----------
4,122,894
- -------------------------------------------------------------------------------
INDUSTRIAL (4.5%)
Sears Roebuck Co., Series II, Medium Term Note 9.22%,
1/30/97............................................... 400,000 403,000
Whitman Corp., Series B, Medium Term Note 8.12%,
1/27/97............................................... 300,000 301,593
-----------
704,593
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS--(CONTINUED)
- --------------------------------------------------------------------------------
UTILITIES (9.5%)
Commonwealth Edison 7.02%, 2/1/97....................... $ 630,000 $ 631,575
Potomac Capital, Medium Term Note 6.19%, 4/28/97........ 250,000 250,512
Texas Utilities Electric Co. 9.20%, 1/10/97............. 600,000 603,750
-----------
1,485,837
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $9,118,187)............ 9,124,017
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (6.4%)
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (6.4%)
6.875%, 2/28/97 (COST $1,003,566)....................... 1,000,000 1,005,050
- --------------------------------------------------------------------------------
AGENCY SECURITIES (35.1%)
- --------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK (9.6%)
5.32%, 2/3/97........................................... 1,500,000 1,500,150
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (3.2%)
5.70%, 11/20/97......................................... 500,000 500,000
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION (12.8%)
Zero Coupon, 11/6/96.................................... 2,000,000 1,998,552
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (9.5%)
Zero Coupon, 1/22/97.................................... 1,500,000 1,482,155
- --------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES
(COST $5,480,483)...................................... 5,480,857
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (18.9%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (18.9%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $2,955,458,
collateralized by $2,856,334 of various U.S.
Treasury Notes, 5.875%-7.75%, due 3/31/99-11/30/99,
valued at $2,955,007
(COST $2,955,000).................................. $2,955,000 $ 2,955,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (118.7%)
(COST $18,557,236) (A).............................. 18,564,924
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-18.7%)........... (2,923,925)
- ------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $15,640,999
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/floating rate security--rate disclosed is as of October 31, 1996.
(a) The cost for federal income tax purposes was $18,557,236. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$7,688. This consisted of aggregate gross unrealized appreciation for all
securities of $8,628 and aggregate gross unrealized depreciation for all
securities of $940.
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE>
SIRACH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (96.2%)
- -------------------------------------------------------------------------------
BANKS (7.3%)
BankAmerica Corp. ....................................... 1,400 $ 128,100
Chase Manhattan Corp..................................... 1,200 102,900
Citicorp Bank............................................ 750 74,250
First Bank System, Inc................................... 1,400 92,400
Washington Federal, Inc.................................. 2,800 67,375
----------
465,025
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.6%)
ConAgra, Inc............................................. 1,800 89,775
CPC International, Inc. ................................. 800 63,100
PepsiCo, Inc. ........................................... 2,600 77,025
----------
229,900
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (1.7%)
AlliedSignal, Inc. ...................................... 1,700 111,350
- -------------------------------------------------------------------------------
CHEMICALS (1.1%)
Praxair, Inc............................................. 1,600 70,800
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE (1.5%)
*BMC Software, Inc........................................ 650 53,869
Computer Association International, Inc. ................ 700 41,388
----------
95,257
- -------------------------------------------------------------------------------
CONSUMER STAPLES (3.9%)
Clorox Co................................................ 350 38,194
Gillette Co. ............................................ 1,200 89,700
Procter & Gamble Co...................................... 1,250 123,750
----------
251,644
- -------------------------------------------------------------------------------
ELECTRONICS (3.0%)
General Electric Co...................................... 1,500 145,125
Honeywell, Inc. ......................................... 800 49,700
----------
194,825
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE>
SIRACH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (4.9%)
Halliburton Co............................................ 1,450 $ 82,106
Mobil Corp................................................ 1,000 116,750
Williams Cos., Inc. ...................................... 2,200 114,950
----------
313,806
- --------------------------------------------------------------------------------
ENVIRONMENTAL (2.4%)
*United Waste Systems, Inc................................. 1,900 65,075
*U.S.A. Waste Services, Inc. .............................. 2,860 91,520
----------
156,595
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (9.6%)
Capital One Financial Corp. .............................. 3,100 96,488
Equifax, Inc. ............................................ 2,950 87,762
Household International, Inc. ............................ 500 44,250
Merrill Lynch & Co. ...................................... 1,400 98,350
MGIC Investment Corp. .................................... 1,350 92,644
Morgan Stanley Group, Inc. ............................... 1,100 55,275
SunAmerica, Inc. ......................................... 2,000 75,000
The Money Store, Inc. .................................... 2,450 63,700
----------
613,469
- --------------------------------------------------------------------------------
HEALTH CARE (5.3%)
*Boston Scientific Corp. .................................. 1,300 70,688
Cardinal Health, Inc. .................................... 1,100 86,350
Columbia/HCA Healthcare Corp.............................. 1,650 58,988
*Oxford Health Plans, Inc. ................................ 1,100 50,119
Tenent Healthcare Corp. .................................. 3,400 70,975
----------
337,120
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.2%)
Black & Decker Corp....................................... 2,100 78,488
- --------------------------------------------------------------------------------
INSURANCE (4.2%)
American International Group, Inc. ....................... 1,100 119,487
Travelers, Inc............................................ 2,050 111,213
UNUM Corp. ............................................... 650 40,869
----------
271,569
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-38
<PAGE>
SIRACH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (4.8%)
*Boston Chicken, Inc. .................................... 1,600 $ 58,100
Hilton Hotels Corp. ..................................... 3,100 94,162
Marriott International, Inc. ............................ 1,700 96,688
McDonald's Corp. ........................................ 1,350 59,906
----------
308,856
- -------------------------------------------------------------------------------
MANUFACTURING (0.5%)
Johnson Controls, Inc.................................... 400 29,200
- -------------------------------------------------------------------------------
MISCELLANEOUS (1.3%)
Tyco International Ltd. ................................. 1,700 84,363
- -------------------------------------------------------------------------------
OFFICE EQUIPMENT (1.3%)
Hewlett-Packard Co. ..................................... 950 41,919
Xerox Corp. ............................................. 900 41,737
----------
83,656
- -------------------------------------------------------------------------------
PHARMACEUTICALS (9.1%)
Abbott Laboratories...................................... 1,450 73,406
*Amgen, Inc. ............................................. 1,600 98,100
Johnson & Johnson........................................ 2,100 103,425
Merck & Co., Inc. ....................................... 1,700 126,012
Pfizer, Inc.............................................. 1,400 115,850
Schering-Plough Corp..................................... 1,000 64,000
----------
580,793
- -------------------------------------------------------------------------------
RETAIL (12.4%)
Albertson's, Inc......................................... 2,050 70,469
*Borders Group, Inc. ..................................... 1,600 50,400
CUC International, Inc. ................................. 3,500 85,750
Gap, Inc. ............................................... 2,450 71,050
Home Depot, Inc.......................................... 2,100 114,975
*Price/Costco, Inc........................................ 5,150 102,034
*Safeway, Inc. ........................................... 2,450 105,044
*Staples, Inc. ........................................... 4,450 83,437
Walgreen Co. ............................................ 2,800 105,700
----------
788,859
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-39
<PAGE>
SIRACH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SERVICES (5.6%)
*Ceridian Corp. .......................................... 950 $ 47,144
*Corporate Express, Inc. ................................. 1,300 42,656
Electronic Data Systems Corp............................. 1,700 76,500
First Data Corp. ........................................ 1,150 91,712
Paychex, Inc............................................. 900 51,187
Service Corp. International.............................. 1,800 51,300
----------
360,499
- -------------------------------------------------------------------------------
TECHNOLOGY (6.0%)
*Cisco Systems, Inc. ..................................... 1,550 95,809
*Microsoft Corp., Inc. ................................... 750 102,984
*Oracle Corp. ............................................ 2,250 95,203
*Sun Microsystems, Inc. .................................. 1,500 91,406
----------
385,402
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (3.1%)
*ADC Telecommunications, Inc. ............................ 750 51,328
*Andrew Corp.............................................. 900 43,875
Lucent Technologies, Inc................................. 1,400 65,800
*Newbridge Networks Corp. ................................ 1,200 37,950
----------
198,953
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (1.3%)
Liz Claiborne, Inc....................................... 550 23,238
*Nautica Enterprises, Inc. ............................... 2,000 61,250
----------
84,488
- -------------------------------------------------------------------------------
UTILITIES (1.1%)
Sprint Corp. ............................................ 1,750 68,687
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $6,073,231)....................................... 6,163,604
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE>
SIRACH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (9.1%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (9.1%)
Chase Securities, Inc. 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $586,091, collateralized
by $566,434 of various U.S. Treasury Notes, 5.875%-
7.75% due 3/31/99-11/30/99, valued at $586,001
(COST $586,000)....................................... $586,000 $ 586,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (105.3%)
(COST $6,659,231)(A)................................... 6,749,604
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
(NET) (-5.3%).......................................... (339,571)
- ------------------------------------------------------------------------------
NET ASSETS (100%)........................................ $6,410,033
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
(a) The cost for federal income tax purposes was $6,668,755. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$80,849. This consisted of aggregate gross unrealized appreciation for all
securities of $188,924 and aggregate gross unrealized depreciation for all
securities of $108,075.
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE>
SIRACH PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
SIRACH SIRACH
SPECIAL SIRACH STRATEGIC
EQUITY GROWTH BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments at cost..................... $366,806,160 $129,608,973 $77,712,592
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investments, at Value................... $453,819,823 $144,358,101 $84,640,968
Cash.................................... 610 976,162 318,696
Receivable for Investments Sold......... 1,581,942 1,882,497 532,306
Receivable from Investment Advisor--Note
B..................................... -- -- --
Dividends Receivable.................... 63,600 76,813 25,382
Receivable for Portfolio Shares Sold.... 2,201,195 784,914 19,116
Interest Receivable..................... 2,902 3,479 466,927
Other Assets............................ 16,796 4,077 2,733
- -------------------------------------------------------------------------------
Total Assets........................... 457,686,868 148,086,043 86,006,128
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased....... 14,923,487 4,535,165 2,471,264
Payable for Portfolio Shares Redeemed... 20,503 -- 15,260
Payable for Investment Advisory Fees--
Note B................................ 273,356 76,808 45,432
Payable for Administrative Fees--Note
C..................................... 53,875 15,464 11,625
Payable for Directors' Fees--Note G..... 2,296 937 678
Payable for Distribution Fees--Note E... 91 2,528 --
Other Liabilities....................... 79,943 36,330 31,859
- -------------------------------------------------------------------------------
Total Liabilities...................... 15,353,551 4,667,232 2,576,118
- -------------------------------------------------------------------------------
NET ASSETS............................... $442,333,317 $143,418,811 $83,430,010
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital......................... 260,244,836 107,683,929 67,135,880
Undistributed Net Investment Income..... -- 250,911 336,195
Accumulated Net Realized Gain (Loss).... 95,074,818 20,734,843 9,029,559
Unrealized Appreciation................. 87,013,663 14,749,128 6,928,376
- -------------------------------------------------------------------------------
NET ASSETS............................... $442,333,317 $143,418,811 $83,430,010
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
NET ASSETS............................... $441,326,469 $128,981,707 $83,430,010
Shares Issued and Outstanding ($0.001
par value)+........................... 24,550,720 9,204,691 6,960,180
Net Asset Value, Offering, and
Redemption Price Per Share............ $ 17.98 $ 14.01 $ 11.99
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
NET ASSETS............................... $ 1,006,848 $ 14,437,104 --
Shares Issued and Outstanding ($0.001
par value) (Authorized 10,000,000).... 56,035 1,030,938 --
Net Asset Value, Offering, and
Redemption Price Per Share............ $ 17.97 $ 14.00 --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
+ Authorized Shares 50,000,000 25,000,000 25,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE>
SIRACH PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
SIRACH SIRACH
FIXED SHORT-TERM SIRACH
INCOME RESERVES EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments at cost...................... $18,783,188 $18,557,236 $6,659,231
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investments, at Value.................... $18,972,071 $18,564,924 $6,749,604
Cash..................................... 623 930 866
Receivable for Investments Sold.......... 593,881 -- --
Receivable from Investment Advisor--Note
B...................................... 2,334 7,437 6,264
Dividends Receivable..................... -- -- 3,363
Receivable for Portfolio Shares Sold..... 17,228 5,182 --
Interest Receivable...................... 278,667 175,253 91
Other Assets............................. 564 531 31
- -------------------------------------------------------------------------------
Total Assets............................ 19,865,368 18,754,257 6,760,219
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased........ 1,028,592 2,505,025 325,043
Payable for Portfolio Shares Redeemed.... -- 576,305 --
Payable for Investment Advisory Fees--
Note B................................. -- -- --
Payable for Administrative Fees--Note C.. 7,278 6,913 3,344
Payable for Directors' Fees--Note G...... 655 605 775
Payable for Distribution Fees--Note E.... -- -- --
Other Liabilities........................ 25,524 24,410 21,024
- -------------------------------------------------------------------------------
Total Liabilities....................... 1,062,049 3,113,258 350,186
- -------------------------------------------------------------------------------
NET ASSETS................................ $18,803,319 $15,640,999 $6,410,033
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.......................... 18,937,120 15,542,494 6,292,266
Undistributed Net Investment Income...... 138,014 94,428 1,709
Accumulated Net Realized Gain (Loss)..... (460,698) (3,611) 25,685
Unrealized Appreciation.................. 188,883 7,688 90,373
- -------------------------------------------------------------------------------
NET ASSETS................................ $18,803,319 $15,640,999 $6,410,033
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
NET ASSETS................................ $18,803,319 $15,640,999 $6,410,033
Shares Issued and Outstanding ($0.001 par
value)+................................ 1,930,992 1,562,802 584,346
Net Asset Value, Offering, and Redemption
Price Per Share........................ $ 9.74 $ 10.01 $ 10.97
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
NET ASSETS................................ -- -- --
Shares Issued and Outstanding ($0.001 par
value) (Authorized 10,000,000)......... -- -- --
Net Asset Value, Offering, and Redemption
Price Per Share........................ -- -- --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
+ Authorized Shares 25,000,000 25,000,000 25,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE>
SIRACH PORTFOLIOS
STATEMENT OF OPERATIONS
Year Ended October 31, 1996
<TABLE>
<CAPTION>
SIRACH SIRACH
SPECIAL SIRACH STRATEGIC
EQUITY GROWTH BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................ $ 948,778 $ 1,220,779 $ 493,074
Interest................. 1,860,530 1,020,228 3,038,427
- ------------------------------------------------------------------------------------------------
Total Income............. 2,809,308 2,241,007 3,531,501
- ------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory
Fees--Note B
Basic Fees............... $3,404,812 $793,566 $578,683
Less: Fees Waived........ -- 3,404,812 -- 793,566 -- 578,683
Administrative Fees--Note
C....................... 617,933 159,310 133,890
Custodian Fees--Note D... 39,353 15,671 23,404
Registration and Filing
Fees.................... 23,889 30,504 29,119
Audit Fees............... 27,381 15,599 14,666
Legal Fees............... 35,839 8,691 7,047
Printing Fees............ 11,533 10,752 9,822
Directors' Fees--Note G.. 12,553 4,731 4,182
Distribution and Service
Fees--Note E ........... 91 2,528 --
Other Expenses........... 60,113 21,151 24,436
Expenses Assumed by the
Adviser--Note B......... -- -- --
- ------------------------------------------------------------------------------------------------
Total Expenses........... 4,233,497 1,062,503 825,249
Expense Offset--Note A... (5,198) (1,989) (4,118)
- ------------------------------------------------------------------------------------------------
Net Expenses............. 4,228,299 1,060,514 821,131
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
(LOSS)................... (1,418,991) 1,180,493 2,710,370
- ------------------------------------------------------------------------------------------------
NET REALIZED GAIN ON
INVESTMENTS.............. 103,695,546 22,211,165 11,567,491
- ------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON INVESTMENTS........... 3,942,509 2,947,210 (1,526,919)
- ------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS.............. 107,638,055 25,158,375 10,040,572
- ------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $106,219,064 $26,338,868 $12,750,942
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE>
SIRACH PORTFOLIOS
STATEMENT OF OPERATIONS--(CONTINUED)
Year Ended October 31, 1996
<TABLE>
<CAPTION>
SIRACH SIRACH
FIXED SHORT-TERM SIRACH
INCOME RESERVES EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO*
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................. $ -- $ -- $ 6,694
Interest.................. 1,064,960 911,064 3,012
- --------------------------------------------------------------------------------------------
Total Income............. 1,064,960 911,064 9,706
- --------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............... $ 105,292 $ 66,747 $ 4,898
Less: Fees Waived........ (105,292) -- (66,747) -- (4,898) --
Administrative Fees--Note
C....................... 85,627 77,350 9,454
Custodian Fees--Note D.... 1,922 6,951 3,986
Registration and Filing
Fees.................... 15,220 18,159 1,785
Audit Fees................ 12,290 13,351 12,500
Legal Fees................ 2,886 1,471 318
Printing Fees............. 10,304 8,177 4,480
Directors' Fees--Note G... 2,736 2,734 1,429
Distribution and Service
Fees--Note E............ -- -- --
Other Expenses............ 4,547 6,523 313
Expenses Assumed by the
Adviser--Note B......... (12,221) (50,756) (26,497)
- --------------------------------------------------------------------------------------------
Total Expenses........... 123,311 83,960 7,768
Expense Offset--Note A.... (1,696) (489) (986)
- --------------------------------------------------------------------------------------------
Net Expenses............. 121,615 83,471 6,782
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME...... 943,345 827,593 2,924
- --------------------------------------------------------------------------------------------
NET REALIZED GAIN ON
INVESTMENTS.............. 173,221 -- 25,685
- --------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON INVESTMENTS........... (282,306) (619) 90,373
- --------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS.............. (109,085) (619) 116,058
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $ 834,260 $826,974 $118,982
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
* For the period July 1, 1996 (commencement of operations) to October 31, 1996.
The accompanying notes are an integral part of the financial statements.
F-45
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss)...................... $ (1,418,991) $ 3,240,775
Net Realized Gain................................. 103,695,546 104,351,652
Net Change in Unrealized
Appreciation/Depreciation....................... 3,942,509 10,094,755
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From
Operations..................................... 106,219,064 117,687,182
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class.............................. (736,639) (3,406,140)
Net Realized Gain:
Institutional Class.............................. (104,062,768) (30,437,924)
- ----------------------------------------------------------------------------------
Total Distributions.............................. (104,799,407) (33,844,064)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE J):
Institutional Class:
Issued--Regular................................... 49,166,742 50,510,747
--In Lieu of Cash Distributions................. 102,741,800 33,371,636
Redeemed.......................................... (210,082,635) (183,166,928)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) from Institutional Class
Shares......................................... (58,174,093) (99,284,545)
- ----------------------------------------------------------------------------------
Institutional Service Class*:
Issued--Regular................................... 1,760,960 --
Redeemed.......................................... (699,549) --
- ----------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares......................................... 1,061,411 --
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions..... (57,112,682) (99,284,545)
- ----------------------------------------------------------------------------------
Total Decrease.................................... (55,693,025) (15,441,427)
Net Assets:
Beginning of Period............................... 498,026,342 513,467,769
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $0 and $548,507,
respectively)................................... $ 442,333,317 $ 498,026,342
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on
March 22, 1996.
The accompanying notes are an integral part of the financial statements.
F-46
<PAGE>
SIRACH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 1,180,493 $ 1,351,821
Net Realized Gain................................... 22,211,165 4,963,869
Net Change in Unrealized Appreciation/Depreciation.. 2,947,210 9,582,044
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From
Operations....................................... 26,338,868 15,897,734
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class................................. (1,064,254) (1,405,888)
Institutional Service Class*........................ (3,552) --
- ----------------------------------------------------------------------------------
Total Distributions................................ (1,067,806) (1,405,888)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE J):
Institutional Class:
Issued--Regular..................................... 32,367,362 52,374,107
--In Lieu of Cash Distributions................... 985,751 1,348,126
Redeemed............................................ (44,372,083) (34,371,163)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) from Institutional Class
Shares........................................... (11,018,970) 19,351,070
- ----------------------------------------------------------------------------------
Institutional Service Class*:
Issued--Regular..................................... 14,445,297 --
--In Lieu of Cash Distributions................... 3,552 --
Redeemed............................................ (68,952)
- ----------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares........................................... 14,379,897 --
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions....... 3,360,927 19,351,070
- ----------------------------------------------------------------------------------
Total Increase...................................... 28,631,989 33,842,916
Net Assets:
Beginning of Period................................. 114,786,822 80,943,906
- ----------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $250,911 and $138,224,
respectively)..................................... $143,418,811 $114,786,822
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on
March 22, 1996.
The accompanying notes are an integral part of the financial statements.
F-47
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 2,710,370 $ 3,312,441
Net Realized Gain..................................... 11,567,491 4,166,964
Net Change in Unrealized Appreciation/Depreciation.... (1,526,919) 8,906,025
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From
Operations......................................... 12,750,942 16,385,430
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (2,789,994) (3,307,979)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE J):
Institutional Class:
Issued--Regular....................................... 12,209,599 24,186,341
--In Lieu of Cash Distributions..................... 2,784,689 3,307,576
Redeemed.............................................. (37,359,268) (44,301,823)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions......... (22,364,980) (16,807,906)
- ----------------------------------------------------------------------------------
Total Decrease........................................ (12,404,032) (3,730,455)
NET ASSETS:
Beginning of Period................................... 95,834,042 99,564,497
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $336,195 and $399,022, respectively)...... $83,430,010 $95,834,042
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-48
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 943,345 $ 828,911
Net Realized Gain..................................... 173,221 82,728
Net Change in Unrealized Appreciation/Depreciation.... (282,306) 976,781
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 834,260 1,888,420
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (898,915) (831,956)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE J):
Issued--Regular....................................... 10,044,016 4,809,340
--In Lieu of Cash Distributions..................... 897,150 831,346
Redeemed.............................................. (7,511,761) (3,436,827)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 3,429,405 2,203,859
- ----------------------------------------------------------------------------------
Total Increase........................................ 3,364,750 3,260,323
Net Assets:
Beginning of Period................................... 15,438,569 12,178,246
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $138,014 and $89,858, respectively)....... $18,803,319 $15,438,569
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-49
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 827,593 $ 1,161,187
Net Realized Loss.................................... -- (3,611)
Net Change in Unrealized Appreciation/Depreciation... (619) 25,034
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations........................................ 826,974 1,182,610
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (838,639) (1,159,685)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE J):
Issued--Regular...................................... 6,000,675 11,897,304
--In Lieu of Cash Distributions.................... 834,416 1,158,032
Redeemed............................................. (9,671,711) (15,960,149)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions........ (2,836,620) (2,904,813)
- ----------------------------------------------------------------------------------
Total Decrease....................................... (2,848,285) (2,881,888)
Net Assets:
Beginning of Period.................................. 18,489,284 21,371,172
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $94,428 and $105,474, respectively)...... $15,640,999 $ 18,489,284
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-50
<PAGE>
SIRACH EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
JULY 1,
1996** TO
OCTOBER 31,
1996
- ----------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................................... $ 2,924
Net Realized Gain................................................... 25,685
Net Change in Unrealized Appreciation/Depreciation.................. 90,373
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............... 118,982
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................................... (1,215)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE J):
Issued--Regular..................................................... 6,424,415
--In Lieu of Cash Distributions................................... 1,215
Redeemed............................................................ (133,364)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions....................... 6,292,266
- ----------------------------------------------------------------------------------
Total Increase...................................................... 6,410,033
Net Assets:
Beginning of Period................................................. --
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment income of
$1,709)........................................................... $6,410,033
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
F-51
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL CLASS SERVICE CLASS
--------------------------------------------------- -------------
MARCH 22,
YEAR ENDED OCTOBER 31, 1996** TO
--------------------------------------------------- OCTOBER 31,
1996 1995 1994 1993 1992 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 18.80 $ 16.10 $ 19.10 $ 15.03 $ 13.90 $ 16.54
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)................ (0.06) 0.11 0.04 (0.01) 0.05 (0.01)
Net Realized and
Unrealized Gain
(Loss)................ 3.51 3.65 (0.90) 4.68 1.13 1.44
- --------------------------------------------------------------------------------------------
Total from Investment
Operations............ 3.45 3.76 (0.86) 4.67 1.18 1.43
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.03) (0.11) (0.02) (0.01) (0.05) --
Net Realized Gain...... (4.24) (0.95) (2.12) (0.59) -- --
- --------------------------------------------------------------------------------------------
Total Distributions.... (4.27) (1.06) (2.14) (0.60) (0.05) --
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 17.98 $ 18.80 $ 16.10 $ 19.10 $ 15.03 $ 17.97
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL RETURN............ 23.62% 25.31% (4.68)% 31.81% 8.50% 8.65%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of
Period (Thousands).... $441,326 $498,026 $513,468 $528,078 $358,714 $ 1,007
Ratio of Expenses to
Average Net Assets.... 0.87% 0.85% 0.88% 0.89% 0.90% 1.12%*
Ratio of Net Investment
Income (Loss) to
Average Net Assets.... (0.29)% 0.64% 0.27% (0.03)% 0.38% (0.64)%*
Portfolio Turnover
Rate.................. 129% 137% 107% 102% 122% 129%
Average Commission
Rate#................. $ 0.0590 N/A N/A N/A N/A $ 0.0590
- --------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... 0.87% 0.85% N/A N/A N/A 1.12%*
- --------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Initial offering of Institutional Service Class Shares
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged, during the period.
The accompanying notes are an integral part of the financial statements.
F-52
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL CLASS SERVICE CLASS
------------------------------- -------------
YEARS ENDED DECEMBER 1 MARCH 22,
OCTOBER 31, 1993** TO 1996*** TO
------------------ OCTOBER 31, OCTOBER 31,
1996 1995 1994 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 11.35 $ 9.66 $ 10.00 $ 12.80
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.12 0.15 0.10 0.07
Net Realized and Unrealized Gain
(Loss)........................ 2.65 1.70 (0.36) 1.19
- --------------------------------------------------------------------------------
Total from Investment
Operations................... 2.77 1.85 (0.26) 1.26
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.11) (0.16) (0.08) (0.06)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 14.01 $ 11.35 $ 9.66 $ 14.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN..................... 24.52% 19.33% (2.58)% 9.87%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................... $128,982 $114,787 $80,944 $14,437
Ratio of Expenses to Average Net
Assets........................ 0.87% 0.86% 0.92%* 1.12%*
Ratio of Net Investment Income
to Average Net Assets......... 0.97% 1.48% 1.13%* 0.72%*
Portfolio Turnover Rate......... 151% 119% 141% 151%
Average Commission Rate#........ $ 0.0600 N/A N/A $0.0600
- --------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets Including Expense
Offsets....................... 0.86% 0.84% N/A 1.11%*
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Initial offering of Institutional Service Class Shares
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged, during the period.
The accompanying notes are an integral part of the financial statements.
F-53
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1,
OCTOBER 31, 1993** TO
---------------- OCTOBER 31,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 10.75 $ 9.35 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.36 0.36 0.27
Net Realized and Unrealized Gain (Loss)......... 1.24 1.39 (0.69)
- -------------------------------------------------------------------------------
Total From Investment Operations............... 1.60 1.75 (0.42)
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........................... (0.36) (0.35) (0.23)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................... $ 11.99 $ 10.75 $ 9.35
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN .................................... 15.13% 19.10% (4.19)%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)........... $83,430 $95,834 $99,564
Ratio of Expenses to Average Net Assets......... 0.93% 0.87% 0.90%*
Ratio of Net Investment Income to Average Net
Assets........................................ 3.04% 3.49% 3.05%*
Portfolio Turnover Rate......................... 172% 158% 158%
Average Commission Rate #....................... $0.0600 N/A N/A
- -------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
Including Expense Offsets..................... 0.92% 0.86% N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged, during the period.
The accompanying notes are an integral part of the financial statements.
F-54
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1,
OCTOBER 31, 1993** TO
---------------- OCTOBER 31,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $9.88 $9.16 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.55 0.58 0.48
Net Realized and Unrealized Gain (Loss)......... (0.15) 0.73 (0.91)
- -------------------------------------------------------------------------------
Total From Investment Operations............... 0.40 1.31 (0.43)
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........................... (0.54) (0.59) (0.41)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................... $9.74 $9.88 $9.16
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+.................................... 4.21% 14.75% (4.33)%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)........... $18,803 $15,439 $12,178
Ratio of Expenses to Average Net Assets......... 0.76% 0.76% 0.75%*
Ratio of Net Investment Income to Average Net
Assets........................................ 5.84% 6.13% 5.37%*
Portfolio Turnover Rate......................... 260% 165% 230%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses Assumed by
the Adviser Per Share......................... $0.07 $0.06 $0.08
Ratio of Expenses to Average Net Assets
Including Expense Offsets..................... 0.75% 0.75% N/A
- -------------------------------------------------------------------------------
</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 during the
periods indicated.
The accompanying notes are an integral part of the financial statements.
F-55
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1,
OCTOBER 31, 1993** TO
---------------- OCTOBER 31,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $10.02 $10.03 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.51 0.59 0.34
Net Realized and Unrealized Loss................ (0.01) (0.02) (0.02)
- -------------------------------------------------------------------------------
Total From Investment Operations............... 0.50 0.57 0.32
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........................... (0.51) (0.58) (0.29)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................... $10.01 $10.02 $10.03
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+.................................... 5.12% 5.83% 3.24%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)........... $15,641 $18,489 $21,371
Ratio of Expenses to Average Net Assets......... 0.50% 0.52% 0.50%*
Ratio of Net Investment Income to Average Net
Assets........................................ 4.96% 5.34% 3.53%*
Portfolio Turnover Rate......................... 0% 38% 13%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses Assumed by
the Adviser Per Share......................... $0.07 $0.04 $0.04
Ratio of Expenses to Average Net Assets
Including Expense Offsets..................... 0.50% 0.50% N/A
- -------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
F-56
<PAGE>
SIRACH EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
JULY 1,
1996** TO
OCTOBER 31,
1996
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................... $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............................................. 0.01
Net Realized and Unrealized Gain.................................. 0.97
- -------------------------------------------------------------------------------
Total From Investment Operations................................. 0.98
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............................................. (0.01)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..................................... $10.97
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+...................................................... 9.80%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)............................. $6,410
Ratio of Expenses to Average Net Assets........................... 1.03%*
Ratio of Net Investment Income to Average Net Assets.............. 0.39%*
Portfolio Turnover Rate........................................... 34%
Average Commission Rate........................................... $0.0600
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses Assumed by the Adviser Per
Share........................................................... $ 0.14
Ratio of Expenses to Average Net Assets Including Expense Off-
sets............................................................ 0.90%
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Total Return would have been lower had certain fees not been waived and ex-
penses assumed by the Adviser during the period indicated.
The accompanying notes are an integral part of the financial statements.
F-57
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The Sirach Spe-
cial Equity Portfolio, Sirach Growth Portfolio, Sirach Strategic Balanced
Portfolio, Sirach Fixed Income Portfolio, Sirach Short-Term Reserves Portfolio
and Sirach Equity Portfolio (the "Portfolios"), portfolios of UAM Funds Inc.,
are diversified, open-end management investment companies. 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
and The Sirach Equity Portfolio began operations on July 1, 1996. At October
31, 1996, the UAM Funds were composed of forty active portfolios. The finan-
cial statements of the remaining portfolios are presented separately. The
Portfolios are authorized to offer two separate classes of shares--Institu-
tional Class Shares and Institutional Service Class Shares. As of October 31,
1996, only the Sirach Special Equity Portfolio and Sirach Growth Portfolio
have issued Institutional Service Class Shares. Both classes of shares have
identical voting, dividend, liquidation and other rights. The objectives of
the Portfolios are as follows:
SIRACH SPECIAL EQUITY PORTFOLIO seeks to provide maximum long-term
growth of capital consistent with reasonable risk to principal, by
investing in small to medium capitalized companies with particularly
attractive financial characteristics.
SIRACH GROWTH PORTFOLIO seeks to provide long-term capital growth
consistent with reasonable risk to principal by investing primarily in
common stocks of companies that offer long-term growth potential.
SIRACH STRATEGIC BALANCED PORTFOLIO seeks to provide long-term growth of
capital consistent with reasonable risk to principal by investing in a
diversified portfolio of common stocks and fixed income securities.
SIRACH FIXED INCOME PORTFOLIO seeks to provide above-average total
return with reasonable risk to principal by investing primarily in
investment grade fixed income securities.
SIRACH SHORT-TERM RESERVES PORTFOLIO seeks to provide competitive rates
of return consistent with the maintenance of principal and liquidity by
investing primarily in investment grade fixed income securities with an
average weighted maturity of three years or less.
SIRACH EQUITY PORTFOLIO seeks to provide long-term capital growth
consistent with reasonable risk to principal by investing, under normal
circumstances, up to 90% of its total assets in common stocks of companies
that offer long-term growth potential.
F-58
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of
their financial statements. Generally accepted accounting principles may re-
quire management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.
1. SECURITY VALUATION: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valua-
tion is made or, if no sale occurred on such day, at the mean of the bid
and asked prices. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and un-
listed equity securities are valued not exceeding the current asked prices
nor less than the current bid 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 secu-
rities, quotations from dealers, market transactions in comparable securi-
ties 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 quota-
tions are readily available is determined in good faith at fair value us-
ing methods determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as
a regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
At October 31, 1996, the following Portfolios had available an approxi-
mate capital loss carryovers for Federal income tax purposes, which will
expire on the dates indicated:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
SIRACH PORTFOLIOS 2002 2003 TOTAL
----------------- --------- ------ ---------
<S> <C> <C> <C>
Fixed Income...................................... $ 388,000 -- $ 388,000
Short-Term Reserves............................... -- $4,000 4,000
</TABLE>
The Sirach Growth Portfolio, the Sirach Strategic Balanced Portfolio and
the Sirach Fixed Income Portfolio utilized capital loss carryovers for
Federal income tax purposes of approximately $386,000, $2,353,000 and
$238,000, respectively.
F-59
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase 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 monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: Each of the Portfolios will normally
distribute substantially all of its net investment income 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. These dif-
ferences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments and in-kind
transactions.
Permanent book and tax basis difference relating to shareholder distri-
butions resulted in reclassification as follows:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED NET
NET INVESTMENT REALIZED PAID IN
SIRACH PORTFOLIOS INCOME GAIN (LOSS) CAPITAL
----------------- -------------- ----------- ----------
<S> <C> <C> <C>
Special Equity........................ $1,607,123 $(8,629,740) $7,022,617
Growth................................ -- (977,399) 977,399
Strategic Balanced.................... 16,797 (16,797) --
Fixed Income.......................... 3,726 (3,726) --
</TABLE>
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
F-60
<PAGE>
SIRACH PORTFOLIOS
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. Discounts and
premiums on securities purchased are amortized over their respective
lives. Most expenses of the UAM Funds can be directly attributed to a par-
ticular portfolio. Expenses which cannot be directly attributed are appor-
tioned among the portfolios of the UAM Funds based on their relative net
assets. Additionally, certain expenses are apportioned among the portfo-
lios 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 in-
creased to include expense offsets for custodian balance credits.
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 fees calculated at an annual rate of average
daily net assets as follows:
<TABLE>
<CAPTION>
SIRACH PORTFOLIOS RATE
- ----------------- -----
<S> <C>
Special Equity............................................................ 0.70%
Growth.................................................................... 0.65%
Strategic Balanced........................................................ 0.65%
Fixed Income.............................................................. 0.65%
Short-Term Reserves....................................................... 0.40%
Equity.................................................................... 0.65%
</TABLE>
The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses, if necessary, in order to keep the Sirach Fixed Income
Portfolio, the Sirach Short-Term Reserves Portfolio and the Sirach Equity
Portfolio total annual operating expenses, after the effect of expense offset
arrangements, from exceeding 0.75%, 0.50% and 0.90% of average daily net as-
sets, respectively.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive
F-61
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
annual fees, computed daily and payable monthly, of 0.19% of the first $200
million of the combined aggregate net assets; plus 0.11% of the next $800 mil-
lion of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are sub-
ject to a graduated minimum fee schedule per portfolio which rises from $2,000
per month, upon inception of a portfolio, to $70,000 annually after two years.
For portfolios with more than one class of shares, the minimum annual fee in-
creases to $90,000. In addition, the Administrator receives a Portfolio-spe-
cific monthly fee of between 0.02%-0.06% of the aggregate net assets of the
Portfolios. Also effective April 15, 1996, the Administrator has entered into
a Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the period April 15, 1996 to October 31, 1996, UAM Fund Services,
Inc. earned the following amounts from the Portfolios as Administrator and
paid the following portion to CGFSC.
<TABLE>
<CAPTION>
PORTION
ADMINISTRATION PAID TO
SIRACH PORTFOLIOS FEES CGFSC
- ----------------- -------------- --------
<S> <C> <C>
Special Equity.......................................... $369,138 $263,156
Growth.................................................. 96,046 68,389
Strategic Balanced...................................... 77,368 50,225
Fixed Income............................................ 46,824 42,951
Short-Term Reserves..................................... 43,098 39,655
Equity.................................................. 9,454 9,168
</TABLE>
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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 mil-
lion of the combined aggregate net assets; plus 0.12% of the next $800 million
of the combined aggregate net assets; plus 0.08% of the combined aggregate net
assets in excess of $1 billion but less than $3 billion; plus 0.06% of the
combined aggregate net assets in excess of $3 billion. The fees were allocated
among the portfolios of the UAM Funds and AEW on the basis of their relative
net assets and were subject to a graduated minimum fee schedule per portfolio
which rose from
F-62
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$2,000 per month, upon inception of a portfolio, to $70,000 annually after two
years. For the period November 1, 1995 to April 15, 1996, CGFSC earned the
following from the Portfolios as Administrator.
<TABLE>
<CAPTION>
ADMINISTRATION
SIRACH PORTFOLIOS FEES
- ----------------- --------------
<S> <C>
Special Equity................................................... $248,795
Growth........................................................... 63,264
Strategic Balanced............................................... 56,522
Fixed Income..................................................... 38,803
Short-Term Reserves.............................................. 34,253
</TABLE>
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolios' assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolios by the Bank, all of
which is unpaid at October 31, 1996, is as follows:
<TABLE>
<CAPTION>
SIRACH PORTFOLIOS
- -----------------
<S> <C>
Special Equity.......................................................... $25,427
Growth.................................................................. 6,588
Strategic Balanced...................................................... 5,129
Fixed Income............................................................ 3,809
Short-Term Reserves..................................................... 1,976
</TABLE>
E. DISTRIBUTION AND SERVICE PLANS: UAM Fund Distributors, Inc. ("the Dis-
tributor"), a wholly-owned subsidiary of UAM, distributes the shares of the
Portfolios. The Sirach Special Equity Portfolio and Sirach Growth Portfolio
have adopted a Distribution and Service Plan (the "Plan") on behalf of the
Service Class Shares pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Under the Plan, the Sirach Special Equity Portfolio and Sirach Growth
Portfolio may not incur distribution and service fees which exceed an annual
rate of 0.75% of the Sirach Special Equity Portfolio and Sirach Growth Portfo-
lio's net assets, however, the Board has currently limited aggregate payments
under the Plan to 0.50% per annum of the Sirach Special Equity Portfolio and
Sirach Growth Portfolio's net assets. The Sirach Special Equity Portfolio and
Sirach Growth Portfolio's Service Class Shares are not currently making pay-
ments for distribution fees. The Sirach Special Equity Portfolio's and Sirach
Growth Portfolio's Service Class Shares pay service fees at an annual rate of
0.25% of the average daily value of Service Class Shares owned by clients of
such Service Organizations. The Distrib-
F-63
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
utor does not receive any fee or other compensation with respect to the other
Portfolios in this report.
F. PURCHASES AND SALES: For the period ended October 31, 1996 the Portfolios
made purchases and sales of investment securities other than long-term U.S.
Government and short-term securities of:
<TABLE>
<CAPTION>
SIRACH PORTFOLIOS PURCHASES SALES
- ----------------- ------------ ------------
<S> <C> <C>
Special Equity........................................ $586,012,674 $687,558,003
Growth................................................ 157,228,173 157,235,619
Strategic Balanced.................................... 100,100,428 104,637,572
Fixed Income.......................................... 19,540,137 14,556,551
Short-Term Reserves................................... 497,510 --
Equity................................................ 6,692,864 645,318
</TABLE>
Purchases and sales of long-term U.S. Government securities were approxi-
mately $40,816,469 and $61,632,747, respectively, for Sirach Strategic Bal-
anced Portfolio, $16,739,536 and $21,796,380, respectively for Sirach Fixed
Income Portfolio, $500,000 and $0, respectively, for Sirach Short-Term Re-
serves Portfolio. There were no purchases or sales of long-term U.S. Govern-
ment securities for Sirach Special Equity Portfolio, Sirach Growth Portfolio
and Sirach Equity Portfolio. Sales for Sirach Special Equity Portfolio and
Sirach Growth Portfolio include in-kind transactions of $30,646,856 and
$4,200,555, respectively, including realized gains of $8,441,609 and $977,399,
respectively.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolios excluding Sirach Equity Portfolio, along
with certain other Portfolios of UAM Funds, collectively entered into an
agreement which enables them to participate in a $100 million unsecured line
of credit with several banks. Borrowings will be made solely to temporarily
finance the repurchase of Capital shares. Interest is charged to each partici-
pating Portfolio based on its borrowings at a rate per annum equal to the Fed-
eral 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 partic-
ipating Portfolio based on its average daily unused portion of the line of
credit. During the year ended October 31, 1996, the Portfolios had no
borrowings under the agreement.
F-64
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
I. OTHER: At October 31, 1996 the percentage of total shares outstanding
held by record shareholders owning 10% or greater of the aggregate total
shares outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF %
SIRACH PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ----------------- ------------ ---------
<S> <C> <C>
Growth--Institutional Class.............................. 2 20.5
Growth--Institutional Service Class...................... 4 93.8
Fixed Income............................................. 3 52.1
Short-Term Reserves...................................... 3 74.2
Equity................................................... 3 91.0
</TABLE>
At October 31, 1996 the percentage of total shares held by record sharehold-
ers affiliated with the UAM Funds was 16.5% for the Sirach Equity Portfolio.
J. CAPITAL SHARE TRANSACTIONS: Transactions in capital shares for the Port-
folios, by class, were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS INSTITUTIONAL SERVICE
SHARES CLASS SHARES
------------------------ ----------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, MARCH 22, 1996* TO
1996 1995 OCTOBER 31, 1996
----------- ----------- ------------------
<S> <C> <C> <C> <C>
SIRACH SPECIAL EQUITY PORT-
FOLIO:
Shares Issued............... 2,744,916 3,142,594 93,038
In Lieu of Cash Distribu-
tions..................... 7,041,933 2,298,514 --
Shares Redeemed............. (11,728,227) (10,848,182) (37,003)
----------- ----------- ---------
Net Increase (Decrease) from
Capital Share Transac-
tions..................... (1,941,378) (5,407,074) 56,035
=========== =========== =========
SIRACH GROWTH PORTFOLIO:
Shares Issued............... 2,516,616 4,951,616 1,035,866
In Lieu of Cash Distribu-
tions..................... 78,516 130,396 269
Shares Redeemed............. (3,499,650) (3,351,588) (5,197)
----------- ----------- ---------
Net Increase (Decrease) from
Capital Share Transac-
tions..................... (904,518) 1,730,424 1,030,938
=========== =========== =========
</TABLE>
F-65
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
---------------------------
YEAR ENDED
YEAR ENDED OCTOBER
OCTOBER 31, 1996 31, 1995
---------------- ----------
<S> <C> <C>
SIRACH STRATEGIC BALANCED PORTFOLIO:
Shares Issued...................................... 1,081,826 2,482,322
In Lieu of Cash Distributions...................... 246,974 336,268
Shares Redeemed.................................... (3,281,799) (4,557,601)
---------- ----------
Net Increase (Decrease) from
Capital Share Transactions....................... (1,952,999) (1,739,011)
========== ==========
SIRACH FIXED INCOME PORTFOLIO:
Shares Issued...................................... 1,045,131 502,850
In Lieu of Cash Distributions...................... 92,899 87,772
Shares Redeemed.................................... (768,942) (358,693)
---------- ----------
Net Increase (Decrease) from
Capital Share Transactions....................... 369,088 231,929
========== ==========
SIRACH SHORT-TERM RESERVES PORTFOLIO:
Shares Issued...................................... 600,040 1,185,842
In Lieu of Cash Distributions...................... 83,796 116,064
Shares Redeemed.................................... (965,861) (1,587,975)
---------- ----------
Net Increase (Decrease) from
Capital Share Transactions....................... (282,025) (286,069)
========== ==========
<CAPTION>
JULY 1, 1996* TO
OCTOBER 31, 1996
----------------
<S> <C> <C>
SIRACH EQUITY PORTFOLIO:
Shares Issued...................................... 596,664 --
In Lieu of Cash Distributions...................... 111 --
Shares Redeemed.................................... (12,429) --
---------- ----------
Net Increase (Decrease) from
Capital Share Transactions....................... 584,346 --
========== ==========
</TABLE>
* Commencement of Operations
F-66
<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
Sirach Equity Portfolio
In our opinion, the accompanying statements of assets and liabilities, in-
cluding the portfolios of investments, and the related statements of opera-
tions and of changes in net assets and the financial highlights present fair-
ly, in all material respects, the financial position of the Sirach Special Eq-
uity Portfolio, Sirach Growth Portfolio, Sirach Strategic Balanced Portfolio,
Sirach Fixed Income Portfolio, Sirach Short-Term Reserves Portfolio and Sirach
Equity Portfolio (the "Portfolios"), Portfolios of the UAM Funds, Inc., at Oc-
tober 31, 1996, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods indicat-
ed, in conformity with generally accepted accounting principles. These finan-
cial statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolios' management; our respon-
sibility 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 per-
form 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 presenta-
tion. We believe that our audits, which included confirmation of securities at
October 31, 1996 by correspondence with the custodian and brokers and the ap-
plication 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 9, 1996
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
Sirach Special Equity Portfolio hereby designates $82,946,000 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, 1996, the percent-
age of dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 6.5% for Sirach Special Equity Portfolio, 19.2% for
Sirach Growth Portfolio, 12.5% for Sirach Strategic Balanced Portfolio and
17.3% for Sirach Equity Portfolio.
F-67
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR CORPORATE BOND AND PREFERRED SECURITIES
Excerpts from Moody's Investor Service ("Moody's") description of its high-
est bond ratings: AAA -- judged to be the highest quality; carry the smallest
degree of investment risk: AA -- judged to be of high quality by all stan-
dards; A -- possess many favorable investment attributes and are to be consid-
ered as higher medium grade obligations; BAA -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its high-
est bond ratings: AAA -- highest grade obligations; possess the ultimate de-
gree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues
only in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as safe;
BBB -- regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the lowest
which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment and may
not be able to assess a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association, are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make "indefi-
nite and unlimited" drawings on the Treasury, if needed, to service its debt.
Debt from certain other agencies and instrumentalities,
A-1
<PAGE>
including the Federal Home Loan Bank and Federal National Mortgage Associa-
tion, is not guaranteed by the United States, but those institutions are pro-
tected by the discretionary authority of the U.S. Treasury to purchase certain
amounts of their securities to assist the institution in meeting its debt ob-
ligations. Finally, other agencies and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under government supervision, but their debt securities
are backed only by the credit worthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and The Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with the Portfolios'
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assignment by Moody's. Among the fac-
tors considered by Moody's in assigning ratings are
A-2
<PAGE>
the following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and the appraisal of specu-
lative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to completion and customer acceptance; (4)
liquidity; (5) amount and quality of long term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the manage-
ment of issuer of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolios are also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment as well as the bank which uncondi-
tionally guarantees to pay the draft at its face amount on the maturity date.
Most acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between vari-
ous currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some
A-3
<PAGE>
foreign companies are generally less liquid and more volatile than securities
of comparable domestic companies. There is generally less government supervi-
sion and regulation of stock exchanges, brokers and listed companies than in
the U.S. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social in-
stability, or diplomatic developments which could affect U.S. investments in
those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Fund's Portfolios. However,
these foreign withholding taxes are not expected to have a significant impact.
A-4
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
STERLING PARTNERS' PORTFOLIOS
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
Sterling Partners' Portfolios' Institutional Class Shares dated January 3,
1997 and the Prospectus for the Sterling Partners' Portfolios' Institutional
Service Class Shares (the "Service Class Shares") dated January 3, 1997. To
obtain a Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 7
Shareholder Services....................................................... 8
Investment Limitations..................................................... 10
Management of the Fund..................................................... 11
Investment Adviser......................................................... 14
Service and Distribution Plans............................................. 15
Portfolio Transactions..................................................... 18
Administrative Services.................................................... 19
Performance Calculations................................................... 20
General Information........................................................ 26
Appendix -- Description of Securities and Ratings.......................... A-1
Financial Statements....................................................... 27
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Sterling Partners' Equity, Sterling Partners' Balanced, Sterling Partners'
Small Cap Value and Sterling Partners' Short-Term Fixed Income Portfolios (the
"Sterling Partners' Portfolios") as set forth in the Sterling Partners' Pro-
spectuses:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers domestic and foreign banks or other financial institutions, so long as the
terms, the structure and the aggregate amount of such loans are not inconsis-
tent with the Investment Company Act of 1940, as amended, (the "1940 Act") or
the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio re-
ceives reasonable interest on the loan (which may include the Portfolio in-
vesting any cash collateral in interest bearing short-term investments). As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities
fails financially. These risks are similar to the ones involved with repur-
chase agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits ma-
turing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calen-
dar days will not exceed 10% of the total assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan associations collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other
2
<PAGE>
currencies, (ii) in the case of U.S. banks, it is a member of the Federal De-
posit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment qual-
ity comparable with other debt securities which may be purchased by each Port-
folio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an outstand-
ing unsecured debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obliga-
tions of the U.S. Government and differ mainly in interest rates, ma-
turities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Govern-
ment sponsored instrumentalities and Federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank,
Farmers Home Administration, Federal Farm Credit banks, Federal Inter-
mediate Credit Bank, Federal National Mortgage Association, Federal
Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FUTURES CONTRACTS
Each Portfolio may enter into futures contracts, options, and options on
futures contracts for the purpose of remaining fully invested and reducing
transactions costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at
a specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are
traded on national futures exchanges. Futures exchanges and trading are regu-
lated under the Commodity Exchange Act by the Commodity Futures Trading Com-
mission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
3
<PAGE>
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund expects
to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect secu-
rities it owns against price declines or purchase contracts to protect against
an increase in the price of securities it intends to purchase. As evidence of
this hedging interest, each Portfolio expects that approximately 75% of its
futures contract purchases will be "completed;" that is, equivalent amounts of
related securities will have been purchased or are being purchased by the
Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While a Portfolio will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs
incurred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts
4
<PAGE>
exceeds 5% of the market value of its total assets. In addition, a Portfolio
will not enter into futures contracts to the extent that its outstanding obli-
gations to purchase securities under these contracts would exceed 20% of its
total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to main-
tain its required margin. In such situations, if the Portfolio has insuffi-
cient cash, it may have to sell Portfolio securities to meet daily margin re-
quirements at a time when it may be disadvantageous to do so. In addition, the
Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures posi-
tions also could have an adverse impact on the Portfolio's ability to effec-
tively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contracts would result
in a total loss of the margin deposit, before any deduction for the transac-
tion costs, if the account were then closed out. A 15% decrease would result
in a loss equal to 150% of the original margin deposit if the contract were
closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies of each Portfolio are engaged in only for hedging purposes,
the Adviser does not believe that the Portfolios are subject to the risks of
loss frequently associated with futures transactions. A Portfolio would pre-
sumably have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the Portfolio securities being hedged. It is
also possible that the Portfolio could lose money on futures contracts and
also experience a decline in value of Portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of
a broker with whom the Portfolio has an open position in a futures contract or
related option.
5
<PAGE>
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions a Portfolio has identified as hedging transactions,
the Portfolio is required for Federal income tax purposes to recognize as in-
come for each taxable year its net unrealized gains and losses on regulated
futures contracts as of the end of the year, as well as those actually real-
ized during the year. In most cases, any gain or loss recognized with respect
to a futures contract is considered to be 60% long-term capital gain or loss
and 40% short-term capital gain or loss, without regard to the holding period
of the contract. Furthermore, sales of futures contracts which are intended to
hedge against a change in the value of securities held by the Portfolio may
affect the holding period of such securities and, consequently, the nature of
the gain or loss on such securities upon disposition.
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income: i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must
be limited to less than 30% of a Portfolio's annual gross income. It is antic-
ipated that any net gain realized from the closing out of futures contracts
will be considered a gain from the sale of securities and therefore will be
qualifying income for purposes of the 90% requirement. In order to avoid real-
izing excessive gains on securities held for less than three months, a Portfo-
lio may be required to defer the closing out of futures contracts beyond the
time when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on futures contracts, which have been open for less than
three months as of the end of a Portfolio's fiscal year and which are recog-
nized for tax purposes, will not be considered gains on securities held for
less than three months for the purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized
6
<PAGE>
gains at the end of the Portfolio's fiscal year) on futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Portfolio's other investments and shareholders will be advised on the na-
ture of the payments.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's Cus-
todian. The minimum initial investment required is $2,500 for the Sterling
Partners' Portfolios Institutional Class Shares and $100,000 for the Sterling
Partners' Portfolios Institutional Service Class Shares with certain excep-
tions as may be determined from time to time by officers of the Fund. Other
investment minimums are: initial IRA investment, $500; initial spousal IRA in-
vestment, $250 minimum; additional investment for all accounts, $100. An order
received in proper form prior to the 4:00 p.m. close of the New York Stock Ex-
change ("Exchange") will be executed at the price computed on the date of re-
ceipt; and an order received not in proper form or after the 4:00 p.m. close
of the Exchange will be executed at the price computed on the next day the Ex-
change is open after proper receipt. The Exchange will be closed on the fol-
lowing days: Presidents' Day, February 17, 1997; Good Friday, March 28, 1997;
Memorial Day, May 26, 1997; Independence Day, July 4, 1997; Labor Day, Septem-
ber 1, 1997; Thanksgiving Day, November 27, 1997; Christmas Day, December 25,
1997; New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Securi-
ties and Exchange Commission (the "Commission"), (2) during any period when an
emergency exists as defined by the rules of the Commission as a result of
which it is not reasonably practicable for a Portfolio to dispose of securi-
ties owned by it, or to fairly determine the value of its assets, and (3) for
such other periods as the Commission may permit. The Fund has made an election
with the Commission to pay in cash all redemptions requested by any share-
holder of record limited in amount
7
<PAGE>
during any 90-day period to the lesser of $250,000 or 1% of the net assets of
the Fund at the beginning of such period. Such commitment is irrevocable with-
out the prior approval of the Commission. Redemptions in excess of the above
limits may be paid in whole or in part, in investment securities or in cash,
as the Directors may deem advisable; however, payment will be made wholly in
cash unless the Directors believe that economic or market conditions exist
which would make such a practice detrimental to the best interests of the
Fund. If redemptions are paid in investment securities, such securities will
be valued as set forth in the Prospectus under "Valuation of Shares" and a re-
deeming shareholder would normally incur brokerage expenses if these securi-
ties were converted to cash.
No charge is made by any Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES -- To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account. Sig-
nature guarantees are required in connection with (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) and/or
registered address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees. Sig-
nature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Serv-
ices" in the Sterling Partners' Prospectuses:
8
<PAGE>
EXCHANGE PRIVILEGE
Institutional Class Shares of each Sterling Portfolio may be exchanged for
Institutional Class Shares of the other Sterling Portfolios and Institutional
Service Class Shares of each Sterling Portfolio may be exchanged for Institu-
tional Service Class Shares of the other Sterling Portfolios. In addition, In-
stitutional Class Shares of each Sterling Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in the UAM Funds
which is comprised of the Fund and UAM Funds Trust. (See the list of Portfo-
lios of the UAM Funds -- Institutional Class Shares at the end of the Sterling
Portfolios -- Institutional Class Shares Prospectus.) Service Class Shares of
each Sterling Portfolio may be exchanged for any other Service Class Shares of
a Portfolio included in the UAM Funds which is comprised of the Fund and UAM
Funds Trust. (For those Portfolios currently offering Service Class Shares,
please call the UAM Funds Service Center.) Exchange requests should be made by
calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Serv-
ice Center, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA
02208-2798. The exchange privilege is only available with respect to Portfo-
lios that are qualified for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder and the regis-
tration of the two accounts will be identical. Requests for exchanges received
prior to 4:00 p.m. (Eastern Time) will be processed as of the close of busi-
ness on the same day. Requests received after these times will be processed on
the next business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency and to other re-
strictions established by the Board of Directors to assure that such exchanges
do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
9
<PAGE>
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a written re-
quest to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered own-
ers and all stock certificates, if any, which are subject to the transfer. The
signature on the letter of request, the stock certificate or any stock power
must be guaranteed in the same manner as described under "Redemption of
Shares." As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
Each Sterling Partners' Portfolio is subject to the following restrictions
which are fundamental policies and may not be changed without the approval of
the lesser of: (1) at least 67% of the voting securities of the Portfolio
present at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Portfolio. Each Sterling
Partners' Portfolio will not:
(1)invest in commodities;
(2) purchase or sell real estate, although it may purchase and sell secu-
rities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i) mak-
ing any permitted borrowings, mortgages or pledges, or (ii) entering
into options, futures or repurchase transactions;
(4) purchase on margin or sell short;
(5) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(6) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% of the net assets of the Portfolio, determined at the
time of investment, in securities subject to legal or contractual re-
strictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;
(7) invest for the purpose of exercising control over management of any
company;
(8) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of the Portfo-
lio's total
10
<PAGE>
assets would be invested in securities of companies within such indus-
try; provided, however, that there shall be no limitation on the pur-
chase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or instruments issued by U.S. banks
when the Portfolio adopts a temporary defensive position; and
(9) write or acquire options or interests in oil, gas or other mineral ex-
ploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsible
to the Fund's Board of Directors. The Directors set broad policies for the Fund
and elect its Officers. The following is a list of the Directors and Officers
of the Fund and a brief statement of their present positions and principal oc-
cupations during the past five years. As of December 31, 1996, the Directors
and Officers of the Fund owned less than 1% of the Fund's outstanding shares.
<TABLE>
<C> <S>
JOHN T. BENNETT, JR. Director of the Fund, President of Squam Investment
College Road-RFD 3 Management Company, Inc. and Great Island Investment
Meredith, NG 03253 Company, Inc.; President of Bennett Management
Age: 67 Company from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief Executive
16 West Madison Street Officer of Broventure Company, Inc.; Chairman of the
Baltimore, MD 21201 Board of Chektec Corporation and Cyber Scientific,
Age: 47 Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Philadelphia
4000 Bell Atlantic Tower office of the law firm Dechert Price & Rhoads;
1717 Arch Street Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the Fund;
One International Place President, Chief Executive Officer and a Director of
Boston, MA 02110 United Asset Management Corporation; Director,
Age: 60 Partner or Trustee of each of the Investment
Companies of the Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief Investment
One Financial Center Officer of Dewey Square Investors Corporation since
Boston, MA 02111 1988; Director and Chief Executive Officer of H.T.
Age: 52 Investors, Inc., formerly a subsidiary of Dewey
Square.
</TABLE>
- ----------
* These people deemed to be "interested persons" of the Fund as that term is
defined in the 1940 Act.
11
<PAGE>
<TABLE>
<C> <S>
WILLIAM H. PARK* Vice President of the Fund; Executive Vice President
One International Place and Chief Financial Officer of United Asset Management
Boston, MA 02110 Corporation.
Age:49
GARY L. FRENCH* Treasurer of the Fund; President of UAM Fund Services,
211 Congress Street Inc. and UAM Fund Distributors, Inc.; Vice President
Boston, MA 02110 of Operations, Development and Control of Fidelity
Age: 45 Investments in 1995; Treasurer of the Fidelity Group
of Mutual Funds from 1992 to 1995.
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice President of UAM
211 Congress Street Fund Services, Inc.; former Manager of Fund
Boston, MA 02110 Administration and Compliance of Chase Global Fund
Age: 32 Services Company from 1995 to 1996; formerly Senior
Manager of Deloitte & Touche LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and General
211 Congress Street Counsel of UAM Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc; Associate Attorney of Ropes & Gray
Age: 28 (a law firm) from 1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Chase Global Funds Services
Boston, MA 02108 Company; Senior Vice President, Secretary and General
Age: 41 Counsel of Leland, O'Brien, Rubinstein Associates,
Inc. from November 1990 to November 1991.
</TABLE>
- -----------
* These people deemed to be "interested persons" of the Fund as that term is
defined in the 1940 Act.
12
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator or CGFSC and receive no compensation from the Fund. The fol-
lowing table shows aggregate compensation paid to each of the Fund's unaffili-
ated Directors by the Fund and total compensation paid by the Fund, UAM Funds
Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively the
"Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day........... $25,463 0 0 $30,500
Former Director
Philip D. English....... $25,463 0 0 $30,500
Director
William A. Humenuk...... $25,463 0 0 $30,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996, the following persons or organizations held of rec-
ord or beneficially 5% or more of the shares of a Portfolio, as noted.
Sterling Partners' Balanced Portfolio: The Chase Manhattan Bank, N.A.,
Trustee for Employee Savings Plan & Trust of Bowers Fibers, Inc., 770 Broad-
way, New York, NY, 8.7%*, The Chase Manhattan Bank, N.A., Trustee for the J.C.
Steele & Sons, Inc., Retirement & Profit Sharing Plan 770 Broadway, New York,
NY, 7.3%*; Fleet National Bank, Trustee, FBO Smith Helmo Sterling, Muliss &
Moar Partners, P.O. Box 92800, Rochester, NY, 8.1%*; Hartnat & Co., Nalle
Clinic, P.O. Box 4044, Boston, MA, 5.6%*; and Joseph B. Callahan and James O.
Goodwin Henderson Clinic for Women, c/o Dr. James O. Goodwin Vance Medical
Building, 1912 Ruin Creek Road, Henderson, NC, 5%*.
Sterling Partners' Equity Portfolio: H. Keith Brunnemer, Jr., Michael Peeler
Fund, c/o Brunnemer & Company, 227 W. Trade Street, Suite 1510, Charlotte, NC,
11%; The Chase Manhattan Bank, N.A., Trustee for the J.C. Steele & Sons, Inc.,
13
<PAGE>
Retirement & Profit Sharing Plan, 770 Broadway, New York, NY, 8.8%* and;
Hartnat & Co., Smith Anderson, P.O. Box 4044, Boston, MA, 6.5%*; Bank of Bos-
ton & Co., Profit Sharing, c/o Fairfield Communities, Inc., P.O. Box 809,
Boston, MA, 5%.
Sterling Partners' Short-Term Fixed Income Portfolio: The Chase Manhattan
Bank, N.A., Trustee for Princess House Inc., 401(k) Plan, 770 Broadway, New
York, NY, 10.0%*; Northwestern Trust Co., Personal Trust, 1201 3rd Ave., Suite
2010, Seattle, WA, 9.9%; The Chase Manhattan Bank, N.A., Trustee for the J.C.
Steele & Sons, Inc., Retirement & Profit Sharing Plan 770 Broadway, New York,
NY, 8.0%*; Hartnat & Co., P.O. Box 4044, Boston, MA, 7.7%*; W. Olin Nisbet,
Jr., Family Limited Partnership, c/o Beth Reigel, 1614 Beverly Drive, Char-
lotte, NC, 6.4%; Betty K. Love, 2496 Old Lexington Road, Asheboro, NC, 5.8%;
Angus M. McBryde, Jr., 13 Logan Street, Charleston, SC, 5.2%.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
The persons or organizations owning 25% or more of the outstanding shares of
a Portfolio may be presumed to "control" (as that term is defined in the In-
vestment Company Act of 1940, as amended, (the "1940 Act") such Portfolio. As
a result, those persons or organizations could have the ability to vote a ma-
jority of the shares of the Portfolio on any matter requiring the approval of
shareholders of such Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
Sterling Capital Management Company (the "Adviser") is a wholly-owned sub-
sidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institu-
tional investment management. Since its first acquisition in August 1983, UAM
has acquired or organized approximately 45 such wholly-owned affiliated firms
(the "UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated
Firms to retain control over their investment advisory decisions is necessary
to allow them to continue to provide investment management services that are
intended to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
14
<PAGE>
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: Nalle Clinic, Nucor Corp., Mc-
Devitt Street Bovis, ENT Associates, Dean Witter, Reynolds Inc., Walter Indus-
tries, Inc., Street Enterprises, Inc., Georgia Marble Corp., Cheraw Yarn
Mills, Sanger Clinic, Adobe Systems, Inc., Paychex, Inc., Belk Store Services,
Davidson College and Lakeland Regional Medical Center.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, each Sterling Partners' Portfolio pays the Adviser an an-
nual fee, in monthly installments, calculated by applying the following annual
percentage rates to all of the Sterling Partners' Portfolios' average daily
net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
Sterling Partners' Balanced Portfolio.................................. 0.75%
Sterling Partners' Equity Portfolio.................................... 0.75%
Sterling Partners' Small Cap Value Portfolio........................... 1.00%
Sterling Partners' Short-Term Fixed Income Portfolio................... 0.50%
</TABLE>
For the fiscal years ended October 31, 1994, 1995 and 1996, Sterling Part-
ners' Balanced Portfolio paid advisory fees of approximately $423,000,
$490,000 and $462,951, respectively.
For the fiscal years ended October 31, 1994, 1995 and 1996, Sterling Part-
ners' Equity Portfolio paid advisory fees of approximately $89,000 $137,000
and $184,081, respectively. During this period, the Adviser voluntarily waived
advisory fees of approximately $67,000, $60,000 and $72,415, respectively.
For the fiscal years ended October 31, 1994, 1995 and 1996, Sterling Part-
ners' Short-Term Fixed Income Portfolio paid advisory fees of approximately
$1,000, $15,000 and $0, respectively. During these periods, the Adviser volun-
tarily waived advisory fees of approximately $114,000, $105,000 and $121,012,
respectively.
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolios' Service Class Shares Prospectus, UAM Fund Dis-
tributors, Inc. (the "Distributor") may enter into agreements with broker-
dealers and other financial institutions ("Service Agents"), pursuant to which
they will provide administrative support services to Service Class sharehold-
ers who are their
15
<PAGE>
customers ("Customers") in consideration of such Fund's payment of 0.25 of 1%
(on an annualized basis) of the average daily net asset value of the Service
Class Shares held by the Service Agent for the benefit of its Customers. Such
services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account record for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by share-
holders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting divi-
dend and other account options and opening any necessary custody ac-
counts;
(j) providing account maintenance and accounting support for all transac-
tions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder service must constitute a permissible non-banking activity
in accordance with the then current regulations of, and interpreta-
tions thereof by, the Board of Governors of the Federal Reserve Sys-
tem, if applicable.
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Direc-
tors. Pursuant to the Service Plan, the Board of Directors reviews, at least
quarterly, a written report of the amounts expended under each agreement with
Service Agents and the purposes for which the expenditures were made. In addi-
tion, arrangements with Service Agents must be approved annually by a majority
of the Fund's Directors, including a majority of the Directors who are not
"interested persons" of the company as defined in the 1940 Act and have no di-
rect or indirect financial interest in such arrangements.
The Board of Directors has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is
a reasonable likelihood that the arrangements will benefit the Fund and its
sharehold-
16
<PAGE>
ers by affording the Fund greater flexibility in connection with the servicing
of the accounts of the beneficial owners of its shares in an efficient manner.
Any material amendment to the Fund's arrangements with Service Agents must be
approved by a majority of the Fund's Board of Directors (including a majority
of the disinterested Directors). So long as the arrangements with Service
Agents are in effect, the selection and nomination of the members of the
Fund's Board of Directors who are not "interested persons" (as defined in the
1940 Act) of the Company will be committed to the discretion of such non-in-
terested Directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Distribu-
tion Plan for the Service Class Shares of the Fund (the "Distribution Plan").
The Distribution Plan permits the Fund to pay for certain distribution, promo-
tional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the Dis-
tribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing adver-
tisements, sales literature and prospectuses and reports used for sales pur-
poses, compensating sales and marketing personnel, and paying distribution and
maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' aver-
age daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares, cur-
rently cannot exceed 0.50% of the average daily net assets represented by the
Service Class. While the current fee which will be payable under the Service
Plan has been set at 0.25%, the Plan permits a full 0.75% on all assets to be
paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class
Shares will be borne by such persons without any reimbursement from such clas-
ses. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for aid in pro-
viding administrative services to shareholders.
17
<PAGE>
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Directors of the Fund, in-
cluding a majority of the Directors who are not "interested persons" (as de-
fined in the 1940 Act) of the Fund and who have no direct or indirect finan-
cial interest in the Plans or any related agreements, by vote cast in person
at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the re-
lated agreements must be approved annually by the Board of Directors in the
same manner, as specified above. The Sterling Partners' Portfolios Service
Class Shares have not been offered prior to the date of this Statement.
Each year the Directors must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested per-
sons" or by a majority vote of the outstanding voting securities of the Class.
Any amendment materially increasing the maximum percentage payable under the
Plans must likewise be approved by a majority vote of the relevant Class' out-
standing voting securities, as well as by a majority vote of those Directors
who are not "interested persons." Also, any other material amendment to the
Plans must be approved by a majority vote of the Directors including a major-
ity of the Directors of the Fund having no interest in the Plans. In addition,
in order for the Plans to remain effective, the selection and nomination of
Directors who are not "interested persons" of the Fund must be effected by the
Directors who themselves are not "interested persons" and who have no direct
or indirect financial interest in the Plans. Persons authorized to make pay-
ments under the Plans must provide written reports at least quarterly to the
Board of Directors for their review. The NASD has adopted amendments to its
Rules of Fair Practice relating to investment company sales charges. The Fund
and the Distributor intend to operate in compliance with these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the bro-
ker effecting the transaction. It is not the Fund's practice to allocate bro-
kerage or effect principal transactions with dealers on the basis of sales of
shares which may be made through broker-dealer firms. However, the Adviser may
place portfolio orders with qualified broker-dealers who
18
<PAGE>
recommend the Fund's Portfolios or who act as agents in the purchase of shares
of the Portfolios for their clients. During the fiscal years ended October 31,
1994, 1995 and 1996, the entire Fund paid brokerage commissions of approxi-
mately $2,402,000, $2,983,000 and $2,887,884, respectively.
Some securities considered for investment by the Portfolios may also be ap-
propriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such allo-
cations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC'). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, CGFSC or its predecessor, Mutual Funds Service Company, pro-
vided certain administrative services to the Fund under an Administration
Agreement between the Fund and U.S. Trust Company of New York. During the fis-
cal years ended October 31, 1994, October 31, 1995 and October 31, 1996, ad-
ministrative services fees paid to the Administrator by the Sterling Partners'
Equity, Balanced and Short-Term Fixed Income Portfolios totaled: $66,000,
$76,000 and $87,881; $72,000, $82,000 and $99,401; and $74,000, $80,000 and
$84,081, respectively. Of the fees paid during the year ended October 31,
1996, Sterling Partners' Equity Portfolio paid $76,476 to CGFSC and $11,405 to
UAMFSI; Sterling Partners' Balanced Portfolio paid $79,502 to CGFSC and
$19,899 to UAMFSI; and Sterling Partners' Short-Term Fixed Income Portfolio
paid $78,948 to CGFSC and $5,133 to UAMFSI. The services provided by the Ad-
ministration and the basis of the current fees payable to the Administrator
are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
Each Portfolio may from time to time quote various performance figures to
illustrate the past performance of each class of the Portfolio.
19
<PAGE>
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by each class of the Portfolio be accompanied by certain standard-
ized performance information computed as required by the Commission. Current
yield and average annual compounded total return quotations used by each class
of the Portfolio are based on the standardized methods of computing perfor-
mance mandated by the Commission. An explanation of those and other methods
used by each class of the Portfolio to compute or express performance follows.
TOTAL RETURN
The average annual total return of the Sterling Partners' Portfolios is de-
termined by finding the average annual compounded rates of return over 1, 5,
and 10 year periods that would equate an initial hypothetical $1,000 invest-
ment to its ending redeemable value. The calculation assumes that all divi-
dends and distributions are reinvested when paid. The quotation assumes the
amount was completely redeemed at the end of each 1, 5, and 10 year period and
the deduction of all applicable Fund expenses on an annual basis. Since Serv-
ice Class Shares of the Sterling Partners' Portfolios bear additional service
and distribution expenses, the average annual total return of the Service
Class Shares of a Portfolio will generally be lower than that of the Institu-
tional Class Shares of the same Portfolio.
The average annual total rates of return for the Institutional Class Shares
of the Sterling Partners' Portfolios from inception on the date of the Finan-
cial Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR FIVE YEARS THROUGH YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, INCEPTION
1996 1996 1996 DATE
----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
Sterling Partners' Balanced
Portfolio................. 15.52% 10.12% 9.79% 3/15/91
Sterling Partners' Equity
Portfolio................. 24.76% 13.64% 13.11% 5/15/91
Sterling Partners' Short-
Term Fixed Income
Portfolio................. 5.51% -- 5.18% 2/10/92
</TABLE>
These figures were calculated according to the following formula:
P (1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
20
<PAGE>
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5,
or 10 year periods (or fractional portion thereof).
Service Class Shares of the Sterling Partners' Portfolios were not offered
as of October 31, 1996. Accordingly, no total return figures are available.
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ments. Since Service Class Shares of the Sterling Partners' Short-Term Fixed
Income Portfolio bear additional service and distribution expenses, the yield
of the Service Class Shares of the Portfolio will generally be lower than that
of the Institutional Class Shares of the Portfolio.
The current yield of the Sterling Partners' Short-Term Fixed Income Portfo-
lio is determined by dividing the net investment income per share earned dur-
ing a30-day base period by the maximum offering price per share on the last
day of the period and annualizing the result. Expenses accrued for the period
include any fees charged to all shareholders during the base period. The yield
for the Sterling Partners' Short-Term Fixed Income Portfolio for the 30-day
period ended October 31, 1995 was 5.60%.
This figure was obtained using the following formula:
Yield = 2[( a - b + 1 )/6/ - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
Service Class Shares of the Sterling Partners' Short-Term Fixed Income Port-
folio were not offered as of October 31, 1996. Accordingly, no yield figure is
available.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above)
21
<PAGE>
to performance as reported by other investments, indices and averages. The
following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices --unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the per-
formance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Govern-
ment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
22
<PAGE>
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency issues
and mortgage pass-through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) The Lehman Brothers 1-3 Year Government Bond Index -- The Government
Bond Index is made up of the Treasury Bond Index (all public obliga-
tions of the U.S. Treasury, excluding flower bonds and foreign-
targeted issues with maturities of one to three years) and the Agency
Bond Index (all publicly issued debt of U.S. Government agencies and
quasi-federal corporations, and corporate debt guaranteed by the U.S.
Government with maturities of one to three years). The Lehman Brothers
Bond Indices include fixed rate debt issues rated investment grade or
higher by Moody's Investors Service, Standard and Poor's Corporation,
or Fitch Investors Service, in that order. All issues have at least
one year to maturity and an outstanding par value of at least $100
million for U.S. Government issues and $50 million for all others.
(m) The Salomon Brothers 3 Month T-Bill Average -- The average return for
all treasury bills for the previous three month period.
(n) The Lehman Brothers Intermediate Government/Corporate Index is an un-
managed index composed of a combination of the Government and Corpo-
rate 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 oth-
ers. 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 noncon-
vertible debt issued by or guaranteed by foreign or international gov-
ernments 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.
(o) Lehman Brothers Government/Corporate Bond Index -- is an unmanaged in-
dex composed of approximately 5,000 publicly issued, fixed rate, non-
convertible corporate and U.S. Government debt rated "Baa" or better,
with at least one year to maturity and at least $1 million par value
outstanding. It is a market value-weighted price index, in which the
relative importance of each issue is proportional to its aggregate
market value. The percentage change between one month's total market
value
23
<PAGE>
and the next, plus one twelfth of the current yield, results in
monthly total return. The rates of return reflect total return, with
interest reinvested.
(p) Donoghue's Money Fund Average is an average of all major money market
fund yields, published weekly for 7- and 30-day yields.
(q) The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index com-
posed of all outstanding U.S. Treasury issues maturing within one to
three years.
(r) The Merrill Lynch 1-3 Year Corporate Index is an unmanaged index com-
posed of all outstanding public issues with a quality rating BBB3 --
AAA maturing within one to three years.
(s) NASDAQ Industrial Index--is composed of more than 3,000 industrial is-
sues. It is a value-weighted index calculated on price change only and
does not include income.
(t) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
(u) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, market value weighted index of the 3,000 largest U.S. publicly-
traded companies.
(v) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ sys-
tem exclusive of those traded on an exchange, 65% Standard & Poor's
500 Stock Index and 35% Salomon Brothers High Grade Bond Index; and
60% Standard & Poor's 500 Stock Index and 40% Lehman Brothers
Government/Corporate Bond Index and 50% Standard & Poor's 500 Stock
Index, 45% Lehman Brothers Intermediate Government/ Corporate Index
and 5% Salomon Brothers 3 Month T-Bill Index.
(w) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(x) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(y) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service -- publi-
cations that rate fund performance over specified time periods.
24
<PAGE>
(z) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(aa) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(bb) Savings and Loan Historical Interest Rates -- as published by the
U.S. Savings and Loan League Fact Book.
(cc) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its futures. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other aver-
ages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at the UAM Funds Service Center,
c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798.
The Fund's Articles of Incorporation authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of com-
mon stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders. The Directors of the
Fund may create additional Portfolios and classes of shares at a future date.
Both classes of shares of each Portfolio of the Fund, when issued and paid
for as provided for in the Prospectuses, will be fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the
25
<PAGE>
election of Directors can elect 100% of the Directors if they choose to do so.
A shareholder is entitled to one vote for each full share held (and a frac-
tional vote for each fractional share held), then standing in his or her name
on the books of the Fund. Both Institutional Class and Service Class Shares
represent an interest in the same assets of a Portfolio and are identical in
all respects except that the Service Class Shares bear certain expenses re-
lated to shareholder servicing and the distribution of such shares, and have
exclusive voting rights with respect to matters relating to such distribution
expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed in-
come and capital gains (see discussion under "Dividends, Capital Gains Distri-
butions and Taxes" in the Prospectus). The amounts of any income dividends or
capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of that Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the Portfolios at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital
gains recognized by a Portfolio will be distributed to its investors without
need to offset (for Federal income tax purposes) such gains against any net
capital losses of another Portfolio.
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived
26
<PAGE>
from loans of securities, and gains from the sale of securities or foreign
currencies, or other income derived with respect to its business of investing
in such securities or currencies. In addition, gains realized on the sale or
other disposition of securities held for less than three months must be lim-
ited to less than 30% of the Portfolio's annual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Sterling Partners' Portfolios and the Finan-
cial Highlights for the respective periods presented, which appear in the
Portfolios' 1996 Annual Report to Shareholders, and the report thereon of
Price Waterhouse LLP, independent accountants, also appearing therein, are at-
tached to this SAI.
27
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (61.3%)
- -------------------------------------------------------------------------------
BANKS (2.4%)
Bankers Trust New York Corp. ............................. 10,042 $ 848,549
NationsBank Corp. ........................................ 5,750 541,937
-----------
1,390,486
- -------------------------------------------------------------------------------
BASIC RESOURCES (0.5%)
*Destec Energy, Inc. ...................................... 20,884 313,260
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.4%)
Interstate Bakeries Corp. ................................ 25,050 1,061,494
Nabisco Holdings Corp. ................................... 29,100 1,083,975
Tyson Foods, Inc., Class A................................ 14,133 416,923
-----------
2,562,392
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (2.3%)
Knight-Ridder, Inc. ...................................... 8,737 326,545
Scripps Co. (E.W.)........................................ 21,275 1,007,903
-----------
1,334,448
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (3.7%)
Ingersoll-Rand Co. ....................................... 23,675 985,472
Keystone International, Inc. ............................. 22,275 400,950
Stewart & Stevenson Services, Inc. ....................... 36,244 770,185
-----------
2,156,607
- -------------------------------------------------------------------------------
CONSTRUCTION (1.2%)
*USG Corp. ................................................ 24,400 719,800
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.3%)
First Brands Corp. ....................................... 29,374 833,487
Hasbro, Inc. ............................................. 14,067 546,855
Philip Morris Cos., Inc. ................................. 12,100 1,120,762
-----------
2,501,104
- -------------------------------------------------------------------------------
ELECTRONICS (0.5%)
Motorola, Inc. ........................................... 6,025 277,150
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (4.9%)
Chevron Corp. ............................................ 12,922 $ 849,622
Exxon Corp. .............................................. 3,434 304,338
Mobil Corp. .............................................. 7,174 837,564
Schlumberger Ltd. ........................................ 8,925 884,691
-----------
2,876,215
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.3%)
Walt Disney Co. .......................................... 11,557 761,317
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.7%)
J.P. Morgan & Co. ........................................ 10,071 869,883
Paine Webber Group........................................ 31,900 749,650
-----------
1,619,533
- -------------------------------------------------------------------------------
HEALTH CARE (7.1%)
*Acuson Corp. ............................................. 48,621 1,027,119
*Magellan Health Services, Inc. ........................... 50,350 925,181
McKesson Corp. ........................................... 8,400 417,900
*St. Jude Medical, Inc. ................................... 21,875 864,063
U.S. Surgical Corp. ...................................... 21,725 909,734
-----------
4,143,997
- -------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.0%)
Stanhome, Inc. ........................................... 21,888 580,032
- -------------------------------------------------------------------------------
INSURANCE (3.5%)
Associates First Capital Corp. ........................... 10,017 434,487
Chubb Corp. .............................................. 22,093 1,104,650
Ohio Casualty Corp. ...................................... 15,525 504,563
-----------
2,043,700
- -------------------------------------------------------------------------------
MANUFACTURING (4.7%)
*Amphenol Corp., Class A................................... 31,814 632,303
Belden, Inc. ............................................. 19,258 553,668
Snap-On Tools Corp. ...................................... 25,925 832,841
United Dominion Industries................................ 37,295 769,209
-----------
2,788,021
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ----------------------------------------------------------------------------
MINING (0.8%)
Potash Corp. of Saskatchewan, Inc. .................... 6,622 $ 469,334
- ----------------------------------------------------------------------------
PHARMACEUTICALS (0.9%)
Pharmacia & Upjohn, Inc. .............................. 7,775 279,900
Rhone-Poulenc Rorer, Inc. ............................. 4,000 268,500
-----------
548,400
- ----------------------------------------------------------------------------
RETAIL (3.7%)
Family Dollar Stores, Inc. ............................ 45,150 767,550
*Federated Department Stores, Inc. ..................... 9,237 304,821
*Price/Costco, Inc. .................................... 54,750 1,088,156
-----------
2,160,527
- ----------------------------------------------------------------------------
SERVICES (0.7%)
Flight Safety International, Inc. ..................... 8,620 425,612
- ----------------------------------------------------------------------------
TECHNOLOGY (3.0%)
*Cisco Systems, Inc. ................................... 6,337 392,102
Hewlett-Packard Co. ................................... 16,213 715,399
Intel Corp. ........................................... 4,590 504,326
Lucent Technologies, Inc. ............................. 3,254 152,914
-----------
1,764,741
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS (1.2%)
Ameritech Corp. ....................................... 6,894 377,446
AT&T Corp. ............................................ 9,242 322,315
-----------
699,761
- ----------------------------------------------------------------------------
TEXTILES & APPAREL (2.2%)
Russell Corp. ......................................... 18,375 521,391
Unifi, Inc. ........................................... 24,775 771,122
-----------
1,292,513
- ----------------------------------------------------------------------------
TRANSPORTATION (2.0%)
Canadian National Railway.............................. 42,655 1,173,013
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ----------------------------------------------------------------------------
UTILITIES (2.3%)
CMS Energy Corp. ................................... 19,623 $ 620,577
Portland General Corp............................... 11,205 490,219
Sierra Pacific Resources............................ 9,500 264,813
-----------
1,375,609
- ----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $30,530,701)................................. 35,977,572
- ----------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (13.8%)
- ----------------------------------------------------------------------------
BANKS (2.6%)
BankAmerica Corp.
6.65%, 5/1/01..................................... $ 910,000 915,988
NationsBank Corp.
5.70%, 2/12/01.................................... 640,000 621,939
-----------
1,537,927
- ----------------------------------------------------------------------------
FINANCIAL SERVICES (6.0%)
Associates Corp. of North America
6.00%, 6/15/01.................................... 1,750,000 1,716,400
Sears Roebuck Acceptance Corp.
6.54%, 5/6/99..................................... 1,800,000 1,813,590
-----------
3,529,990
- ----------------------------------------------------------------------------
INDUSTRIAL (2.3%)
Ford Motor Corp.
7.25%, 10/1/08.................................... 1,300,000 1,318,044
- ----------------------------------------------------------------------------
TRANSPORTATION (2.9%)
Southern Railway Corp.
10.00%, 7/15/00................................... 1,535,000 1,720,935
- ----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $8,013,658).................................. 8,106,896
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (22.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (14.0%)
6.50%, 4/30/99......................................... $2,460,000 $ 2,497,663
5.625%, 11/30/00....................................... 200,000 197,062
5.50%, 12/31/00........................................ 450,000 441,072
5.625%, 2/28/01........................................ 745,000 732,894
7.50%, 11/15/01........................................ 375,000 397,148
6.50%, 8/15/05......................................... 3,905,000 3,945,885
-----------
8,211,724
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (7.2%)
6.25%, 8/15/23......................................... 1,205,000 1,131,941
7.625%, 2/15/25........................................ 2,435,000 2,713,126
6.75%, 8/15/26......................................... 390,000 394,629
-----------
4,239,696
- -------------------------------------------------------------------------------
U.S. TREASURY STRIPS (0.3%)
Zero Coupon, 5/15/01................................... 235,000 179,190
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.5%)
Federal National Mortgage Association
REMIC Series 92-150G
6.75%, 9/25/18,
Estimated Average Life 8/97++......................... 293,445 293,861
- -------------------------------------------------------------------------------
MORTGAGE PASS-THROUGHS (0.4%)
Federal Home Loan Mortgage Corporation
Pool #M90315
5.50%, 12/1/98,
Estimated Average Life 7/98++......................... 129,732 128,435
Federal Home Loan Mortgage Corporation
Pool #G50213
6.50%, 11/1/99,
Estimated Average Life 12/98++........................ 66,437 66,603
-----------
195,038
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $13,013,667)..... 13,119,509
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -----------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.0%)
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.0%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $1,168,181,
collateralized by $1,129,001 various U.S. Treasury
Notes, 5.875%-7.75%, due from 3/31/99-11/30/99,
valued at $1,168,003 (COST $1,168,000)............ $1,168,000 $ 1,168,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%)
(COST $52,726,026)(A)............................... 58,371,977
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)................... 319,144
- -----------------------------------------------------------------------------
NET ASSETS (100%)..................................... $58,691,121
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Estimated Average Life is unaudited.
* Non-Income Producing Security.
(a) The cost for federal income tax purposes was $52,766,288. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$5,605,689. This consisted of aggregate gross unrealized appreciation for
all securities of $6,222,695 and aggregate gross unrealized depreciation
for all securities of $617,006.
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (95.4%)
- -------------------------------------------------------------------------------
BANKS (3.7%)
Bankers Trust New York Corp. ............................. 8,685 $ 733,883
NationsBank Corp. ........................................ 5,062 477,093
-----------
1,210,976
- -------------------------------------------------------------------------------
BASIC RESOURCES(0.8%)
*Destec Energy, Inc. ...................................... 18,467 277,005
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (7.1%)
Interstate Bakeries Corp. ................................ 24,130 1,022,509
Nabisco Holdings Corp. ................................... 25,761 959,597
Tyson Foods, Inc., Class A................................ 11,661 344,000
-----------
2,326,106
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (3.5%)
Knight-Ridder, Inc. ...................................... 7,750 289,656
Scripps Co. (E.W.)........................................ 18,382 870,847
-----------
1,160,503
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (5.9%)
Ingersoll-Rand Co. ....................................... 22,611 941,183
Keystone International, Inc. ............................. 17,329 311,922
Stewart & Stevenson Services, Inc. ....................... 32,025 680,531
-----------
1,933,636
- -------------------------------------------------------------------------------
CONSTRUCTION (1.9%)
*USG Corp. ................................................ 21,575 636,463
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (6.7%)
First Brands Corp. ....................................... 25,902 734,969
Hasbro, Inc. ............................................. 12,465 484,577
Philip Morris Cos., Inc. ................................. 10,666 987,938
-----------
2,207,484
- -------------------------------------------------------------------------------
ELECTRONICS (0.7%)
Motorola, Inc. ........................................... 5,102 234,692
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (7.5%)
Chevron Corp. ............................................ 11,093 $ 729,365
Exxon Corp. .............................................. 3,050 270,306
Mobil Corp. .............................................. 6,350 741,362
Schlumberger Ltd. ........................................ 7,207 714,394
-----------
2,455,427
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (2.0%)
Walt Disney Co. .......................................... 10,001 658,816
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (4.2%)
J.P. Morgan & Co. ........................................ 8,544 737,988
Paine Webber Group........................................ 27,531 646,979
-----------
1,384,967
- -------------------------------------------------------------------------------
HEALTH CARE (10.8%)
*Acuson Corp. ............................................. 41,701 880,934
*Magellan Health Services, Inc. ........................... 44,455 816,861
McKesson Corp. ........................................... 7,325 364,419
*St. Jude Medical, Inc. ................................... 18,950 748,525
U.S. Surgical Corp. ...................................... 17,866 748,139
-----------
3,558,878
- -------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.6%)
Stanhome, Inc. ........................................... 19,300 511,450
- -------------------------------------------------------------------------------
INSURANCE (5.4%)
Associates First Capital Corp. ........................... 8,902 386,124
Chubb Corp. .............................................. 19,546 977,300
Ohio Casualty Corp. ...................................... 13,260 430,950
-----------
1,794,374
- -------------------------------------------------------------------------------
MANUFACTURING (7.3%)
*Amphenol Corp., Class A................................... 28,168 559,839
Belden, Inc. ............................................. 16,195 465,606
Snap-On Tools Corp. ...................................... 22,850 734,056
United Dominion Industries................................ 31,300 645,563
-----------
2,405,064
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MINING (1.2%)
Potash Corp. of Saskatchewan, Inc.......................... 5,668 $ 401,719
- --------------------------------------------------------------------------------
PHARMACEUTICALS (1.4%)
Pharmacia & Upjohn, Inc.................................... 6,640 239,040
Rhone-Poulenc Rorer, Inc. ................................. 3,317 222,654
-----------
461,694
- --------------------------------------------------------------------------------
RETAIL (5.8%)
Family Dollar Stores, Inc.................................. 40,025 680,425
*Federated Department Stores, Inc........................... 7,713 254,529
*Price/Costco, Inc.......................................... 49,439 982,600
-----------
1,917,554
- --------------------------------------------------------------------------------
SERVICES (1.1%)
FlightSafety International, Inc............................ 7,410 365,869
- --------------------------------------------------------------------------------
TECHNOLOGY (4.7%)
*Cisco Systems, Inc. ....................................... 5,365 331,959
Hewlett-Packard Co. ....................................... 15,062 664,611
Intel Corp................................................. 3,806 418,184
Lucent Technologies, Inc................................... 2,545 119,615
-----------
1,534,369
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.8%)
Ameritech Corp............................................. 5,831 319,247
AT&T Corp.................................................. 8,145 284,057
-----------
603,304
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (3.5%)
Russell Corp. ............................................. 16,575 470,316
Unifi, Inc. ............................................... 22,268 693,091
-----------
1,163,407
- --------------------------------------------------------------------------------
TRANSPORTATION (3.2%)
Canadian National Railway.................................. 37,842 1,040,655
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES (3.6%)
CMS Energy Corp. ..................................... 16,761 $ 530,066
Portland General Corp................................. 9,793 428,444
Sierra Pacific Resources.............................. 8,775 244,603
-----------
1,203,113
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $26,372,777)................................... 31,447,525
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.9%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $1,606,249,
collateralized by $1,552,376 various U.S. Treasury
Notes, 5.875%-7.75%, due from 3/31/99-11/30/99,
valued at $1,606,004
(COST $1,606,000)................................... $1,606,000 1,606,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $27,978,777)(A)................................ 33,053,525
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)................... (110,679)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $32,942,846
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
(a) The cost for federal income tax purposes was $27,997,083. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$5,056,442. This consisted of aggregate gross unrealized appreciation for
all securities of $5,464,687 and aggregate gross unrealized depreciation
for all securities of $408,245.
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (30.6%)
- -------------------------------------------------------------------------------
BANKS (4.9%)
Chase Manhattan Grantor Trust, Series 1995A A 6.00%,
09/17/01,
Estimated Average Life 11/97++....................... $ 290,550 $ 291,419
Irving Bank Corp.
8.50%, 6/1/02, callable 12/31/96...................... 318,000 319,984
NationsBank Corp.
6.625%, 1/15/98....................................... 500,000 504,965
----------
1,116,368
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (12.2%)
*Ford Motor Credit Corp.-Medium Term Note
5.938%, 2/1/99, callable 2/1/98....................... 1,000,000 1,002,680
General Electric Capital Corp.
7.34%, 3/2/99......................................... 750,000 770,475
Grand Metropolitan Investment Corp.-Medium Term Note
6.186%, 8/3/99........................................ 1,000,000 998,330
----------
2,771,485
- -------------------------------------------------------------------------------
INDUSTRIAL (11.3%)
Cooper Industries, Inc.
7.76%, 11/5/97........................................ 1,000,000 1,018,490
Du Pont (E.I.) de Nemours-Medium Term Note
8.35%, 5/15/98........................................ 1,000,000 1,036,230
PHH Group, Inc.
8.00%, 1/1/97......................................... 500,000 501,850
----------
2,556,570
- -------------------------------------------------------------------------------
TRANSPORTATION (2.2%)
Seaboard System, Series 6
10.00%, 5/15/97....................................... 500,000 511,230
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND
NOTES (COST $6,925,241)................................ 6,955,653
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (67.7%)
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (48.6%)
5.875%, 7/31/97........................................ $ 850,000 $ 852,525
6.50%, 8/15/97......................................... 500,000 503,905
5.50%, 9/30/97......................................... 400,000 400,064
5.00%, 1/31/98......................................... 1,000,000 992,340
6.125%, 5/15/98........................................ 1,000,000 1,006,560
6.25%, 7/31/98......................................... 475,000 479,156
5.875%, 8/15/98........................................ 1,900,000 1,904,446
6.875%, 8/31/99........................................ 1,000,000 1,025,000
7.125%, 9/30/99........................................ 1,000,000 1,032,030
6.25%, 5/31/00......................................... 1,250,000 1,260,150
5.50%, 12/31/00........................................ 500,000 490,080
5.25%, 1/31/01......................................... 500,000 486,330
6.625%, 7/31/01........................................ 600,000 612,654
-----------
11,045,240
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY SECURITIES (6.8%)
Federal Home Loan Bank
7.76%, 9/19/01, Callable 9/19/97....................... 500,000 508,815
Federal Home Loan Mortgage Corp.
6.14%, 10/23/98, Callable 11/30/96..................... 500,000 499,610
Guaranteed Trade Trust, Series 93-A
4.86%, 4/1/98, Estimated Average Life 9/97++........... 30,000 29,805
Tennessee Valley Authority
5.98%, 4/1/36, Putable 4/1/98.......................... 500,000 506,410
-----------
1,544,640
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (2.9%)
Federal Home Loan Mortgage Corporation
REMIC Series 1484Q
5.00%, 1/15/23,
Estimated Average Life 12/13++........................ 78,594 56,564
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED)
Federal National Mortgage Association
REMIC Series G-93 2D
6.00%, 10/25/12,
Estimated Average Life 7/97++....................... $ 225,200 $ 224,797
REMIC Series 92-49 E
7.00%, 7/25/17,
Estimated Average Life 3/97++....................... 60,863 60,819
REMIC Series 92-150G
6.75%, 9/25/18,
Estimated Average Life 8/97++....................... 310,213 310,653
-----------
652,833
- -------------------------------------------------------------------------------
MORTGAGE PASS-THROUGHS (9.4%)
Federal Home Loan Mortgage Corporation
Pool #G50213
6.50%, 11/1/99,
Estimated Average Life 12/98++...................... 1,356,100 1,359,490
Pool #G40112
7.50%, 9/1/01,
Estimated Average Life 8/99++....................... 752,558 768,080
-----------
2,127,570
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $15,297,044).................................... 15,370,283
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.2%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.2%)
Chase Securities, Inc., 5.58%, dated 10/31/96, due
11/1/96, to be repurchased at $43,007,
collateralized by $41,564 various U.S. Treasury
Notes, 5.875%-7.75%, due from 3/31/99-11/30/99,
valued at $43,000 (COST $43,000)................... $ 43,000 $ 43,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%)
(COST $22,265,285)(A)............................... 22,368,936
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.5%)................... 348,232
- ------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $22,717,168
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Estimated Average Life is unaudited.
* Variable/Floating rate security--rate disclosed is as of October 31,
1996.
REMIC Real Estate Mortgage Investment Conduit.
(a) The cost for federal income tax purposes was $22,267,915. At October
31, 1996, net unrealized appreciation for all securities based on tax
cost was $101,021. This consisted of aggregate gross unrealized
appreciation for all securities of $169,639 and aggregate gross
unrealized depreciation for all securities of $68,618.
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
STERLING PARTNERS' PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
STERLING
STERLING STERLING PARTNERS'
PARTNERS' PARTNERS' SHORT-TERM
BALANCED EQUITY FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost..................... $52,726,026 $27,978,777 $22,265,285
=========== =========== ===========
Investments, at Value.................... $58,371,977 $33,053,525 $22,368,936
Cash..................................... 474 -- 109
Receivable for Investments Sold.......... 390,035 332,677 --
Receivable due from Investment Adviser... -- -- 3,335
Receivable for Portfolio Shares Sold..... 4,863 2,961 110,751
Dividends Receivable..................... 24,864 22,331 --
Interest Receivable...................... 339,596 -- 339,829
Other Assets............................. 2,079 1,443 758
- -------------------------------------------------------------------------------
Total Assets............................ 59,133,888 33,412,937 22,823,718
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased........ 365,602 401,794 --
Payable for Portfolio Shares Redeemed.... 1,200 -- 50,398
Payable for Investment Advisory Fees..... 35,530 11,411 --
Payable for Dividends.................... -- -- 19,210
Payable for Administrative Fees.......... 9,395 7,941 7,161
Payable for Custodian Fees............... 2,789 3,877 3,576
Payable to Custodian Bank................ -- 16,454 --
Payable for Directors' Fees.............. 751 704 632
Other Liabilities........................ 27,500 27,910 25,573
- -------------------------------------------------------------------------------
Total Liabilities....................... 442,767 470,091 106,550
- -------------------------------------------------------------------------------
NET ASSETS................................ $58,691,121 $32,942,846 $22,717,168
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.......................... $48,497,914 $24,576,972 $23,015,379
Undistributed (Distributions in Excess
of) Net Investment Income.............. 165,686 24,710 (31,812)
Accumulated Net Realized Gain (Loss)..... 4,381,570 3,266,416 (370,050)
Unrealized Appreciation.................. 5,645,951 5,074,748 103,651
- -------------------------------------------------------------------------------
NET ASSETS................................ $58,691,121 $32,942,846 $22,717,168
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par
value) (Authorized 25,000,000)......... 4,676,780 2,095,162 2,286,889
Net Asset Value, Offering and Redemption
Price Per Share........................ $ 12.55 $ 15.72 $ 9.93
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
STERLING PARTNERS' PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
<TABLE>
<CAPTION>
STERLING
STERLING STERLING PARTNERS'
PARTNERS' PARTNERS' SHORT-TERM
BALANCED EQUITY FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................ $ 669,737 $ 623,893 $ --
Interest................. 1,673,384 61,623 1,503,129
- ----------------------------------------------------------------------------------------------
Total Income............. 2,343,121 685,516 1,503,129
- ----------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory
Fees--Note B
Basic Fee................ $462,951 $256,496 $ 121,012
Less: Fees Waived........ -- 462,951 (72,415) 184,081 (121,012) --
-------- -------- ---------
Administrative Fees--Note
C....................... 99,401 87,881 84,081
Custodian Fees--
Note D.................. 13,159 10,035 8,442
Audit Fees............... 14,666 13,098 13,349
Printing Fees............ 13,629 16,085 13,633
Legal Fees............... 5,902 4,333 3,178
Registration and Filing
Fees.................... 14,502 14,961 15,616
Directors' Fees--
Note G.................. 3,610 3,125 2,873
Other Expenses........... 8,733 5,902 5,451
Expenses Reimbursed by
Adviser................. -- -- (12,908)
- ----------------------------------------------------------------------------------------------
Total Expenses........... 636,553 339,501 133,715
Expense Offset--
Note A.................. (4,896) (1,036) (655)
- ----------------------------------------------------------------------------------------------
Net Expenses............. 631,657 338,465 133,060
- ----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME..... 1,711,464 347,051 1,370,069
- ----------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
ON INVESTMENTS........... 4,827,174 4,140,929 (8,572)
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON INVESTMENTS........... 2,106,555 2,701,952 (86,140)
- ----------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS.............. 6,933,729 6,842,881 (94,712)
- ----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $8,645,193 $7,189,932 $1,275,357
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 1,711,464 $ 2,583,735
Net Realized Gain.................................. 4,827,174 3,426,488
Net Change in Unrealized
Appreciation/Depreciation........................ 2,106,555 2,718,106
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations...................................... 8,645,193 8,728,329
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (1,822,583) (2,532,840)
Net Realized Gain.................................. (3,417,915) (1,844,451)
- --------------------------------------------------------------------------------
Total Distributions............................... (5,240,498) (4,377,291)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 10,461,361 20,677,998
--In Lieu of Cash Distributions.............. 5,122,683 4,260,401
Redeemed........................................... (25,230,195) (29,030,268)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions...... (9,646,151) (4,091,869)
- --------------------------------------------------------------------------------
Total Increase (Decrease).......................... (6,241,456) 259,169
Net Assets:
Beginning of Period................................ 64,932,577 64,673,408
- --------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $165,686 and $273,713,
respectively).................................... $ 58,691,121 $ 64,932,577
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued.................................... 862,801 1,855,817
In Lieu of Cash Distributions.................... 448,253 391,431
Shares Redeemed.................................. (2,111,425) (2,580,432)
- --------------------------------------------------------------------------------
(800,371) (333,184)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 347,051 $ 430,483
Net Realized Gain................................... 4,140,929 2,237,512
Net Change in Unrealized Appreciation/Depreciation.. 2,701,952 1,463,755
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations....................................... 7,189,932 4,131,750
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (366,530) (412,329)
Net Realized Gain................................... (2,251,608) (1,076,275)
- --------------------------------------------------------------------------------
Total Distributions................................ (2,618,138) (1,488,604)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular..................................... 7,389,338 8,462,828
--In Lieu of Cash Distributions............... 2,561,496 1,471,882
Redeemed............................................ (13,548,762) (3,960,760)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions..................................... (3,597,928) 5,973,950
- --------------------------------------------------------------------------------
Total Increase...................................... 973,866 8,617,096
Net Assets:
Beginning of Period................................. 31,968,980 23,351,884
- --------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $24,710 and $44,189,
respectively)..................................... $ 32,942,846 $31,968,980
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued..................................... 512,923 665,503
In Lieu of Cash Distributions..................... 194,161 125,595
Shares Redeemed................................... (947,380) (318,325)
- --------------------------------------------------------------------------------
(240,296) 472,773
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,370,069 $ 1,335,117
Net Realized Loss..................................... (8,572) (146,132)
Net Change in Unrealized
Appreciation/Depreciation........................... (86,140) 695,074
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 1,275,357 1,884,059
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,338,257) (1,354,608)
In Excess of Net Investment Income.................... (31,812) --
- ----------------------------------------------------------------------------------
Total Distributions.................................. (1,370,069) (1,354,608)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 5,687,848 6,891,367
--In Lieu of Cash Distributions................. 1,151,331 1,252,521
Redeemed.............................................. (8,749,458) (8,333,106)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions......... (1,910,279) (189,218)
- ----------------------------------------------------------------------------------
Total Increase (Decrease)............................. (2,004,991) 340,233
Net Assets:
Beginning of Period................................... 24,722,159 24,381,926
- ----------------------------------------------------------------------------------
End of Period (including distributions in excess of
net investment income of $(31,812) and $(7,354),
respectively)....................................... $22,717,168 $24,722,159
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 572,484 701,034
In Lieu of Cash Distributions....................... 116,075 127,414
Shares Redeemed..................................... (882,706) (850,335)
- ----------------------------------------------------------------------------------
(194,147) (21,887)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 11.86 $ 11.13 $ 11.51 $ 10.71 $ 10.26
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.34 0.46 0.32 0.34 0.37
Net Realized and Unrealized Gain
(Loss)........................ 1.38 1.04 (0.25) 0.94 0.50
- -------------------------------------------------------------------------------
Total From Investment
Operations................... 1.72 1.50 0.07 1.28 0.87
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.36) (0.45) (0.32) (0.32) (0.37)
Net Realized Gain............... (0.67) (0.32) (0.13) (0.16) (0.05)
- -------------------------------------------------------------------------------
Total Distributions............ (1.03) (0.77) (0.45) (0.48) (0.42)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 12.55 $ 11.86 $ 11.13 $ 11.51 $ 10.71
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN..................... 15.52% 14.23% 0.66% 12.23% 8.65%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................... $58,691 $64,933 $64,673 $47,016 $39,129
Ratio of Expenses to Average Net
Assets......................... 1.03% 0.96% 1.01% 0.99% 1.09%
Ratio of Net Investment Income to
Average Net Assets............. 2.77% 3.96% 3.05% 3.08% 3.52%
Portfolio Turnover Rate.......... 84% 130% 70% 49% 80%
Average Commission
Rate #......................... $0.0684 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets Including Expense
Offsets........................ 1.02% 0.96% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission per share it paid for portfolio
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 13.69 $ 12.54 $ 12.39 $ 11.01 $10.29
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............ 0.15 0.21 0.16 0.15 0.17
Net Realized and Unrealized
Gain........................... 3.01 1.73 0.27 1.53 0.75
- -------------------------------------------------------------------------------
Total From Investment
Operations.................... 3.16 1.94 0.43 1.68 0.92
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............ (0.16) (0.20) (0.15) (0.16) (0.16)
Net Realized Gain................ (0.97) (0.59) (0.13) (0.14) (0.04)
- -------------------------------------------------------------------------------
Total Distributions............. (1.13) (0.79) (0.28) (0.30) (0.20)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.... $ 15.72 $ 13.69 $ 12.54 $ 12.39 $11.01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+..................... 24.76% 16.61% 3.50% 15.46% 9.01%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)..................... $32,943 $31,969 $23,352 $15,982 $9,725
Ratio of Expenses to Average Net
Assets.......................... 0.99% 1.00% 0.99% 0.93% 1.04%
Ratio of Net Investment Income to
Average Net Assets.............. 1.01% 1.64% 1.34% 1.30% 1.73%
Portfolio Turnover Rate........... 78% 135% 73% 55% 84%
Average Commission Rate#.......... $0.0687 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses
Assumed by the Adviser
Per Share....................... $ 0.03 $ 0.03 $ 0.04 $ 0.06 $ 0.09
Ratio of Expenses to Average Net
Assets Including
Expense Offsets................. 0.99% 0.99% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
+ Total return would have been lower had certain fees not been waived and ex-
penses assumed by the Adviser during the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-29
<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,
1992** TO
YEARS ENDED OCTOBER 31, OCTOBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 9.96 $ 9.74 $ 10.12 $ 10.07 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...... 0.56 0.54 0.49 0.53 0.30
Net Realized and Unrealized
Gain (Loss).............. (0.03) 0.23 (0.38) 0.06 0.07
- -------------------------------------------------------------------------------
Total From Investment
Operations.............. 0.53 0.77 0.11 0.59 0.37
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income...... (0.55) (0.55) (0.48) (0.53)+ (0.30)
In Excess of Net Investment
Income................... (0.01) -- # -- -- --
Net Realized Gain.......... -- -- -- (0.01) --
Return of Capital.......... -- -- (0.01) -- --
- -------------------------------------------------------------------------------
Total Distributions....... (0.56) (0.55) (0.49) (0.54) (0.30)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................... $ 9.93 $ 9.96 $ 9.74 $ 10.12 $ 10.07
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN++.............. 5.51% 8.16% 1.16% 5.98% 3.75%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)............... $22,717 $24,722 $24,382 $20,256 $12,101
Ratio of Expenses to Average
Net Assets................ 0.55% 0.55% 0.53% 0.50% 0.50%*
Ratio of Net Investment
Income to Average Net
Assets.................... 5.66% 5.55% 5.00% 5.24% 5.00%*
Portfolio Turnover Rate..... 48% 58% 100% 78% 122%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share......... $ 0.06 $ 0.04 $ 0.05 $ 0.05 $ 0.03
Ratio of Expenses to Average
Net Assets Including
Expense Offsets........... 0.55% 0.55% N/A N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Because of the differences between book and tax basis accounting, approxi-
mately $0.025 of the Portfolio's distributions for the year ended October
31, 1993 were return of capital for Federal income tax purposes.
++ Total return would have been lower had certain fees not been waived and
assumed by the Adviser during the periods indicated.
# Value is less than $0.01 per share.
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust, (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The Sterling
Partners' Balanced Portfolio, Sterling Partners' Equity Portfolio and the
Sterling Partners' Short Term Fixed Income Portfolio (the "Portfolios"), are
portfolios of UAM Funds, Inc., are diversified, open-end management investment
companies. At October 31, 1996, the UAM Funds were composed of forty active
portfolios. The financial statements of the remaining portfolios are presented
separately. The objectives of the Portfolios are as follows:
The STERLING PARTNERS' BALANCED PORTFOLIO seeks to provide maximum long-
term total return consistent with reasonable risk to principal, by invest-
ing in a balanced portfolio of common stocks and fixed income securities.
The STERLING PARTNERS' EQUITY PORTFOLIO seeks to provide maximum long-
term total return consistent with reasonable risk to principal, by invest-
ing primarily in common stocks.
The STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO seeks to pro-
vide a high level of current income consistent with the maintenance of
principal and liquidity by investing primarily in investment grade fixed
income securities with an average weighted maturity between 1 and 3 years.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: Equity securities listed on a securities exchange
and unlisted securities for which market quotations are readily available
are valued at the last quoted sales price as of the close of the exchange
on the day the valuation is made. Price information on listed securities
is taken from the exchange where the security is primarily traded. In ad-
dition, listed and unlisted securities not traded on the valuation date
for which market quotations are readily available are valued at the aver-
age between the bid and asked price. Fixed income securities are stated on
the basis of valuations provided by brokers and/or a pricing service which
uses information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at time
of purchase are valued at
F-31
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 Di-
rectors.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
At October 31, 1996, the following Portfolio had available an approxi-
mate capital loss carryover for Federal income tax purposes, which will
expire on the dates indicated:
<TABLE>
<CAPTION>
EXPIRATION DATE OCTOBER 31,
-----------------------------
STERLING PARTNERS' PORTFOLIO 2002 2003 TOTAL
---------------------------- --------- --------- ---------
<S> <C> <C> <C>
Short-Term Fixed Income....................... $ 222,000 $ 145,000 $ 367,000
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distrib-
ute substantially all of its net investment income to shareholders quar-
terly for the Sterling Partners' Equity and Sterling Partners' Balanced
Portfolios, and monthly for the Sterling Partner's Short-Term Fixed Income
Portfolio. 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
F-32
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
may differ from generally accepted accounting principles. These differ-
ences are primarily due to differing book and tax treatments in the timing
of the recognition of gains or losses on investments and in-kind transac-
tions.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications as follows:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED PAID
NET INVESTMENT NET REALIZED IN
STERLING PARTNERS' PORTFOLIO INCOME GAIN CAPITAL
---------------------------- -------------- ------------ --------
<S> <C> <C> <C>
Balanced............................... $ 3,092 $(429,397) $426,305
Equity................................. -- (859,487) 859,487
Short-Term Fixed Income................ (24,458) 23,509 949
</TABLE>
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
5. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date. Interest income is recognized on the accrual basis. Discounts and
premiums on securities purchased are amortized using the effective yield
basis 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 ap-
portioned among the portfolios of the UAM Funds and AEW Commercial Mort-
gage Securities Fund, Inc. ("AEW"), an affiliated closed-end management
investment company, based on their relative net assets. Custodian fees for
the Portfolios have been increased to include expense offsets for custo-
dian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Sterling Capital Management Company (the "Adviser"), a wholly-owned subsidiary
of United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at 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. The Adviser has volun-
tarily agreed to waive a portion of its advisory fees and to assume expenses,
if necessary, in order to keep the total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 1.11%, 0.99% and 0.55%
of average daily net assets
F-33
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
for the Sterling Partners' Balanced Portfolio, Sterling Partners' Equity Port-
folio and the Sterling Partners' Short Term Fixed Income Portfolio, respec-
tively.
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services,
Inc. (the "Administrator"), a wholly-owned subsidiary of UAM, provides and
oversees administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds and AEW under a Fund Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 bil-
lion of the combined aggregate net assets; plus 0.05% of the combined aggre-
gate 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 af-
ter two years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000. In addition, the Administrator receives a
Portfolio-specific monthly fee of 0.06%, 0.06% and 0.04% of average daily net
assets for Sterling Partners' Balanced Portfolio, Sterling Partners' Equity
Portfolio and Sterling Partners' Short-Term Fixed Portfolio, respectively.
Also effective April 15, 1996, the Administrator has entered into a Mutual
Funds Service Agreement with Chase Global Funds Services Company ("CGFSC"), an
affiliate of The Chase Manhattan Bank, under which CGFSC agrees to provide
certain services, including but not limited to, administration, fund account-
ing, dividend disbursing and transfer agent services. Pursuant to the Mutual
Funds Service Agreement, the Administrator pays CGFSC a monthly fee. For the
period April 15, 1996 to October 31, 1996, UAM Fund Services, Inc. earned the
following amounts from the Portfolios as Administrator and paid the following
portion to CGFSC:
<TABLE>
<CAPTION>
PORTION
ADMINISTRATION PAID TO
STERLING PARTNERS' PORTFOLIOS FEES CGFSC
- ----------------------------- -------------- -------
<S> <C> <C>
Balanced................................................ $62,275 $42,376
Equity.................................................. 52,322 40,917
Short-Term Fixed Income................................. 46,496 41,362
</TABLE>
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, com-
puted 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
F-34
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
million of the combined aggregate net assets; plus 0.12% of the next $800 mil-
lion of the combined aggregate net assets; plus 0.08% of the combined aggre-
gate net assets in excess of $1 billion but less than $3 billion; plus 0.06%
of the combined aggregate net assets in excess of $3 billion. The fees were
allocated among the portfolios of the UAM Funds and AEW on the basis of their
relative net assets and were subject to a graduated minimum fee schedule per
portfolio which rose from $2,000 per month, upon inception of a portfolio, to
$70,000 annually after two years. For the period November 1, 1995 to April 15,
1996, CGFSC earned the following amounts from the Portfolios as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
STERLING PARTNERS' PORTFOLIOS FEES
- ----------------------------- --------------
<S> <C>
Balanced......................................................... $37,126
Equity........................................................... 35,559
Short-Term Fixed Income.......................................... 37,585
</TABLE>
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the
"Bank"), an affiliate of CGFSC, is custodian for the Portfolios' assets held
in accordance with the custodian agreement. For the period July 17, 1996 to
October 31, 1996, the amount charged to the Portfolios by the Bank aggregated
the following:
<TABLE>
<CAPTION>
CUSTODIAN
STERLING PARTNERS' PORTFOLIOS FEES
- ----------------------------- ---------
<S> <C>
Balanced.............................................................. $1,590
Equity................................................................ 2,548
Short-Term Fixed Income............................................... 2,478
</TABLE>
As of October 31, 1996, all of these amounts are unpaid.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
F. PURCHASES AND SALES: For the year ended October 31, 1996 purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:
<TABLE>
<CAPTION>
STERLING PARTNERS' PORTFOLIOS PURCHASES SALES
- ----------------------------- ----------- -----------
<S> <C> <C>
Balanced............................................... $41,721,993 $42,254,129
Equity................................................. 25,800,779 31,449,705
Short-Term Fixed Income................................ 4,328,808 4,825,789
</TABLE>
F-35
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases and sales of long-term U.S. Government securities were $8,670,097
and $19,964,213, respectively, for the Sterling Partners' Balanced Portfolio,
and $7,183,186 and $6,205,304, respectively, for the Sterling Partner's Short-
Term Fixed Income Portfolio. The Sterling Partners' Balanced Portfolio and the
Sterling Partners' Equity Portfolio sales figures include $6,737,469 and
$6,733,596 of in-kind transactions which resulted in realized gains of
$426,305 and $859,487, respectively. There were no purchases or sales of long-
term U.S. Government securities for the Sterling Partners' Equity Portfolio.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolios, along with certain other portfolios of
UAM Funds, collectively entered into an agreement which enables them to par-
ticipate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of Capi-
tal 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 its
average daily unused portion of the line of credit. During the period ended
October 31, 1996 the Portfolios had no borrowings under the agreement.
I. OTHER: At October 31, 1996, the percentage of total shares outstanding
held by record shareholders owning 10% or greater of the aggregate total
shares outstanding for each Portfolio were:
<TABLE>
<CAPTION>
NO. OF %
STERLING PARTNERS' PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ----------------------------- ------------ ---------
<S> <C> <C>
Equity................................................... 1 11.9%
Short-Term Fixed Income.................................. 1 11.7
</TABLE>
F-36
<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 statement of assets and liabilities, in-
cluding the portfolios of investments, and the related statements of opera-
tions and of changes in net assets and the financial highlights present fair-
ly, in all material respects, the financial position of the Sterling Partners'
Balanced Portfolio, Sterling Partners' Equity Portfolio, and Sterling Part-
ners' Short-Term Fixed Income Portfolio (the "Portfolios"). Portfolios of the
UAM Funds, Inc., at October 31, 1996, and the results of each of their opera-
tions, 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 re-
ferred 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 re-
quire 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 dis-
closures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall fi-
nancial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the cus-
todian 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 9, 1996
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
The Sterling Partners' Balanced and Sterling Partners' Equity Portfolios
hereby designates $1,635,000 and $1,095,000, respectively, as a long-term cap-
ital gain dividend for the purpose of the dividend paid deduction on its fed-
eral income tax return.
For the year ended October 31, 1996, the percentage of dividends that qual-
ify for the 70% dividend received deduction for corporate shareholders for the
Sterling Partners' Balanced and Sterling Partners' Equity Portfolios is 14.6%
and 34.1%, respectively.
F-37
<PAGE>
APPENDIX--DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of its
highest bond ratings: Aaa -- judged to be the best quality; carry the smallest
degree of investment risk; Aa -- judged to be of high quality by all stan-
dards; A -- possess many favorable investment attributes and are to be consid-
ered as higher medium grade obligations; Baa -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its high-
est bond ratings: AAA -- highest grade obligations; possess the ultimate de-
gree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues
only in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as safe;
BBB -- regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the lowest
which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment and may
not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make "indefi-
nite and unlimited" drawings on the U.S. Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not guar-
anteed by the United States, but those institutions are protected by
A-1
<PAGE>
the discretionary authority of the U.S. Treasury to purchase certain amounts
of their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered insti-
tutions under Government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
III. COMMERCIAL PAPER
A Portfolio may invest in commercial paper (including variable amount master
demand notes) rated A-1 or better by S&P or Prime-1 by Moody's, or, if
unrated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. Commercial paper refers to short-term,
unsecured promissory notes issued by corporations to finance short-term credit
needs. Commercial paper is usually sold on a discount basis and has a maturity
at the time of issuance not exceeding nine months. Variable amount master de-
mand notes are demand obligations that permit the investment of fluctuating
amounts at varying market rates of interest pursuant to arrangement between
the issuer and a commercial bank acting as agent for the payees of such notes,
whereby both parties have the right to vary the amount of the outstanding in-
debtedness on the notes. Because variable amount master demand notes are di-
rect lending arrangements between a lender and a borrower, it is not generally
contemplated that such instruments will be traded, and there is no secondary
market for these notes, although they are redeemable (and thus immediately re-
payable by the borrower) at face value, plus accrued interest, at any time. In
connection with the Portfolio's investment in variable amount master demand
notes, the Adviser's investment management staff will monitor, on an ongoing
basis, the earning power, cash flow and other liquidity ratios of the issuer,
and the borrower's ability to pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established and the issuer has a strong position
within the industry; (6) the reliability and quality of management are unques-
tioned. Relative strength or weakness of the above factors determine whether
the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is the
highest commercial paper rating assigned by Moody's. Among the factors consid-
ered by Moody's in assigning ratings are the
A-2
<PAGE>
following: (1) evaluation of the management of the issuer; (2) economic evalu-
ation of the issuer's industry or industries and the appraisal of speculative-
type risks which may be inherent in certain areas; (3) evaluation of the is-
suer's products in relation to completion and customer acceptance; (4) liquid-
ity; (5) amount and quality of long term debt; (6) trend of earnings over a
period of ten years; (7) financial strength of a parent company and the rela-
tionships which exist with the issuer, and (8) recognition by the management
of obligations which may be present or may arise as a result of public inter-
est questions and preparations to meet such obligations.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may be increased or decreased periodically. Frequently,
dealers selling variable rate certificates of deposit to a Portfolio will
agree to repurchase such instruments, at the Portfolio's option, at par on or
near the coupon dates. The dealers' obligations to repurchase these instru-
ments are subject to conditions imposed by various dealers; such conditions
typically are the continued credit standing of the issuer and the existence of
reasonably orderly market conditions. The Portfolio is also able to sell vari-
able rate certificates of deposit in the secondary market. Variable rate cer-
tificates of deposit normally carry a higher interest rate than comparable
fixed rate certificates of deposit. A bankers' acceptance is a time draft
drawn on a commercial bank by a borrower usually in connection with an inter-
national commercial transaction (to finance the import, export, transfer or
storage of goods). The borrower is liable for payment as well as the bank,
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and are
traded in the secondary markets prior to maturity.
A-3
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
TS&W PORTFOLIOS
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- JANUARY 3, 1997
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
TS&W Portfolios' Institutional Class Shares dated January 3, 1997. To obtain
the Prospectus, please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies......................................... 2
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 8
Shareholder Services....................................................... 9
Investment Limitations..................................................... 10
Management of the Fund..................................................... 12
Investment Adviser......................................................... 14
Portfolio Transactions..................................................... 16
Administrative Services.................................................... 17
Performance Calculations................................................... 17
General Information........................................................ 22
Financial Statements....................................................... 23
Appendix -- Description of Securities and Ratings.......................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the TS&W Equity, TS&W Fixed Income and TS&W International Equity Portfolios
(the "TS&W Portfolios") as set forth in the TS&W Prospectus:
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers, deal-
ers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, as amended, (the "1940 Act")
or the Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that (a) the bor-
rower pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities is-
sued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by the Portfolio at any time, and (d) the Portfolio receives
reasonable interest on the loan (which may include the Portfolio investing any
cash collateral in interest bearing short-term investments). As with other ex-
tensions of credit, there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails finan-
cially. These risks are similar to the ones involved with repurchase agree-
ments as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable de-
posits maintained in a banking institution for a specified period of time
at a stated interest rate. Time deposits maturing in more than seven days
will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calendar days will not exceed 10% of the total
assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by com-
mercial banks or savings and loan association collateralized by funds depos-
ited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually
in connection with an international commercial transaction (to finance the im-
port, export, transfer or storage of goods).
2
<PAGE>
Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be pur-
chased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, issued by a corporation having an outstanding unsecured
debt issue rated A or better by Moody's or by S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of
the U.S. Government and differ mainly in interest rates, maturities and
dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. These include securities
issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Ad-
ministration, Federal Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennes-
see Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
FUTURES CONTRACTS
The TS&W International Equity Portfolio may enter into futures contracts for
the purposes of hedging, remaining fully invested and reducing transactions
costs. Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specific security at a specified
future time and at a specified price. Futures contracts which are standardized
as to maturity date and underlying financial instrument are traded on national
futures exchanges. Futures exchanges and trading are regulated under the Com-
modity Exchange Act by the Commodity Futures Trading Commission ("CFTC"), a
U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold" or "selling" a contract pre-
viously "purchased") in an identical contract to terminate the position. Bro-
kerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
posi-
3
<PAGE>
tions in futures contracts. A margin deposit is intended to assure completion
of the contract (delivery or acceptance of the underlying security) if it is
not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the con-
tract value may reduce the required margin, resulting in a repayment of excess
margin to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The TS&W Interna-
tional Equity Portfolio expects to earn interest income on its margin depos-
its.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade and use futures
contracts with the expectation of realizing profits from a fluctuation in in-
terest rates. The TS&W International Equity Portfolio intends to use futures
contracts only for hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of the Portfolio. The TS&W International Equity Portfolio will only sell
futures contracts to protect securities it owns against price declines or pur-
chase contracts to protect against an increase in the price of securities it
intends to purchase. As evidence of this hedging interest, the Portfolio ex-
pects that approximately 75% of its futures contracts purchases will be "com-
pleted", that is, equivalent amounts of related securities will have been pur-
chased or are being purchased by the Portfolio upon sale of open futures con-
tracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the TS&W International Equity Portfolio's exposure to
market fluctuations, the use of futures contracts may be a more effective
means of hedging this exposure. While the Portfolio will incur commission ex-
penses in both opening and closing out future positions, these costs are lower
than transaction costs incurred in the purchase and sale of the underlying se-
curities.
4
<PAGE>
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The TS&W International Equity Portfolio will not enter into futures contract
transactions to the extent that, immediately thereafter, the sum of its ini-
tial margin deposits on open contracts exceeds 5% of the market value of its
total assets. In addition, the Portfolio will not enter into futures contracts
to the extent that its outstanding obligations to purchase securities under
these contracts would exceed 5% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The TS&W International Equity Portfolio will minimize the risk that it will
be unable to close out a futures position by only entering into futures which
are traded on national futures exchanges and for which there appears to be a
liquid secondary market. However, there can be no assurance that a liquid sec-
ondary market will exist for any particular futures contract at any specific
time. Thus, it may not be possible to close a futures position. In the event
of adverse price movements, the TS&W International Equity Portfolio would con-
tinue to be required to make daily cash payments to maintain its required mar-
gin. In such situations, if the Portfolio has insufficient cash, it may have
to sell securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Portfolio may be required to make
delivery of the instruments underlying futures contracts it holds. The inabil-
ity to close futures positions also could have an adverse impact on the Port-
folio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in excess of
the amount invested in the contract. However, because the futures strategies
of the TS&W International Equity Portfolio are engaged in only for hedging
purposes, the Adviser does not believe that the Portfolio is subject to the
risks of loss frequently associated with futures transactions. The Portfolio
would presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument and sold it
after the decline.
Utilization of futures transactions by the TS&W International Equity Portfo-
lio does involve the risk of imperfect or no correlation where the securities
underlying the futures contracts have different maturities than the portfolio
securities being hedged. It is also possible that the Portfolio could lose
money on futures contracts
5
<PAGE>
and also experience a decline in value of portfolio securities. There is also
the risk of loss by the Portfolio of margin deposits in the event of bank-
ruptcy of a broker with whom the Portfolio has an open position in a futures
contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and, therefore, does not
limit potential losses because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the TS&W International Equity Portfolio has identi-
fied as hedging transactions, the Portfolio is required for Federal income tax
purposes to recognize as income for each taxable year its net unrealized gains
and losses on regulated futures contracts as of the end of the year as well as
those actually realized during the year. In most cases, any gain or loss rec-
ognized with respect to a futures contract is considered to be 60% long-term
capital gain or loss and 40% short-term capital gain or loss without regard to
the holding period of the contract. Furthermore, sales of futures contracts
which are intended to hedge against a change in the value of securities held
by the Portfolio may affect the holding period of such securities and, conse-
quently, the nature of the gain or loss on such securities upon disposition.
In order for the TS&W International Equity Portfolio to continue to qualify
for Federal income tax treatment as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities and gains from
the sale of securities of foreign currencies or other income derived with re-
spect to its business investing in such securities or currencies. In addition,
gains realized on the sale or other disposition of securities held for less
than three months must be limited to less than 30% of a Portfolio's annual
gross income. It is anticipated that any net gain realized from the closing
out of futures contracts will be considered a gain from the sale of securities
and, therefore, will be qualifying income for purposes of the 90% requirement.
In order to avoid realizing excessive gains on securities held for less than
three months, the Portfolio may be required to defer the closing out of
futures contracts beyond the time when it would otherwise be advantageous to
do so. It is anticipated that unrealized gains on futures contracts
6
<PAGE>
which have been open for less than three months as of the end of the Portfo-
lio's fiscal year, and which are recognized for tax purposes, will not be con-
sidered gains on securities held for less than three months for the purposes
of the 30% test.
The TS&W International Equity Portfolio will distribute to shareholders an-
nually any net capital gains which have been recognized for Federal income tax
purposes (including unrealized gains at the end of the Portfolio's fiscal
year) on futures transactions. Such distribution will be combined with distri-
butions of capital gains realized on the Portfolio's other investments, and
shareholders will be advised on the nature of the payment.
OPTIONS
The TS&W International Equity Portfolio may purchase and sell put and call
options on futures contracts for hedging purposes. Investments in options in-
volve some of the same considerations that are involved in connection with in-
vestments in futures contracts (e.g., the existence of a liquid secondary mar-
ket). In addition, the purchase of an option also entails the risk that
changes in the value of the underlying security or contract will not be fully
reflected in the value of the option purchased. Depending on the pricing of
the option compared to either the futures contract on which it is based or the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract or securities.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required is $2,500 with certain exceptions for select cus-
tomers of the Adviser and Directors, officers and employees of the Fund and
the Adviser. Other investment minimums are: initial IRA investment, $500; ini-
tial spousal IRA investment, $250; minimum additional investment for all ac-
counts, $100. An order received in proper form prior to the 4:00 p.m. close of
the New York Stock Exchange (the "Exchange") will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the 4:00 p.m. close of the Exchange will be executed at the price com-
puted on the next day the Exchange is open after proper receipt. The Exchange
will be closed on the following days: Presidents' Day, February 17, 1997; Good
Friday, March 28, 1997; Memorial Day, May 26, 1997; Independence Day, July 4,
1997; Labor Day, September 1, 1997; Thanksgiving Day, November 27, 1997;
Christmas Day, December 25, 1997; and New Year's Day, January 1, 1998.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
7
<PAGE>
management such rejection is in the best interests of the Fund, and (3) to re-
duce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commis-
sion, (2) during any period when an emergency exists as defined by the rules
of the Commission as a result of which it is not reasonably practicable for a
Portfolio to dispose of securities owned by it or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may per-
mit. The Fund has made an election with the Commission to pay in cash all re-
demptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid, in whole or in part, in investment securities or in cash as the Direc-
tors may deem advisable; however, payment will be made wholly in cash unless
the Directors believe that economic or market conditions exist which would
make such a practice detrimental to the best interests of the Fund. If redemp-
tions are paid in investment securities, such securities will be valued as set
forth in the Prospectus under "Valuation of Shares", and a redeeming share-
holder would normally incur brokerage expenses if these securities were con-
verted to cash.
No charge is made by the Portfolios for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolios.
SIGNATURE GUARANTEES
To protect your account, the Fund and Chase Global Funds Services Company
("CGFSC") from fraud, signature guarantees are required for certain redemp-
tions. Signature guarantees are required for (1) redemptions where the pro-
ceeds are to be sent to someone other than the registered shareowner(s) or the
registered address or (2) share transfer requests. The purpose of signature
guarantees is to verify the identity of the party who has authorized a redemp-
tion.
Signatures must be guaranteed by an "eligible guarantor institution" as de-
fined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, na-
tional securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institution is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing
8
<PAGE>
corporation or maintain net capital of at least $100,000. Credit unions must
be authorized to issue signature guarantees. Signatures guarantees will be ac-
cepted from any eligible guarantor institution which participates in a signa-
ture guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Serv-
ices" in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each TS&W Portfolio may be exchanged for In-
stitutional Class Shares of any other TS&W Portfolio. In addition, Institu-
tional Class Shares of each TS&W Portfolio may be exchanged for any other In-
stitutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds--Institutional Class Shares in the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM
Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O.
Box 2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are registered for sale in the shareholder's state
of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed are held by the Fund for the account of the shareholder, and the reg-
istration of the two accounts will be identical. Requests for exchanges re-
ceived prior to 4:00 p.m. Eastern Time will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed
on the next business day. Neither the Fund nor CGFSC will be responsible for
the authenticity of the exchange instructions received by telephone. Exchanges
may also be subject to limitations as to amounts or frequency and to other re-
strictions established by the
9
<PAGE>
Fund's Board of Directors to assure that such exchanges do not disadvantage
the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, there-
fore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information
in this regard. The exchange privilege may be modified or terminated at any
time.
INVESTMENT LIMITATIONS
Each TS&W Portfolio is subject to the following restrictions which may be
changed by the Fund's Board of Directors upon reasonable notice to sharehold-
ers. Investment limitations (2), (3), (5), (6), (8), (9), (12) and (13) are
classified as fundamental. A Portfolio's fundamental investment limitation
cannot be changed without approval by a "majority of the outstanding shares"
(as defined in the 1940 Act) of the Portfolio. These restrictions supplement
the investment objectives and policies set forth in the Prospectus. Each TS&W
Portfolio will not:
(1) invest in commodities except that the TS&W International Equity
Portfolio may invest in futures contracts and options to the extent
that not more than 5% of the Portfolio's assets is required as de-
posit to secure obligations under futures contracts and the entry
into forward foreign currency exchange contracts is not and shall
not be deemed to involve investing in commodities;
(2) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, subject to the limita-
tion described in (10) below) which are publicly distributed, and
(ii) by lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not in-
consistent with the 1940 Act or the rules and regulations or inter-
pretations of the Commission thereunder.
(3) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit a Portfolio from
(i) making any permitted borrowings, mortgages or pledges, or (ii)
entering into options and futures (for the TS&W International Equity
Portfolio) or repurchase transactions;
(4) purchase on margin or sell short except as specified in (1) above;
(5) purchase more than 10% of any class of the outstanding voting securi-
ties of any issuer;
10
<PAGE>
(6) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in securities of any single issuer
(other than obligations issued or guaranteed as to principal and in-
terest by the government of the U.S. or any agency or instrumentality
thereof);
(7) purchase or retain securities of an issuer if those officers and Di-
rectors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(8) borrow money, except from banks and as a temporary measure for ex-
traordinary or emergency purposes, and then, in no event, in excess
of 10% of the Portfolio's gross assets valued at the lower of market
or cost, and a Portfolio may not purchase additional securities when
borrowings exceed 5% of total gross assets;
(9) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(10) underwrite the securities of other issuers or invest more than an ag-
gregate of 10% of the net assets of the Portfolio, determined at the
time of investment, in securities subject to legal or contractual re-
strictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;
(11) invest for the purpose of exercising control over management of any
company;
(12) invest more than 5% of its assets at the time of purchase in the se-
curities of companies that have (with predecessors) a continuous op-
erating history of less than 3 years; and
(13) acquire any securities of companies within one industry if, as a re-
sult of such acquisition, more than 25% of the value of a Portfo-
lio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no lim-
itation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or instruments
issued by U.S. banks when a Portfolio adopts a temporary defensive
position.
11
<PAGE>
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Officers of the Fund manage its day-to-day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and elect its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a brief statement of their present positions and prin-
cipal occupations during the past five years. As of December 31, 1996, the Di-
rectors and officers of the Fund owned less than 1% of the Fund's outstanding
shares.
<TABLE>
<C> <S>
JOHN T. BENNETT, JR. Director of the Fund; President of Squam Investment
College Road-RFD 3 Management Company, Inc. and Great Island Investment
Meredith, NH 03253 Company, Inc.; President of Bennett Management
Age: 67 Company from 1988 to 1993.
PHILIP D. ENGLISH Director of the Fund; President and Chief Executive
16 West Madison Street Officer of Broventure Company, Inc.; Chairman of the
Baltimore, MD 21201 Board of Chektec Corporation and Cyber Scientific,
Age: 47 Inc.
WILLIAM A. HUMENUK Director of the Fund; Partner in the Philadelphia
4000 Bell Atlantic Tower office of the law firm Dechert Price & Rhoads;
1717 Arch Street Director, Hofler Corp.
Philadelphia, PA 19103
Age: 54
NORTON H. REAMER* Director, President and Chairman of the Fund;
One International Place President, Chief Executive Officer and a Director of
Boston, MA 02110 United Asset Management Corporation; Director,
Age: 60 Partner or Trustee of each of the Investment
Companies of the Eaton Vance Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief Investment
One Financial Center Officer of Dewey Square Investors Corporation since
Boston, MA 02111 1988; Director and Chief Executive Officer of H.T.
Age: 52 Investors, Inc., formerly a subsidiary of Dewey
Square.
WILLIAM H. PARK* Vice President of the Fund; Executive Vice President
One International Place and Chief Financial Officer of United Asset
Boston, MA 02110 Management Corporation.
Age: 49
GARY L. FRENCH* Treasurer of the Fund; President of UAM Fund
211 Congress Street Services, Inc. and UAM Fund Distributors, Inc.; Vice
Boston, MA 02110 President of Operations, Development and Control of
Age: 45 Fidelity Investments in 1995; Treasurer of the
Fidelity Group of Mutual Funds from 1991 to 1995.
</TABLE>
12
<PAGE>
<TABLE>
<C> <S>
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice President of UAM
211 Congress Street Fund Services, Inc.; former Manager of Fund Administration
Boston, MA 02110 and Compliance of Chase Global Fund Services Company from
Age: 32 1995 to 1996; formerly Senior Manager of Deloitte & Touche
LLP from 1985 to 1995.
MICHAEL DEFAO* Secretary of the Fund; Vice President and General Counsel
211 Congress Street of UAM Fund Services, Inc. and UAM Fund Distributors,
Boston, MA 02110 Inc.; Associate Attorney of Ropes & Gray (a law firm) from
Age: 28 1993 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior Vice President and
73 Tremont Street General Counsel of Chase Global Funds Services Company;
Boston, MA 02108 Senior Vice President, Secretary and General Counsel of
Age: 41 Leland, O'Brien, Rubinstein Associates, Inc. from November
1990 to November 1991.
</TABLE>
- -----------
* These people are deemed to be "interested persons" of the Fund as that term
is defined in the 1940 Act.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated per-
son, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director re-
ceives a $2,000 meeting fee which is aggregated for all of the Directors and
allocated proportionately among the Portfolios of the Fund and UAM Funds Trust
and reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no re-
muneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"),
the Administrator or CGFSC and receive no compensation from the Fund. The fol-
lowing table shows aggregate compensation paid to each of the Fund's unaffili-
ated Directors by the Fund and total compensation paid by the Fund, UAM Funds
Trust and AEW Commercial Mortgage Securities Fund, Inc. (collectively the
"Fund Complex") in the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO DIRECTORS
--------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. ... $25,463 0 0 $30,500
Director
J. Edward Day .......... $25,463 0 0 $30,500
Former Director
Philip D. English ...... $25,463 0 0 $30,500
Director
William A. Humenuk ..... $25,463 0 0 $30,500
Director
</TABLE>
13
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of December 6, 1996 the following persons or organizations held of record
or beneficially 5% or more of the shares of the TS&W Portfolios:
TS&W International Equity Portfolio: Riverside Health Care Foundation, 606
Denbigh Boulevard, Suite 601, Newport News, VA, 9.4% and The Kennedy Founda-
tion, 1700 Tower II, Corpus Christi, TX, 7.1%; Larco Reinvest, c/o Central Fi-
delity Bank, Attn: Mutual Fund Desk, P.O. Box 27602, Richmond, VA, 5%*.
TS&W Equity Portfolio: Lewis Gale Clinic, Inc., PS Fund E, 1802 Braeburn
Dr., Salem, VA, 13.8%. Larco/Reinvest, c/o Central Fidelity Bank, P.O. Box
27602, Richmond, VA, 14.4%.
TS&W Fixed Income Portfolio: Lewis Gale Clinic, Inc., PS Fund E, 1802
Braeburn Dr., Salem, VA, 24153, 14.9%. Nationsbank of Virginia, NA, Trustee
for C.B. Fleet Defined Benefit Plan, Crestar Bank, 919 E. Main Street, Rich-
mond, VA, 7.6%* and Larco/Reinvest, c/o Central Fidelity Bank, P.O. Box 27602,
Richmond, VA, 8.1%.
The persons or organizations owning 25% or more of the outstanding shares of
a Portfolio may be presumed to control (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have
the ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Thompson, Siegel & Walmsley, Inc. (the "Adviser") is a wholly-owned subsidi-
ary of UAM, a holding company incorporated in Delaware in December 1980 for
the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has ac-
quired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to op-
erate under their own firm name, with their own leadership and individual in-
vestment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
14
<PAGE>
PHILOSOPHY AND STYLE
The Adviser's investment professionals work as a team in the development of
equity investment strategy. The stock selection process combines an economic
top-down approach with fundamental valuation analysis and market structure
analysis. Through economic analysis, the Adviser attempts to assess which
areas of the economy are expected to exhibit relative strength and studies
broad economic and political trends and monitors the movement of interest
rates and corporate earnings. Input for economic analysis is derived from a
detailed analysis of the economy and from an analysis of historical corporate
earnings trends, both prepared internally. Through fundamental valuation anal-
ysis, the Adviser attempts to seek out sectors, industries and companies in
the market which represent areas of undervaluation and attempts to identify
and evaluate pricing anomalies across national markets and within industry
sectors. Tools and measures utilized include a dividend discount model and
relative value screens as well as other traditional and fundamental measures
of value including price/earnings ratios, price to book ratios and dividend
yields. Fundamental analysis is performed on industries and companies in order
to verify their potential attractiveness for investment. The Adviser attempts
to purchase stocks of companies which should benefit from economic trends and
which are attractively valued relative to their fundamentals and other compa-
nies in the market.
The Adviser's investment professionals work as a team in the development of
fixed income investment strategy. The decision making consists of an interac-
tive economic top-down approach, valuation analysis, market structure analy-
sis, and fundamental credit analysis. Economic analysis begins with an exami-
nation of monetary policy, fiscal policy, and gross domestic product. An in-
ternally generated outlook for the direction of interest rates is formulated,
and the maturity/duration of portfolios will be established to reflect the Ad-
viser's outlook. Under normal market conditions, the maturity or duration will
average within a plus or minus range of 20% to the benchmark, which is the
Lehman Brothers Government/Corporate Index. Generally, duration is gradually
adjusted as the outlook for interest rates changes. Valuation analysis exam-
ines market fundamentals and the relative pricing of maturities, sectors, and
individual issues. Market structure analysis compares the present cycle of in-
terest rates to historical cycles in terms of interest rates, supply and de-
mand trends, and investor sentiment. Extreme variance from the norm which cre-
ates excessive risk or opportunity is often highlighted by this work, and
portfolios are adjusted accordingly.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: Johnson & Higgins, Cooper Tire
& Rubber Co., Ames Co., Owens & Minor, Inc. and Butterick Company.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any
15
<PAGE>
performance based criteria. It is not known whether these clients approve or
disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, each TS&W Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to the TS&W Portfolios' average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
TS&W Equity Portfolio.................................................. 0.75%
TS&W Fixed Income Portfolio............................................ 0.45%
TS&W International Equity Portfolio.................................... 1.00%
</TABLE>
For the fiscal year ended October 31, 1994, the TS&W Equity Portfolio, TS&W
Fixed Income Portfolio and TS&W International Equity Portfolio paid advisory
fees of approximately $262,000, $200,000 and $384,000, respectively. Effective
November 1, 1994, the advisory fee changed for the TS&W Fixed Income Portfolio
from an annual rate of 0.65% of average daily net assets to 0.45% of average
daily net assets. For the fiscal years ended October 31, 1995 and 1996, the
TS&W Equity Portfolio, TS&W Fixed Income Portfolio and TS&W International Eq-
uity Portfolio paid advisory fees of approximately $373,000 and $540,514,
$180,000 and $242,726, and $602,000 and $931,429, respectively.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the bro-
kers or dealers that will execute the purchases and sales of investment secu-
rities for the Fund's TS&W Portfolios and direct the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to al-
locate brokerage or principal business on the basis of sales of shares which
may be made through broker-dealer firms. However, the Adviser may place port-
folio orders with qualified broker-dealers who recommend the Fund's Portfolios
or who act as agents in the purchase of shares of the Portfolios for their
clients. During the fiscal years ended October 31, 1994, 1995 and 1996, the
entire Fund paid brokerage commissions of approximately $2,402,000, $2,983,000
and $2,887,884, respectively.
Some securities considered for investment by each of the Fund's Portfolios
may also be appropriate for other clients served by the Adviser. If purchases
or sales of securities consistent with the investment policies of a Portfolio
and one or more of these other clients served by the Adviser is considered at
or about the same
16
<PAGE>
time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations,
are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
As stated in the Prospectus, the Board of Directors of the Fund approved a
new Fund Administration Agreement between UAM Fund Services, Inc., a wholly
owned subsidiary of UAM, and the Fund. The Fund's Directors also approved a
Mutual Fund Services Agreement between UAM Fund Services, Inc. ("UAMFSI") and
Chase Global Funds Services Company ("CGFSC"). The services provided by UAMFSI
and CGFSC and the basis of the fees payable by the Fund under the Fund Admin-
istration Agreement are described in the Portfolios' Prospectus. Prior to
April 15, 1996, Chase Global Funds Services Company or its predecessor, Mutual
Funds Service Company, provided certain administrative services to the Fund
under an Administration Agreement between the Fund and U.S. Trust Company of
New York. For the fiscal year ended October 31, 1994, the TS&W Equity Portfo-
lio, the TS&W Fixed Income Portfolio and the TS&W International Equity Portfo-
lio paid administrative fees of approximately $65,000, $65,000 and $58,000,
respectively. For the fiscal year ended October 31, 1995, the TS&W Equity
Portfolio, the TS&W Fixed Income Portfolio and the TS&W International Equity
Portfolio paid administrative fees of approximately $78,000, $80,000 and
$84,000, respectively. For the fiscal year ended October 31, 1996, the TS&W
Equity Portfolio, the TS&W Fixed Income Portfolio and the TS&W International
Equity Portfolio paid administrative fees of approximately $106,549, $94,203,
and $139,451, respectively. Of the fees paid during the year ended October 31,
1996, TS&W Equity Portfolio paid $80,746 to CGFSC and $25,803 to UAMFSI; TS&W
Fixed Income Portfolio paid $80,008 to CGFSC and $12,895 to UAMFSI; and TS&W
International Equity Portfolio paid $106,703 to CGFSC and $32,748 to UAMFSI.
The services provided by the Administrator and the basis of the fees payable
to the Administrator are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolios may from time to time quote various performance figures to
illustrate past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quota-
tions or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance in-
formation computed as required by the Commission. Current yield and average
annual com-
17
<PAGE>
pounded total return quotations used by the Fund are based on the standardized
methods of computing performance mandated by the Commission. An explanation of
those and other methods used to compute or express performance follows.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeem-
able value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis. The average annual total rates of return for
the TS&W Portfolios from inception and for the one year period ended on the
date of the Financial Statements included herein are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR ENDED THROUGH YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1996 INCEPTION DATE
---------------- ------------------ --------------
<S> <C> <C> <C>
TS&W Equity Portfolio...... 21.45% 12.01% 7/17/92
TS&W Fixed Income
Portfolio................ 4.40% 5.86% 7/17/92
TS&W International Equity
Portfolio................ 8.71% 10.94% 12/18/92
</TABLE>
These figures are calculated according to the following formula:
P (1 + T)n = ERV
where:
P
= a hypothetical initial payment of $1,000
T
= average annual total return
n
= number of years
ERV
= ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
YIELD
Current yield reflects the income per share earned by a Portfolio's invest-
ment.
The current yield of a Portfolio is determined by dividing the net invest-
ment income per share earned during a 30-day base period by the maximum offer-
ing price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the base period. The yield for the TS&W Fixed Income Portfolio for the
30-day period ended on the date of the Financial Statements included herein is
5.79%.
18
<PAGE>
This figure is obtained using the following formula:
Yield = 2 [(a -- b + 1)/6/ -- 1]
------
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the pe-
riod.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as calcu-
lated above) to performance as reported by other investments, indices and av-
erages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 trans-
portation stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an un-
managed index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of per-
formance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unman-
aged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund per-
formance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the
perfor-
19
<PAGE>
mance of over 900 securities listed on the stock exchanges of coun-
tries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North
America.
(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Gov-
ernment National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of pub-
licly issued, non-convertible corporate bonds rated AA or AAA. It is
a value-weighted, total return index, including approximately 800 is-
sues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced invest-
ment grade corporate bonds rated BBB or better, U.S. Treasury/agency
issues and mortgage pass through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) The Lehman Brothers Government/Corporate Index is an unmanaged index
composed of a combination of the Government and Corporate Bond Indi-
ces. 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 interna-
tional 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.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Invest-
ment Survey.
20
<PAGE>
(o) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S. public-
ly-traded companies.
(p) Composite indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and
65% Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond In-
dex.
(q) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(r) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger Invest-
ment Companies Service -- publications that rate fund performance
over specified time periods.
(t) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associ-
ates --historical measure of yield, price and total return for common
and small company stock, long-term government bonds, U.S. Treasury
bills and inflation.
(v) Savings and Loan Historical Interest Rates -- as published by the
U.S. Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and aver-
ages is not identical to the composition of investments in the Fund's Portfo-
lios, that the averages are generally unmanaged, and that the items included
in the calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. In addition, there can be no assur-
ance that the Fund will continue this performance as compared to such other
averages.
21
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland corpo-
ration on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
was changed to "UAM Funds, Inc." The Fund's principal executive office is lo-
cated at One International Place, Boston, MA 02110; however, all investor cor-
respondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series ("Portfolios") or classes of
common stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each TS&W Portfo-
lio's net investment income, if any, together with any net realized capital
gains in the amount and at the times that will avoid both income (including
capital gains) taxes on it and the imposition of the Federal excise tax on un-
distributed income and capital gains. (See discussion under "Dividends, Capi-
tal Gains Distributions and Taxes" in the Prospectus.) The amounts of any in-
come dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net as-
set value of such Portfolio by the per share amount of the dividend or distri-
bution. Furthermore, such dividends or distributions, although in effect a re-
turn of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically re-
ceived in additional shares of the Portfolios at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an in-
come dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any
net capital gains recognized by a Portfolio will be distributed to its invest-
ors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
22
<PAGE>
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived with
respect to its business of investing in such securities or currencies. In ad-
dition, gains realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of the Portfolio's an-
nual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain dis-
closure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the TS&W Portfolios and the Financial Highlights
for the respective periods presented, which appear in the Portfolios' 1996 An-
nual Report to Shareholders, and the report thereon of Price Waterhouse LLP,
independent accountants, also appearing therein, are attached to this SAI.
23
<PAGE>
TS&W EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (92.9%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.0%)
Raytheon Co. .............................................. 15,910 $ 783,568
- -------------------------------------------------------------------------------
BANKS (6.7%)
BankAmerica Corp. ......................................... 18,950 1,733,925
Crestar Financial Corp. ................................... 10,795 663,893
J.P. Morgan & Co. ......................................... 12,000 1,036,500
National City Corp. ....................................... 20,300 880,512
NationsBank Corp. ......................................... 12,500 1,178,125
-----------
5,492,955
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (10.1%)
Archer-Daniels-Midland Co. ................................ 62,500 1,359,375
CPC International, Inc. ................................... 23,570 1,859,084
PepsiCo, Inc. ............................................. 37,850 1,121,306
Procter & Gamble Co. ...................................... 22,000 2,178,000
Unilever N.V.--New York Shares............................. 11,000 1,681,625
-----------
8,199,390
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.9%)
Albany International Corp., Class A........................ 51,325 1,154,813
BW/IP, Inc. ............................................... 45,895 619,583
Caterpillar, Inc. ......................................... 15,000 1,029,375
Goulds Pumps, Inc. ........................................ 18,975 436,425
Ingersoll-Rand Co. ........................................ 17,700 736,763
Keystone International, Inc. .............................. 36,935 664,830
Trinity Industries, Inc. .................................. 28,280 979,195
-----------
5,620,984
- -------------------------------------------------------------------------------
CHEMICALS (4.4%)
Air Products & Chemical, Inc. ............................. 14,250 855,000
Dow Chemical Co. .......................................... 21,720 1,688,730
Nalco Chemical Co. ........................................ 28,840 1,049,055
-----------
3,592,785
- -------------------------------------------------------------------------------
CONSTRUCTION (1.7%)
Masco Corp. ............................................... 45,420 1,425,053
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
TS&W EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL (2.4%)
Corning, Inc. ............................................. 50,500 $ 1,956,875
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (2.0%)
International Flavors & Fragrances, Inc. .................. 40,000 1,655,000
- -------------------------------------------------------------------------------
ELECTRONICS (8.4%)
AMP, Inc. ................................................. 20,000 677,500
Emerson Electric Co. ...................................... 10,050 894,450
General Electric Co. ...................................... 15,490 1,498,658
Hewlett-Packard Co. ....................................... 25,800 1,138,425
Motorola, Inc. ............................................ 30,000 1,380,000
Texas Instruments, Inc. ................................... 26,000 1,251,250
-----------
6,840,283
- -------------------------------------------------------------------------------
ENERGY (10.7%)
Chevron Corp. ............................................. 20,200 1,328,150
Coastal Corp. ............................................. 20,670 888,810
Dresser Industries, Inc. .................................. 39,550 1,300,206
Elf Aquitaine ADR.......................................... 41,979 1,684,407
Enron Corp. ............................................... 22,725 1,056,713
Schlumberger Ltd. ......................................... 12,170 1,206,351
Texaco, Inc. .............................................. 12,500 1,270,313
-----------
8,734,950
- -------------------------------------------------------------------------------
HEALTH CARE (8.3%)
Bristol-Myers Squibb Co. .................................. 18,775 1,985,456
Columbia/HCA Healthcare Corp. ............................. 54,600 1,951,950
Pfizer, Inc. .............................................. 12,700 1,050,925
Schering-Plough Corp. ..................................... 27,740 1,775,360
-----------
6,763,691
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (2.3%)
Bob Evans Farms, Inc. ..................................... 64,150 801,875
McDonald's Corp. .......................................... 24,430 1,084,081
-----------
1,885,956
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
TS&W EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
METALS (2.1%)
Reynolds Metals Co. ....................................... 30,405 $ 1,710,280
- -------------------------------------------------------------------------------
PAPER & PACKAGING (2.5%)
Chesapeake Corp. .......................................... 3,000 84,750
International Paper Co. ................................... 46,400 1,983,600
-----------
2,068,350
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (4.5%)
Duke Realty Investments, Inc. ............................. 25,000 862,500
Liberty Property Trust..................................... 47,500 1,027,187
Merry Land & Investment Co., Inc. ......................... 44,400 932,400
United Dominion Realty Trust............................... 60,000 847,500
-----------
3,669,587
- -------------------------------------------------------------------------------
RETAIL (2.0%)
Nordstrom, Inc. ........................................... 10,000 360,000
Wal-Mart Stores, Inc. ..................................... 48,000 1,278,000
-----------
1,638,000
- -------------------------------------------------------------------------------
SERVICES (5.1%)
Minnesota Mining & Manufacturing Co. ...................... 25,165 1,928,268
WMX Technologies, Inc. .................................... 65,220 2,241,937
-----------
4,170,205
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (0.7%)
Spring Industries, Inc., Class A........................... 12,375 558,421
- -------------------------------------------------------------------------------
UTILITIES (11.1%)
AT&T Corp. ................................................ 15,307 533,832
Dominion Resources, Inc. .................................. 47,650 1,798,788
GTE Corp. ................................................. 47,300 1,992,513
MCI Communications Corp. .................................. 50,000 1,250,000
Pacificorp................................................. 98,600 2,082,925
Southern Co. .............................................. 61,000 1,349,624
-----------
9,007,682
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $63,574,346)...................... 75,774,015
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
TS&W EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.5%)
Chase Securities, Inc., 5.58% dated 10/31/96, due
11/1/96, to be repurchased at $6,145,952,
collateralized by $5,939,821 of various U.S.
Treasury Notes, 5.875%-7.75%, due 3/31/99-11/30/99,
valued at $6,145,014 (COST $6,145,000).............. $6,145,000 $ 6,145,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(COST $69,719,346)(A)................................ 81,919,015
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%) (364,762)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $81,554,253
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
ADR American Depositary Receipt
(a) The cost for federal income tax purposes was $69,720,889. At October 31,
1996, net unrealized appreciation for all securities based on tax cost
was $12,198,126. This consisted of aggregate gross unrealized
appreciation for all securities of $13,721,990 and aggregate gross
unrealized depreciation for all securities of $1,523,864.
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
TS&W FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (57.0%)
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (19.5%)
6.25%, 8/15/23......................................... $3,900,000 $ 3,661,554
7.125%, 2/15/23........................................ 4,155,000 4,347,542
8.125%, 8/15/19........................................ 3,490,000 4,041,560
-----------
12,050,656
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (37.5%)
4.375%, 11/15/96....................................... 1,175,000 1,174,706
5.625%, 8/31/97........................................ 2,250,000 2,251,867
6.25%, 8/31/00......................................... 2,785,000 2,805,386
6.375%, 7/15/99........................................ 2,550,000 2,583,405
6.50%, 8/15/05......................................... 5,850,000 5,911,893
7.25%, 8/15/04......................................... 3,090,000 3,270,085
7.50%, 11/15/01-5/15/02................................ 3,610,000 3,836,261
8.00%, 5/15/01......................................... 1,235,000 1,328,514
-----------
23,162,117
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $34,750,803)..... 35,212,773
- --------------------------------------------------------------------------------
AGENCY SECURITIES (27.1%)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (14.1%)
6.50%, 2/1/03.......................................... 3,075,903 3,054,639
7.00%, 3/1/11.......................................... 2,737,527 2,739,223
8.00%, 2/1/23.......................................... 2,827,998 2,894,593
-----------
8,688,455
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION (13.0%)
Various Pools:
6.50%, 3/15/26........................................ 3,425,796 3,276,798
7.50%, 1/15/07........................................ 1,418 1,422
7.50%, 12/15/22....................................... 1,954,876 1,960,804
9.00%, 8/15/24........................................ 2,606,556 2,766,010
12.50%, 11/15/13...................................... 5,784 6,527
-----------
8,011,561
- --------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES
(COST $16,520,611).................................... 16,700,016
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
TS&W FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (13.6%)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (5.0%)
***CIT Group Holdings 5.56%, 5/2/97..................... $1,425,000 $ 1,425,527
Countrywide Funding Corp. 8.25%, 7/15/02............. 915,000 976,762
Fleet/Norstar Group 8.125%, 7/1/04................... 655,000 700,032
-----------
3,102,321
- --------------------------------------------------------------------------------
INDUSTRIAL (8.6%)
***Ford Motor Credit Co. 5.61%, 5/20/97................. 1,970,000 1,970,965
***G.E. Capital Corp. 5.43%, 8/11/97.................... 2,205,000 2,205,000
General Motors Acceptance Corp.
7.625%, 2/15/97...................................... 1,100,000 1,105,346
-----------
5,281,311
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $8,350,344)..................................... 8,383,632
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.0%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.0%)
Chase Securities, Inc., 5.58% dated 10/31/96, due
11/1/96, to be repurchased at $591,092,
collateralized by $571,267 of various U.S. Treasury
Notes, 5.875%-7.75%, due 3/31/99-11/30/99, valued at
$591,001 (COST $591,000)............................. 591,000 591,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.7%)
(COST $60,212,758)(A) 60,887,421
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.3%) 804,857
- --------------------------------------------------------------------------------
NET ASSETS (100%) $61,692,278
================================================================================
</TABLE>
+ See Note A to Financial Statements.
*** Variable/Floating rate security--rate disclosed is as of October 31, 1996.
(a) The cost for federal income tax purposes was $60,244,205. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$643,216. This consisted of aggregate gross unrealized appreciation for
all securities of $814,589 and aggregate gross unrealized depreciation for
all securities of $171,373.
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (93.8%)
- --------------------------------------------------------------------------------
ARGENTINA (0.9%)
YPF S.A. ADR............................................. 40,000 $ 910,000
- --------------------------------------------------------------------------------
AUSTRALIA (3.0%)
Brambles Industries Ltd. ................................ 106,000 1,755,704
WMC Ltd. ................................................ 207,994 1,307,143
------------
3,062,847
- --------------------------------------------------------------------------------
AUSTRIA (1.0%)
Flughafen Wien AG........................................ 20,100 990,943
- --------------------------------------------------------------------------------
BRAZIL (0.8%)
#Usiminas S.A. ADS....................................... 84,000 861,000
- --------------------------------------------------------------------------------
FRANCE (5.8%)
Banque Paribas........................................... 19,251 1,239,399
Castorama Dubois......................................... 5,396 923,936
Cie Generale des Eaux.................................... 11,156 1,333,865
Elf Aquitaine............................................ 12,463 997,001
Elf Aquitaine ADR........................................ 3,227 129,483
Valeo S.A. .............................................. 22,000 1,320,809
------------
5,944,493
- --------------------------------------------------------------------------------
GERMANY (7.5%)
adidas AG................................................ 17,000 1,432,111
Bayerische Motoren Werke AG.............................. 1,750 1,025,603
Mannesmann AG............................................ 3,681 1,434,945
*Schmalbach Lubeca AG.................................... 8,000 1,598,943
*Tarkett AG.............................................. 34,000 736,977
Veba AG.................................................. 28,000 1,495,369
------------
7,723,948
- --------------------------------------------------------------------------------
HONG KONG (7.1%)
HSBC Holdings plc........................................ 126,833 2,583,675
Hutchison Whampoa Ltd. .................................. 250,000 1,746,058
Sun Hung Kai Properties Ltd. ............................ 150,000 1,707,257
Swire Pacific Ltd., Class A.............................. 150,000 1,324,095
------------
7,361,085
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INDIA (0.9%)
*Indian Opportunities Fund Ltd. ......................... 80,000 $ 692,800
*++(S)Oryx (India) Fund Ltd. (acquired 4/26/95-6/16/95,
Cost $419,550)......................................... 40,000 200,000
------------
892,800
- --------------------------------------------------------------------------------
ISRAEL (0.7%)
Scitex Corp., Ltd. ...................................... 71,000 701,125
- --------------------------------------------------------------------------------
ITALY (1.3%)
WEBS--Italy.............................................. 100,000 1,381,250
- --------------------------------------------------------------------------------
JAPAN (19.6%)
Canon, Inc. ............................................. 97,000 1,859,316
Credit Saison Co., Ltd. ................................. 60,000 1,387,497
Dai-Tokyo Fire & Marine Insurance Co., Ltd. ............. 249,000 1,556,661
East Japan Railway Co. .................................. 300 1,379,583
Hitachi Ltd. ............................................ 143,000 1,269,938
Ito-Yokado Co., Ltd. .................................... 20,000 998,857
Japan Associated Finance Co., Ltd. ...................... 6,000 494,329
*Japan OTC Equity Fund, Inc. ............................ 100,000 750,000
*Kobe Steel Ltd. ........................................ 474,000 1,125,297
Kyocera Corp. ........................................... 19,000 1,254,638
Maezawa Kyuso Industries Co. ............................ 43,000 979,249
Mitsubishi Heavy Industries Ltd. ........................ 223,000 1,715,686
Mitsui & Co., Ltd. ...................................... 199,000 1,609,778
Nomura Securities Co., Ltd. ............................. 90,000 1,487,734
Sony Corp. .............................................. 15,000 900,817
Yamatake-Honeywell Co., Ltd. ............................ 90,000 1,511,474
------------
20,280,854
- --------------------------------------------------------------------------------
KOREA (2.6%)
Korea Electric Power Corp. ADR........................... 82,000 1,476,000
Samsung Electronics...................................... 4,000 282,039
*Samsung Electronics (New)............................... 13,000 891,383
------------
2,649,422
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MALAYSIA (2.7%)
Carlsberg Brewery (Malaysia) Bhd. ....................... 90,000 $ 630,641
Malayan Banking Bhd. .................................... 125,000 1,237,134
Metacorp Bhd. ........................................... 320,000 975,456
------------
2,843,231
- --------------------------------------------------------------------------------
MEXICO (0.8%)
Panamerican Beverages, Inc., Class A..................... 20,000 872,500
- --------------------------------------------------------------------------------
NETHERLANDS (3.7%)
*ASM Lithography Holding N.V. ........................... 17,000 611,114
ING Groep N.V. .......................................... 35,538 1,107,879
Philips Electronics N.V. ................................ 24,000 845,778
Royal PTT Nederland N.V. ................................ 20,228 731,922
Royal PTT Nederland N.V. ADR............................. 16,053 579,915
------------
3,876,608
- --------------------------------------------------------------------------------
NORWAY (1.6%)
Schibsted ASA............................................ 110,000 1,681,667
- --------------------------------------------------------------------------------
SINGAPORE (2.8%)
Clipsal Industries Ltd. ................................. 274,000 876,800
Datacraft Asia Ltd. ..................................... 948,000 1,109,160
Keppel Corp., Ltd. ...................................... 118,000 879,784
------------
2,865,744
- --------------------------------------------------------------------------------
SPAIN (2.3%)
ENDESA................................................... 22,800 1,396,283
Repsol S.A. ADR.......................................... 31,500 1,027,688
------------
2,423,971
- --------------------------------------------------------------------------------
SWEDEN (7.1%)
Astra AB, Class B........................................ 31,500 1,439,276
Electrolux AB, Series B.................................. 15,000 836,151
Ericsson (LM) ADR........................................ 67,000 1,850,875
Sparbanken Sverige AB, Class A........................... 110,000 1,742,362
Stora Kopparbergs Bergslags AB, Class A.................. 109,000 1,427,701
------------
7,296,365
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SWITZERLAND (6.0%)
ABB AG (Bearer)................................. 1,380 $ 1,707,780
CS Holding AG (Registered)...................... 12,000 1,200,285
Magazine Zum Globus (Participating
Certificates)................................. 2,200 1,108,541
Nestle S.A. (Registered)........................ 600 652,670
Societe Generale de Surveillance Holding S.A.
(Bearer)...................................... 695 1,580,296
------------
6,249,572
- -------------------------------------------------------------------------------
THAILAND (1.5%)
Siam Cement Public Co., Ltd. (Foreign).......... 21,000 718,399
Thai Farmers Bank Public Co., Ltd. ............. 154,000 851,864
------------
1,570,263
- -------------------------------------------------------------------------------
UNITED KINGDOM (14.1%)
British Airport Authority plc................... 131,458 1,064,199
*Flextech plc................................... 183,000 1,831,340
Geest plc....................................... 200,000 862,420
Glaxo Wellcome plc.............................. 101,700 1,595,294
Marks & Spencer plc............................. 102,844 862,681
Psion plc....................................... 185,000 1,271,866
Rolls-Royce plc................................. 409,857 1,693,982
RTZ Corp. plc (Registered)...................... 78,227 1,250,639
TI Group plc.................................... 179,165 1,657,397
TransTec plc.................................... 750,000 1,397,364
Unilever plc.................................... 50,000 1,050,363
------------
14,537,545
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $87,033,089)............................ 96,977,233
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS (2.0%)
- -------------------------------------------------------------------------------
FRANCE (0.1%)
Castorama Dubois Investisse,
3.15%, 1/1/03................................. FRF 21,500 49,814
- -------------------------------------------------------------------------------
JAPAN (1.9%)
Denso Corp., Series 4, 1.60%, 12/20/02.......... JPY 120,000,000 1,552,097
Sony Corp., Series 3, 1.40%, 9/30/03............ 41,000,000 458,560
------------
2,010,657
- -------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(COST $2,141,517)............................. 2,060,471
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
<TABLE>
<CAPTION>
NO. OF
WARRANTS VALUE+
- ------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.8%)
- ------------------------------------------------------------------------------
INDIA (0.0%)
*(S)Oryx (India) Fund Ltd., expiring 12/31/99 (ac-
quired 4/26/95, Cost $0).......................... 6,000 $ 1,200
- ------------------------------------------------------------------------------
UNITED STATES (0.8%)
*Merrill Lynch & Co., expiring 5/15/97............. 82,500 825,000
- ------------------------------------------------------------------------------
TOTAL WARRANTS (COST $590,862)...................... 826,200
- ------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.9%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.9%)
Chase Securities, Inc., 5.58% dated 10/31/96, due
11/1/96, to be repurchased at $4,001,620,
collateralized by $3,867,408 of various U.S.
Treasury Notes, 5.875%-7.75%, due 3/31/99-
11/30/99, valued at $4,001,009 (COST
$4,001,000)..................................... $4,001,000 4,001,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(COST $93,766,468)(A)............................. 103,864,904
- ------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES (-0.5%)............................... (525,612)
- ------------------------------------------------------------------------------
NET ASSETS (100%)................................... $103,339,292
==============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
++ Security is deemed illiquid.
# 144A Security--Certain conditions for public resale may exist.
(S) Restricted as to public resale. Value of restricted securities at October
31, 1996 was $201,200 or 0.19% of net assets. (Cost $419,550)
ADR American Depositary Receipt
ADS American Depositary Shares
FRF French Franc
JPY Japanese Yen
(a) The cost for federal income tax purposes was $93,767,668. At October 31,
1996, net unrealized appreciation for all securities based on tax cost
was $10,097,236. This consisted of aggregate gross unrealized
appreciation for all securities of $15,290,129 and aggregate gross
unrealized depreciation for all securities of $5,192,893.
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1996
At October 31, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF
NET MARKET
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense....................................... 1.1% $ 1,109,160
Automotive................................................ 5.4 5,592,492
Basic Resources........................................... 6.2 6,403,484
Beverages, Food & Tobacco................................. 2.3 2,365,561
Capital Equipment......................................... 6.5 6,682,418
Consumer Durables......................................... 4.8 5,001,624
Electronics............................................... 9.3 9,580,721
Energy.................................................... 5.8 6,035,540
Financial Services........................................ 16.8 17,351,571
Manufacturing............................................. 0.6 611,114
Metals.................................................... 1.3 1,307,143
Multi-Industry............................................ 4.6 4,727,549
Paper & Packaging......................................... 2.9 3,026,644
Pharmaceuticals........................................... 1.5 1,595,294
Broadcast and Publishing.................................. 1.6 1,681,667
Real Estate............................................... 1.6 1,707,257
Repurchase Agreement...................................... 3.9 4,001,000
Retail.................................................... 2.5 2,545,851
Services.................................................. 13.1 13,531,515
Technology................................................ 1.9 1,972,991
Telecommunications........................................ 1.8 1,850,875
Textiles & Apparel........................................ 1.4 1,432,111
Transportation............................................ 2.3 2,355,038
Utilities................................................. 1.3 1,396,284
- --------------------------------------------------------------------------------
Total Investments....................................... 100.5% $103,864,904
Other Assets and Liabilities (Net)........................ (0.5) (525,612)
- --------------------------------------------------------------------------------
Net Assets.............................................. 100.0% $103,339,292
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
TS&W PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
TS&W TS&W
TS&W FIXED INTERNATIONAL
EQUITY INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Value (Cost
$69,719,346; $60,212,758;
$93,766,468)......................... $81,919,015 $60,887,421 $103,864,904
Foreign Currency, at Value
(Cost $44,048)....................... -- -- 43,536
Cash................................... 819 841 601
Receivable for Investments Sold........ 1,003,885 -- --
Dividends Receivable................... 129,532 -- 56,047
Receivable for Portfolio Shares Sold... -- -- 25,000
Foreign Withholding Tax Reclaim
Receivable........................... -- -- 93,568
Interest Receivable.................... 952 874,468 7,138
Other Assets........................... 2,597 1,952 4,481
- -------------------------------------------------------------------------------
Total Assets.......................... 83,056,800 61,764,682 104,095,275
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased...... 1,385,550 -- 570,731
Payable for Investment Advisory Fees... 51,084 23,040 87,155
Payable for Portfolio Shares Redeemed.. 25,500 -- 1,010
Payable for Administrative Fees........ 10,873 8,777 14,655
Payable for Dividends Declared......... -- 7,172 --
Payable for Directors' Fees............ 831 772 897
Payable for Custodian Fees............. -- 2,793 50,512
Other Liabilities...................... 28,709 29,850 31,023
- -------------------------------------------------------------------------------
Total Liabilities..................... 1,502,547 72,404 755,983
- -------------------------------------------------------------------------------
NET ASSETS.............................. $81,554,253 $61,692,278 $103,339,292
================================================================================
NET ASSETS CONSIST OF:
Paid in Capital........................ $62,505,535 $61,195,037 $ 91,852,160
Undistributed (Distributions in Excess
of) Net Investment Income............ 189,956 (6,544) 750,393
Accumulated Net Realized Gain (Loss)... 6,659,093 (170,878) 638,815
Unrealized Appreciation................ 12,199,669 674,663 10,097,924
- -------------------------------------------------------------------------------
NET ASSETS.............................. $81,554,253 $61,692,278 $103,339,292
================================================================================
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001
par value) (Authorized 25,000,000)... 5,631,690 5,987,577 7,265,075
Net Asset Value, Offering and
Redemption Price Per Share........... $ 14.48 $ 10.30 $ 14.22
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
TS&W PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
<TABLE>
<CAPTION>
TS&W TS&W
TS&W FIXED INTERNATIONAL
EQUITY INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 1,820,562 $ -- $1,903,724
Interest................................ 296,742 3,381,434 310,420
Less: Foreign Taxes Withheld............ -- -- (176,359)
- ---------------------------------------------------------------------------------
Total Income........................... 2,117,304 3,381,434 2,037,785
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B........ 540,514 242,726 931,429
Administrative Fees--Note C............. 106,549 94,203 139,451
Registration and Filing Fees............ 22,560 24,087 25,425
Custodian Fees--Note D.................. 13,269 12,399 110,537
Audit Fees.............................. 13,098 14,103 14,144
Legal Fees.............................. 11,432 10,008 12,811
Printing Fees........................... 11,281 11,061 11,010
Directors' Fees--Note G................. 3,794 3,437 4,206
Other Expenses.......................... 7,525 5,261 9,152
- ---------------------------------------------------------------------------------
Total Expenses......................... 730,022 417,285 1,258,165
Expense Offset--Note A.................. (4,017) (1,998) (5,832)
- ---------------------------------------------------------------------------------
Net Expenses........................... 726,005 415,287 1,252,333
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME.................... 1,391,299 2,966,147 785,452
- ---------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments............................. 6,684,146 497,684 702,725
Foreign Exchange Transactions........... -- -- (2,591)
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS........................... 6,684,146 497,684 700,134
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON
INVESTMENTS............................ 5,430,617 (872,322) 5,859,381
- ---------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN EXCHANGE TRANSACTIONS.......... 12,114,763 (374,638) 6,559,515
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $13,506,062 $2,591,509 $7,344,967
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
TS&W EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,391,299 $ 1,016,359
Net Realized Gain..................................... 6,684,146 1,569,008
Net Change in Unrealized Appreciation/Depreciation.... 5,430,617 4,326,710
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 13,506,062 6,912,077
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,354,955) (945,498)
Net Realized Gain..................................... (1,593,944) (398,746)
- ----------------------------------------------------------------------------------
Total Distributions.................................. (2,948,899) (1,344,244)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 19,601,348 19,816,109
--In Lieu of Cash Distributions..................... 2,760,308 1,299,007
Redeemed.............................................. (11,716,080) (4,710,423)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 10,645,576 16,404,693
- ----------------------------------------------------------------------------------
Total Increase........................................ 21,202,739 21,972,526
Net Assets:
Beginning of Period................................... 60,351,514 38,378,988
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $189,956 and $153,612, respectively)...... $81,554,253 $60,351,514
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 1,434,829 1,707,150
In Lieu of Cash Distributions........................ 210,384 113,865
Shares Redeemed...................................... (854,647) (397,098)
- ----------------------------------------------------------------------------------
790,566 1,423,917
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
TS&W FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Interest Income................................... $ 2,966,147 $ 2,220,641
Net Realized Gain (Loss).............................. 497,684 (318,472)
Net Change in Unrealized Appreciation/Depreciation.... (872,322) 3,633,112
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 2,591,509 5,535,281
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (2,959,603) (2,221,202)
In Excess of Net Investment Income.................... (6,544) --
- ----------------------------------------------------------------------------------
Total Distributions.................................. (2,966,147) (2,221,202)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 17,967,704 11,492,927
--In Lieu of Cash Distributions..................... 2,915,928 2,166,494
Redeemed.............................................. (5,493,469) (2,412,665)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 15,390,163 11,246,756
- ----------------------------------------------------------------------------------
Total Increase........................................ 15,015,525 14,560,835
Net Assets:
Beginning of Period................................... 46,676,753 32,115,918
- ----------------------------------------------------------------------------------
End of Period (including distributions in excess of
net investment income of $(6,544) and $(561),
respectively)....................................... $61,692,278 $46,676,753
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 1,763,847 1,159,426
In Lieu of Cash Distributions........................ 284,741 215,770
Shares Redeemed...................................... (541,108) (238,868)
- ----------------------------------------------------------------------------------
1,507,480 1,136,328
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 785,452 $ 773,572
Net Realized Gain (Loss)............................. 700,134 (15,979)
Net Change in Unrealized Appreciation/Depreciation... 5,859,381 (1,033,549)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations........................................ 7,344,967 (275,956)
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (847,432) (325,659)
Net Realized Gain.................................... -- (1,317,109)
- ----------------------------------------------------------------------------------
Total Distributions................................. (847,432) (1,642,768)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular...................................... 21,166,664 32,153,751
--In Lieu of Cash Distributions.................... 837,181 1,640,933
Redeemed............................................. (2,715,197) (3,684,934)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 19,288,648 30,109,750
- ----------------------------------------------------------------------------------
Total Increase....................................... 25,786,183 28,191,026
Net Assets:
Beginning of Period.................................. 77,553,109 49,362,083
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $750,393 and $815,136, respectively)..... $103,339,292 $77,553,109
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 1,532,523 2,458,530
In Lieu of Cash Distributions....................... 63,761 130,336
Shares Redeemed..................................... (196,067) (289,115)
- ----------------------------------------------------------------------------------
1,400,217 2,299,751
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 17,**
YEARS ENDED OCTOBER 31, 1992 TO
---------------------------------- OCTOBER 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 12.47 $ 11.23 $ 11.02 $ 9.65 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income........ 0.26 0.23 0.19 0.14 0.02
Net Realized and Unrealized
Gain (Loss)................ 2.34 1.34 0.33 1.36 (0.35)
- -------------------------------------------------------------------------------
Total From Investment
Operations................ 2.60 1.57 0.52 1.50 (0.33)
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........ (0.26) (0.22) (0.18) (0.13) (0.02)
Net Realized Gain............ (0.33) (0.11) (0.13) -- --
- -------------------------------------------------------------------------------
Total Distributions......... (0.59) (0.33) (0.31) (0.13) (0.02)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 14.48 $ 12.47 $ 11.23 $ 11.02 $ 9.65
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN.................. 21.45% 14.32% 4.82% 15.62% (3.30)%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $81,554 $60,352 $38,379 $30,953 $7,233
Ratio of Expenses to Average
Net Assets.................. 1.01% 1.01% 1.10% 1.22% 1.25%*
Ratio of Net Investment Income
to Average Net Assets....... 1.93% 2.04% 1.74% 1.51% 1.25%*
Portfolio Turnover Rate....... 40% 17% 23% 23% 17%
Average Commission Rate #..... $0.0692 N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share........... N/A N/A N/A N/A $ 0.02
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... 1.01% 0.99% N/A N/A N/A
- -------------------------------------------------------------------------------
</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 period indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 17,**
YEARS ENDED OCTOBER 31, 1992 TO
----------------------------------- OCTOBER 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.42 $ 9.60 $ 10.75 $ 10.09 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... 0.56 0.56 0.47 0.44 0.06
Net Realized and Unrealized
Gain (Loss)............... (0.12) 0.82 (1.05) 0.68 0.07
- -------------------------------------------------------------------------------
Total From Investment
Operations............... 0.44 1.38 (0.58) 1.12 0.13
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....... (0.56) (0.56) (0.47) (0.46) (0.04)
Net Realized Gain........... -- -- (0.10) -- --
- -------------------------------------------------------------------------------
Total Distributions........ (0.56) (0.56) (0.57) (0.46) (0.04)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD..................... $ 10.30 $ 10.42 $ 9.60 $ 10.75 $10.09
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN................. 4.40% 14.73% (5.46)% 11.31% 1.31%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................ $61,692 $46,677 $32,118 $28,987 $9,385
Ratio of Expenses to Average
Net Assets................. 0.77% 0.76% 1.02% 1.15% 1.30%*
Ratio of Net Investment
Income to Average Net
Assets..................... 5.50% 5.56% 4.73% 4.39% 4.70%*
Portfolio Turnover Rate...... 59% 25% 27% 83% 5%
- -------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the
Adviser Per Share.......... N/A N/A N/A N/A $ 0.02
Ratio of Expenses to Average
Net Assets Including
Expense Offsets............ 0.77% 0.75% N/A N/A N/A
- -------------------------------------------------------------------------------
</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 period indicated.
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 18,**
YEARS ENDED OCTOBER 31, 1992 TO
-------------------------- OCTOBER 31,
1996 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 13.22 $ 13.85 $ 12.54 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............. 0.10 0.13 0.07 0.05
Net Realized and Unrealized Gain
(Loss).......................... 1.04 (0.31) 1.29 2.49
- ------------------------------------------------------------------------------
Total From Investment
Operations..................... 1.14 (0.18) 1.36 2.54
- ------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............. (0.14) (0.09) (0.05) --
Net Realized Gain................. -- (0.36) -- --
- ------------------------------------------------------------------------------
Total Distributions.............. (0.14) (0.45) (0.05) --
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $ 14.22 $ 13.22 $ 13.85 $ 12.54
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL RETURN....................... 8.71% 1.11% 10.87% 25.40%+
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)...................... $103,339 $77,553 $49,362 $28,030
Ratio of Expenses to Average Net
Assets........................... 1.35% 1.32% 1.38% 1.37%*
Ratio of Net Investment Income to
Average Net Assets............... 0.84% 1.29% 0.70% 1.02%*
Portfolio Turnover Rate............ 25% 23% 30% 11%
Average Commission Rate #.......... $ 0.0015 N/A N/A N/A
- ------------------------------------------------------------------------------
Voluntary Waived Fees and Expenses
Assumed by the Adviser Per
Share............................ N/A N/A N/A $ 0.02
Ratio of Expenses to Average Net
Assets Including Expense
Offsets.......................... 1.34% 1.30% N/A N/A
- ------------------------------------------------------------------------------
</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 period indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are reg-
istered under the Investment Company Act of 1940, as amended. The TS&W Equity
Portfolio, TS&W Fixed Income Portfolio and TS&W International Equity Portfolio
(the "Portfolios"), portfolios of UAM Funds, Inc., are diversified, open-end
management investment companies. At October 31, 1996, the UAM Funds were com-
posed of forty active portfolios. The financial statements of the remaining
portfolios are presented separately. The objectives of the TS&W Portfolios are
as follows:
TS&W EQUITY PORTFOLIO seeks to provide maximum long-term total return
consistent with reasonable risk to principal, by investing in a diversi-
fied portfolio of common stocks of relatively large companies.
TS&W FIXED INCOME PORTFOLIO seeks to provide maximum long-term total re-
turn with reasonable risk to principal, by investing primarily in invest-
ment grade fixed income securities of varying maturities.
TS&W INTERNATIONAL EQUITY PORTFOLIO seeks to provide maximum long-term
total return consistent with reasonable risk to principal, by investing in
a diversified portfolio of common stocks of primarily non-United States
issuers on a world-wide basis.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of
their financial statements. Generally accepted accounting principles may re-
quire management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.
1. SECURITY VALUATION: Equity securities listed on a United States secu-
rities exchange for which market quotations are readily available are val-
ued at the last quoted sales price as of the close of the exchange on the
day the valuation is made or, if no sale occurred on such day, at the bid
price on such day. Securities listed on a foreign exchange are valued at
their closing price. Price information on listed securities is taken from
the exchange where the security is primarily traded. Over-the-counter and
unlisted equity securities are valued at a price not exceeding the current
asked price nor less than the current bid price. Fixed income securities
are stated on the basis of valuations provided by brokers and/or a pricing
service which uses information with respect to transactions in fixed in-
come securities, quotations from dealers, market transactions in compara-
ble securities and various relationships
F-28
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 as-
sets and securities for which no quotations are readily available is de-
termined in good faith at fair value using methods determined by the Board
of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as
a regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provi-
sion for Federal income taxes is required in the financial statements.
The TS&W International Equity Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on either
income or gains earned or repatriated. The TS&W International Equity Port-
folio accrues such taxes as appropriate.
At October 31, 1996, the TS&W Fixed Income Portfolio had available a
capital loss carryover for Federal income tax purposes, of $139,432, which
will expire on October 31, 2003. For the year ended October 31, 1996, the
TS&W Fixed Income Portfolio and the TS&W International Equity Portfolio
utilized capital loss carryover for Federal income tax purposes of
$517,685 and $63,911, respectively.
3. REPURCHASE AGREEMENTS: In connection with transactions involving re-
purchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolios have the right to liquidate the collateral and apply the pro-
ceeds in satisfaction of the obligation. In the event of default or bank-
ruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash bal-
ances into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same collat-
eral requirements as discussed above.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the TS&W In-
ternational Equity Portfolio are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign cur-
rency are
F-29
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
translated into U.S. dollars on the date of valuation. The TS&W Interna-
tional 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. These gains and losses are included in net realized and
unrealized gain and loss on investments on the statement of operations.
Net realized and unrealized gains and losses on foreign currency transac-
tions 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 in-
come and foreign withholding taxes recorded on the TS&W International Eq-
uity Portfolio's books and the U.S. dollar equivalent amounts actually re-
ceived or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The TS&W International
Equity Portfolio may enter into forward foreign currency exchange con-
tracts to protect the value of securities held and related receivables and
payables against changes in future foreign exchange rates. A forward cur-
rency contract is an agreement between two parties to buy and sell cur-
rency 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 current forward rate and the change in
market value is recorded by the TS&W International Equity Portfolio as
unrealized gain or loss. The TS&W International Equity Portfolio recog-
nizes realized gain or loss when the contract is closed, equal to the dif-
ference 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 the unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: The TS&W Equity Portfolio will nor-
mally distribute substantially all of its net investment income quarterly.
The TS&W Fixed Income Portfolio will normally distribute substantially all
of its net investment income monthly. The TS&W International Equity Port-
folio will normally distribute substantially all of its net investment in-
come annually. Any realized net capital gains will be distributed annual-
ly. 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
F-30
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
may differ from generally accepted accounting principles. These differ-
ences are primarily due to differing book and tax treatments for foreign
currency transactions, and for the timing of the recognition of gains or
losses on investments.
Permanent book and tax basis differences relating to shareholder distri-
butions resulted in reclassifications as follows:
<TABLE>
<CAPTION>
UNDISTRIBUTED NET ACCUMULATED NET
TS&W PORTFOLIOS INVESTMENT INCOME REALIZED GAIN
--------------- ----------------- ---------------
<S> <C> <C>
Fixed Income............................... $(5,983) $5,983
International Equity....................... (2,763) 2,763
</TABLE>
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net in-
vestment income per share in the financial highlights.
7. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded
as soon as the TS&W International Equity Portfolio is informed of the ex-
dividend date. Interest income is recognized on the accrual basis. Dis-
counts and premiums on securities purchased are amortized using the effec-
tive yield basis 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 ex-
penses are apportioned among the portfolios of the UAM Funds and AEW Com-
mercial Mortgage Securities Fund, Inc. ("AEW"), an affiliated closed-end
management investment company, based on their relative net assets. Custo-
dian fees for the Portfolios have been increased to include expense off-
sets for custodian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Thompson, Siegal & Walmsley, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory serv-
ices to the Portfolios at a fee calculated at an annual rate of average daily
net assets, as follows:
<TABLE>
<CAPTION>
TS&W PORTFOLIOS RATE
--------------- -----
<S> <C>
Equity................................................................. 0.75%
Fixed Income........................................................... 0.45%
International Equity................................................... 1.00%
</TABLE>
F-31
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
C. ADMINISTRATION SERVICES: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent serv-
ices to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to re-
ceive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.06%, 0.04% and 0.06% of average daily net assets for the TS&W
Equity Portfolio, TS&W Fixed Income Portfolio and TS&W International Equity
Portfolio, respectively. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to, administra-
tion, fund accounting, dividend disbursing and transfer agent services. Pursu-
ant to the Mutual Funds Service Agreement, the Administrator pays CGFSC a
monthly fee. For the period April 15, 1996 to October 31, 1996, UAM Fund Serv-
ices, Inc. earned the following amounts from the Portfolios as administrator,
and paid the following portion to CGFSC:
<TABLE>
<CAPTION>
ADMINISTRATION PORTION PAID
TS&W PORTFOLIOS FEES TO CGFSC
- --------------- -------------- ------------
<S> <C> <C>
Equity.............................................. $70,091 $44,287
Fixed Income........................................ 56,250 43,355
International Equity................................ 91,421 58,673
</TABLE>
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds
and AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net assets
in excess of $1 billion but less than $3 billion; plus 0.06% of the combined
F-32
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
aggregate net assets in excess of $3 billion. The fees were allocated among the
portfolios of the UAM Funds and AEW on the basis of their relative net assets
and were subject to a graduated minimum fee schedule per portfolio which rose
from $2,000 per month, upon inception of a portfolio, to $70,000 annually after
two years. For the period November 1, 1995 to April 15, 1996, CGFSC earned the
following amounts from the Portfolios as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
TS&W PORTFOLIOS FEES
- --------------- --------------
<S> <C>
Equity........................................................... $36,458
Fixed Income..................................................... 37,953
International Equity............................................. 48,030
</TABLE>
D. CUSTODIAN: Effective July 17, 1996, The Chase Manhattan Bank (the "Bank"),
an affiliate of CGFSC, is custodian for the Portfolios' assets held in accor-
dance with the custodian agreement. For the period July 17, 1996 to October 31,
1996, the amount charged to the Portfolios by the Bank aggregated the follow-
ing:
<TABLE>
<CAPTION>
CUSTODIAN
TS&W PORTFOLIOS FEES
- --------------- ---------
<S> <C>
Equity................................................................ $ --
Fixed Income.......................................................... 1,758
International Equity.................................................. 36,723
</TABLE>
As of October 31, 1996, all of these amounts are unpaid.
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
F. PURCHASES AND SALES: For the year ended October 31, 1996, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:
<TABLE>
<CAPTION>
TS&W PORTFOLIOS PURCHASES SALES
- --------------- ----------- -----------
<S> <C> <C>
Equity.................................................. $36,001,486 $26,500,180
Fixed Income............................................ 1,682,768 6,524,974
International Equity.................................... 45,171,138 22,024,719
</TABLE>
F-33
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases and sales of long-term U.S. Government securities were $40,101,619
and $23,963,544, respectively, for the TS&W Fixed Income Portfolio. There were
no purchases or sales of long-term U.S. Government securities for the TS&W Eq-
uity Portfolio and the TS&W International Equity Portfolio.
G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated per-
son, receives $2,000 per meeting attended, which is allocated proportionally
among the active portfolios of UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of Capital shares. Inter-
est 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 com-
mitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating Portfolio based on its average daily
unused portion of the line of credit. During the year ended October 31, 1996,
the Portfolios had no borrowings under the agreement.
I. OTHER: At October 31, 1996, the percentage of total shares outstanding
held by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF %
TS&W PORTFOLIOS SHAREHOLDERS OWNERSHIP
- --------------- ------------ ---------
<S> <C> <C>
Equity................................................... 2 28.1%
Fixed Income............................................. 1 14.8%
</TABLE>
At October 31, 1996, the net assets of the TS&W International Equity Portfo-
lio was substantially comprised of foreign denominated securities and/or cur-
rency. Changes in currency exchange rates will affect the value of and invest-
ment 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 trans-
actions as a result of, among other factors, the possibly lower level of gov-
ernmental supervision and regulation of foreign securities markets and the pos-
sibility of political or economic instability.
F-34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors ofUAM 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 assets and liabilities, in-
cluding the portfolios of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of TS&W Equity Portfolio, TS&W
Fixed Income Portfolio, and TS&W International Equity Portfolio (the "Portfo-
lios"), Portfolios of the UAM Funds, Inc., at October 31, 1996, 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 high-
lights (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 stan-
dards which require that we plan and perform the audit to obtain reasonable as-
surance about whether the financial statements are free of material misstate-
ment. 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, 1996 by correspondence with
the custodians and brokers and the application of alternative auditing proce-
dures where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
At October 31, 1996, the TS&W Equity Portfolio hereby designates $1,308,000,
as a long-term capital gain dividend for the purpose of the dividend paid de-
duction on its Federal income tax return.
For the year ended October 31, 1996, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders for
the TS&W Equity Portfolio is 66.1%. Foreign taxes accrued during the fiscal
year ended October 31, 1996 amounting to $176,000 for the TS&W International
Equity Portfolio are expected to be passed through to the shareholders as for-
eign tax credits on Form 1099--Dividend for the year ending December 31, 1996
which shareholders of these Portfolios will receive in late January 1997. In
addition, for the year ended October 31, 1996, gross income derived from
sources within foreign countries amounted to $1,754,888 for the TS&W Interna-
tional Equity Portfolio.
F-35
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving se-
curity to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate, and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of posi-
tion characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked short-
comings.
A-1
<PAGE>
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies the numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indi-
cates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay princi-
pal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay princi-
pal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse con-
ditions.
C -- The rating C is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or minus
sign, which is used to show relative standing within the major rating catego-
ries except in the AAA, CC, C, CI and D categories.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of res-
idential mortgage loans. These securities are designed to provide monthly pay-
ments
A-2
<PAGE>
of interest and principal to the investor. The mortgagor's monthly payments to
his/her lending institution are "passed-through" to investors. Most issuers or
poolers provide guarantees of payments, regardless of whether or not the mort-
gagor actually makes the payment. The guarantees made by issuers or poolers
are supported by various forms of credit, collateral, guarantees or insurance,
including individual loan, title, pool and hazard insurance purchased by the
issuer. There can be no assurance that the private issuers can meet their ob-
ligations under the policies. Mortgage-backed securities issued by private is-
suers, whether or not such securities are subject to guarantees, may entail
greater risk. If there is no guarantee provided by the issuer, mortgage-backed
securities purchased will be rated investment grade by Moody's or S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participations in loans. The major-
ity of these loans are made to purchasers of 1-4 family homes. The terms and
characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate, fixed-
term mortgages, pools of variable rate mortgages (VRM), growing equity mort-
gages (GEM), graduated payment mortgages (GPM) and other types where the prin-
cipal and interest payment procedures vary may be purchased. VRM's are mort-
gages which reset the mortgage's interest rate on pools of VRM's. GPM and GEM
pools maintain constant interest with varying levels of principal repayment
over the life of the mortgage. These different interest and principal payment
procedures should not impact net asset value since the prices at which these
securities are valued each day will reflect the payment procedures.
All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit stan-
dards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through pri-
vate mortgage insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of the un-
derlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors in-
cluding the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume the prepayments
will result in a 12-year average life. Pools of mortgages with other maturi-
ties or different characteristics will have varying assumptions for average
life.
A-3
<PAGE>
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life as-
sumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yields
of the Portfolios. The compounding effect from reinvestment of monthly pay-
ments received by a Portfolio will increase its yield to shareholders, com-
pared to bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates. In-
stead, these securities provide a monthly payment which consists of both in-
terest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their residential
mortgage loans, net of any fees paid to the issuer or guarantor of such secu-
rities. Additional payments are caused by repayments resulting from the sale
of the underlying residential property, refinancing or foreclosure net of fees
or costs which may be incurred. Some mortgage-backed securities are described
as "modified pass-through." These securities entitle the holders to receive
all interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make the
payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage Cor-
poration (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the avail-
ability of mortgage credit for residential housing. Its stock is owned by the
twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfo-
lio. FHLMC guarantees the timely payment of interest and ultimate collection
of principal.
The Federal National Mortgage Association (FNMA) is a Government sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller/servicers which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.
The principal Government guarantor of mortgage-backed securities is the Gov-
ernment National Mortgage Association (GNMA). GNMA is a wholly-owned
A-4
<PAGE>
U.S. Government corporation within the Department of Housing and Urban Devel-
opment. GNMA is authorized to guarantee, with the full faith and credit of the
U.S. Government, the timely payment of principal and interest on securities
issued by approved institutions and backed by pools of FHA-insured or VA-guar-
anteed mortgages.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Pools created
by such non-governmental issuers generally offer a higher rate of interest
than Government and Government-related pools because there are no direct or
indirect Government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by vari-
ous forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers and mortgage poolers. There
can be no assurance that the private insurers can meet their obligations under
the policies. Mortgage-backed securities purchased will, however, be rated of
investment grade quality by Moody's or S&P.
III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or instrumen-
tality issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export-
Import Bank, Farmers Home Administration, Federal Financing Bank, and others.
Certain agencies and instrumentalities, such as the Government National Mort-
gage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make "indefi-
nite and unlimited" drawings on the Treasury, if needed to service its debt.
Debt from certain other agencies and instrumentalities, including the Federal
Home Loan Bank and Federal National Mortgage Association, is not guaranteed by
the United States, but those institutions are protected by the discretionary
authority of the U.S. Treasury to purchase certain amounts of their securities
to assist the institution in meeting its debt obligations. Finally, other
A-5
<PAGE>
agencies and instrumentalities, such as the Farm Credit System and the Federal
Home Loan Mortgage Corporation, are federally chartered institutions under
Government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export-Import Bank of the United States, Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and The Tennessee Valley Authority.
IV. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usu-
ally sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand obliga-
tions that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. In connection with the Portfolios'
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1) li-
quidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two addi-
tional channels of borrowing; (4) basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; (5) typically, the is-
suer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are un-
questioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1
is the highest commercial paper rating assignment by Moody's. Among the fac-
tors considered by Moody's in assigning ratings are the following: (1) evalua-
tion of the management of the issuer; (2) economic evaluation of the issuer's
industry or industries and the appraisal of speculative-type risks which may
be inherent in certain areas; (3) evaluation of the issuer's products in rela-
tion to completion and customer acceptance; (4) liquidity; (5) amount and
A-6
<PAGE>
quality of long term debt; (6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by the management of issuer of obliga-
tions which may be present or may arise as a result of public interest ques-
tions and preparations to meet such obligations.
V. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking institu-
tion for a specified period of time at a stated interest rate. Certificates of
deposit are negotiable short-term obligations of commercial banks. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. As a result of these adjustments, the interest rate on
these obligations may increase or decrease periodically. Frequently, dealers
selling variable rate certificates of deposit to the Portfolio will agree to
repurchase such instruments, at the Portfolio's option, at par on or near the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasona-
bly orderly market conditions. The Portfolios are also able to sell variable
rate certificates of deposit in the secondary market. Variable rate certifi-
cates of deposit normally carry a higher interest rate than comparable fixed
rate certificates of deposit. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international com-
mercial transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment as well as the bank which uncondi-
tionally guarantees to pay the draft at its face amount on the maturity date.
Most acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
VI. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves cer-
tain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between vari-
ous currencies.
As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and they may have policies that are not
comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies. Secu-
rities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less gov-
ernment supervision and regulation of stock exchanges, brokers and listed com-
panies than in the U.S. In addition, with respect to certain foreign coun-
tries, there is the possibility of
A-7
<PAGE>
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those coun-
tries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the in-
come received from the companies comprising the Fund's Portfolios. However,
these foreign withholding taxes are not expected to have a significant impact.
A-8
<PAGE>
PART C
UAM FUNDS, INC.
(FORMERLY THE REGIS FUND, INC.)
POST-EFFECTIVE AMENDMENT NO. 43
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(A) Financial Statements
Included in Part A for the Portfolios listed below are "Financial
Highlights" for the period from the date indicated to the fiscal year
ended October 31, 1996:
<TABLE>
<S> <C>
Acadian International Equity Portfolio Institutional Class Shares (March 29, 1993)
Acadian Emerging Markets Portfolio Institutional Class Shares (June 17, 1993)
C & B Balanced Portfolio Institutional Class Shares (December 29, 1989)
C & B Equity Portfolio Institutional Class Shares (May 15, 1990)
DSI Disciplined Value Portfolio Institutional Class Shares (December 12, 1989)
DSI Limited Maturity Bond Portfolio Institutional Class Shares (December 18, 1989)
DSI Money Market Portfolio Institutional Class Shares (December 28, 1989)
FMA Small Company Portfolio Institutional Class Shares (July 31, 1991)
ICM Equity Portfolio Institutional Class Shares (October 1, 1993)
ICM Fixed Income Portfolio Institutional Class Shares (November 3, 1992)
ICM Small Company Portfolio Institutional Class Shares (April 19, 1989)
McKee U.S. Government Portfolio Institutional Class Shares (March 2, 1995)
McKee Domestic Equity Portfolio Institutional Class Shares (March 2, 1995)
McKee International Equity Portfolio Institutional Class Shares (May 26, 1994)
NWQ Balanced Portfolio Institutional Class Shares (August 2, 1994)
NWQ Value Equity Portfolio Institutional Class Shares (September 21, 1994)
NWQ Balanced Portfolio Institutional Service Class Shares (January 22, 1996)
Rice, Hall, James Small Cap Portfolio Institutional Class Shares (July 1, 1994)
Sirach Fixed Income Portfolio Institutional Class Shares (December 1, 1993)
Sirach Growth Portfolio Institutional Class Shares (December 1, 1993)
Sirach Short-Term Reserves Portfolio Institutional Class Shares (December 1, 1993)
Sirach Strategic Balanced Portfolio Institutional Class Shares (December 1, 1993)
Sirach Special Equity Portfolio Institutional Class Shares (October 2, 1989)
Sirach Equity Portfolio Institutional Class Shares (July 1, 1996)
Sirach Growth Portfolio Institutional Service Class Shares (March 22, 1996)
Sirach Special Equity Portfolio Institutional Service Class Shares (March 22, 1996)
SAMI Preferred Stock Income Portfolio Institutional Class Shares (June 23, 1992)
Sterling Partners' Balanced Portfolio Institutional Class Shares (March 15, 1991)
Sterling Partners' Equity Portfolio Institutional Class Shares (March 15, 1991)
Sterling Partners' Short-Term Fixed Income Portfolio Institutional Class Shares (February 10, 1992)
TS&W Equity Portfolio Institutional Class Shares (July 17, 1992)
TS&W Fixed Income Portfolio Institutional Class Shares (July 17, 1992)
TS&W International Equity Portfolio Institutional Class Shares (December 18, 1992)
</TABLE>
<PAGE>
Included in Part B :
The Financial Statements for each Portfolio are included in this
Post-effective Amendment No. 438
Acadian International Equity Portfolio Institutional Class Shares
Acadian Emerging Markets Portfolio Institutional Class Shares
C & B Balanced Portfolio Institutional Class Shares
C & B Equity Portfolio Institutional Class Shares
DSI Disciplined Value Portfolio Institutional Class Shares
DSI Limited Maturity Bond Portfolio Institutional Class Shares
DSI Money Market Portfolio Institutional Class Shares
FMA Small Company Portfolio Institutional Class Shares
ICM Equity Portfolio Institutional Class Shares
ICM Fixed Income Portfolio Institutional Class Shares
ICM Small Company Portfolio Institutional Class Shares
McKee U.S. Government Portfolio Institutional Class Shares
McKee Domestic Equity Portfolio Institutional Class Shares
McKee International Equity Portfolio Institutional Class Shares
NWQ Balanced Portfolio Institutional Class Shares and Institutional
Service Class Shares
NWQ Value Equity Portfolio Institutional Class Shares
Rice, Hall, James Small Cap Portfolio Institutional Class Shares
Sirach Fixed Income Portfolio Institutional Class Shares
Sirach Growth Portfolio Institutional Class Shares and Institutional
Service Class Shares
Sirach Short-Term Reserves Portfolio Institutional Class Shares
Sirach Strategic Balanced Portfolio Institutional Class Shares
Sirach Special Equity Portfolio Institutional Class Shares and
Institutional Service Class Shares
Sirach Equity Portfolio Institutional Class Shares
SAMI Preferred Stock Income Portfolio Institutional Class Shares
Sterling Partners' Balanced Portfolio Institutional Class Shares
Sterling Partners' Equity Portfolio Institutional Class Shares
Sterling Partners' Short-Term Fixed Income Portfolio Institutional
Class Shares
TS&W Equity Portfolio Institutional Class Shares
TS&W Fixed Income Portfolio Institutional Class Shares
TS&W International Equity Portfolio Institutional Class Shares
The Financial Statements for the above-referenced Portfolios for the time
periods set forth in each Portfolio's Annual Report dated October 31, 1996
include:
(a) Statement of Net Assets as of October 31, 1996;
(b) Statement of Operations for the period ended October 31, 1996;
(c) Statement of Changes in Net Assets for the period ended October
31, 1996;
(d) Financial Highlights as of October 31, 1996;
(e) Notes to Financial Statements; and
(f) Report of Independent Accountants.
<PAGE>
(B) EXHIBITS
Exhibits previously filed by the Fund are incorporated by reference to
such filings. The following table describes the location of all exhibits. In the
table, the following references are used: RS = original Registration Statement
on Form N-1A filed October 31, 1988; Pre EA = Pre-Effective Amendment No. 1
filed March, 1989; PEA = Post-Effective Amendment (pertinent numbers for each
PEA are included after "PEA", e.g., PEA #3 means the third PEA under the
Securities Act of 1933.)
INCORPORATED BY
EXHIBIT REFERENCE TO (LOCATION):
------- ------------------------
1. Articles of Incorporation PEA#37
A. Amendments PEA#37
B. Articles Supplementary PEA#37, PEA#41, PEA#42
2. By-Laws Pre EA
3. Voting Trust Agreement Not Applicable
4. Specimen of Securities PEA #1, PEA #2, PEA #12, PEA
#13, PEA #16, PEA #19, PEA #21,
PEA #24, PEA# 25, PEA#33,
PEA#37, PEA#39, PEA#40, PEA#41,
PEA#42
5. Investment Advisory Agreements RS, Pre EA, PEA #1, PEA #2, PEA
#5, PEA #7, PEA #12, PEA #13,
PEA #16, PEA #19, PEA #21, PEA
#24, PEA# 25, PEA#31, PEA#33,
PEA#37, PEA#40, PEA#41, PEA#42
6. Distribution Agreement PEA #2
Form of Amended and Restated
Distribution Agreement between
RFI Distributors and The Regis
Fund, Inc. PEA #28
7. Directors' and Officers'
Contracts and Programs Not Applicable
8. Custody Agreements
A. Custodian Agreement Pre EA
B. Corporate Custody Agreement PEA #2
9. Other Material Contracts
A. Fund Administration
Agreement between UAM
Funds, Inc. and UAM Fund
Services, Inc. PEA #40
B. Mutual Funds Service Agreement
between UAM Fund Services, Inc. and
Chase Global Funds Services Company PEA #40
<PAGE>
INCORPORATED BY
EXHIBIT REFERENCE TO (LOCATION):
------- -----------------------------
10. Opinion and Consent of Counsel Pre EA
11. Other Opinions and Consents
A. Consent of Independent Accountants
with respect to 1996 Annual Reports Filed herewith
12. Other Financial Statements Not applicable
13. Agreements relating to Initial
Capital
A. Purchase Agreement Pre EA
14. Model Retirement Plans Not Applicable
15. 12b-1 Plans
A. Form of Distribution Plan PEA #28
B. Form of Selling Dealer Agreement PEA #28
C. Form of Shareholder Services Plan PEA #28
D. Form of Service Agreement
(12b-1 Plan) PEA #28
E. Form of Service Agreement
(Shareholder Services Plan) PEA #28
16. Performance Quotation Schedules
for the period ended October 31, 1996 Filed herewith
18. Rule 18f-3 Multiple Class Plan PEA #36
24. Powers of Attorney PEA #5, PEA #8, PEA #35
27. Financial Data Schedules for the period
ended October 31, 1996 Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (OCTOBER 31, 1996).
<TABLE>
<CAPTION>
<S> <C>
Acadian Emerging Markets Portfolio Institutional Class Shares............................... 29
Acadian International Equity Portfolio Institutional Class Shares........................... 13
C&B Balanced Portfolio Institutional Class Shares........................................... 53
C&B Equity Portfolio Institutional Class Shares............................................. 190
DSI Disciplined Value Portfolio Institutional Class Shares.................................. 52
DSI Limited Maturity Bond Portfolio Institutional Class Shares.............................. 30
DSI Money Market Portfolio Institutional Class Shares....................................... 47
FMA Small Company Portfolio Institutional Class Shares...................................... 46
ICM Fixed Income Portfolio Institutional Class Shares....................................... 32
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ICM Small Company Portfolio Institutional Class Shares.......................................... 242
ICM Equity Portfolio Institutional Class Shares................................................. 26
SAMI Preferred Stock Income Portfolio Institutional Class Shares................................ 14
Sirach Special Equity Portfolio Institutional Class Shares...................................... 176
Sirach Strategic Balanced Portfolio Institutional Class Shares.................................. 66
Sirach Growth Portfolio Institutional Class Shares.............................................. 103
Sirach Fixed Income Portfolio Institutional Class Shares........................................ 32
Sirach Short-Term Reserves Portfolio Institutional Class Shares................................. 30
Sirach Equity Portfolio Institutional Class Shares.............................................. 14
Sterling Partners' Balanced Portfolio Institutional Class Shares................................ 133
Sterling Partners' Equity Portfolio Institutional Class Shares.................................. 94
Sterling Partners' Short-Term Fixed-Income Portfolio Institutional Class Shares................. 68
TS&W Equity Portfolio Institutional Class Shares................................................ 240
TS&W Fixed Income Portfolio Institutional Class Shares.......................................... 155
TS&W International Equity Portfolio Institutional Class Shares.................................. 371
McKee U.S. Government Portfolio Institutional Class Shares...................................... 17
McKee Domestic Equity Portfolio Institutional Class Shares...................................... 19
McKee International Equity Portfolio Institutional Class Shares................................. 38
NWQ Balanced Portfolio Institutional Class Shares............................................... 17
NWQ Balanced Portfolio Institutional Service Class Shares....................................... 13
NWQ Value Equity Portfolio Institutional Class Shares........................................... 16
Rice, Hall, James Small Cap Portfolio Institutional Class Shares................................ 184
Enhanced Monthly Income Portfolio Institutional Class Shares.................................... 8
NWQ Value Equity Portfolio Institutional Service Class Shares *................................. 0
Sirach Special Equity Portfolio Institutional Service Class Shares.............................. 5
Sirach Strategic Balanced Portfolio Institutional Service Class Shares *........................ 0
Sirach Growth Portfolio Institutional Service Class Shares...................................... 7
Sterling Partners' Balanced Portfolio Institutional Service Class Shares*....................... 0
Sterling Partners' Equity Portfolio Institutional Service Class Shares*......................... 0
Sterling Partners' Short-Term Fixed-Income Portfolio Institutional Service Class Shares*........ 0
AEW Commercial Mortgage-Backed Securities Portfolio Institutional Class Shares *................ 112
HJMC Equity Portfolio Institutional Class Shares *.............................................. 0
TOTAL........................................................................................... 2,692
</TABLE>
* Portfolio has been authorized for sale of shares but has yet to begin
operations.
ITEM 27. INDEMNIFICATION
Reference is made to Article NINTH of the Registrant's Articles of
Incorporation, which was filed as Exhibit No. 1 to the Registrant's initial
registration statement. Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provision, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefor, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
Reference is made to the captions "Investment Adviser" and "Administrative
Services" in the Prospectuses constituting Part A of this Registration Statement
and "Management of the Fund" and "Investment Adviser" in Part B of this
Registration Statement.
Acadian Asset Management, Inc.
Listed below are the executive officers and directors of Acadian Asset
Management, Inc. ("AAM"). The business address of AAM is Two International
Place - 26th Floor, Boston, Massachusetts 02110. No officer or director of AAM
has any other affiliation with the Registrant.
Dr. Gary L. Bergstrom, President and Director
Ronald D. Frashure, Executive Vice President and Director
John R. Chisholm, Senior Vice President
Stella M. Hammond, Senior Vice President
Churchill G. Franklin, Senior Vice President
Richard O. Michaud, Senior Vice President
Matthew V. Pierce, Senior Vice President
James W. Graves, Senior Vice President
Cooke & Bieler, Inc.
Listed below are the executive officers and directors of Cooke & Bieler,
Inc. ("C&B"). The business address of C&B is 1700 Market Street, Philadelphia,
Pennsylvania 19103. No officer or Director of C&B has any other affiliation with
the Registrant.
James C. A. McClennon, Partner and Director
Robert B. Arthur, Partner and Director
Walter W. Grant, Partner and Director
Charles E. Haldeman, Partner and Director
John J. Medveckis, Partner and Director
Russell G. Redenbaug, Partner and Director
Ronald D. Henrikisen, Director
Robert R. Glauber, Director
R. James O'Neil, Vice President
Bruce A. Smith, Vice President
Peter A. Thompson, Vice President
Kermit S. Eck, Vice President
Michael M. Meyer, Vice President
Dewey Square Investors Corporation
Listed below are the executive officers and directors of Dewey Square
Investors Corporation ("DSI"). The business address of DSI is One Financial
Center, Boston, Massachusetts 02111. Mr. Whitman is a director of the
Registrant. No other officer or director of DSI has any other affiliation with
the Registrant.
Peter M. Whitman, Jr., President
Ronald L. McCullough, Vice President
G.A. David Gray, Vice President
Eva S. Dewitz, Vice President
Marilyn R. Stegner, Secretary and Treasurer
<PAGE>
Fiduciary Management Associates, Inc.
Listed below are the executive officers and directors of Fiduciary
Management Associates, Inc. ("FMA"). The business address of FMA is 55 West
Monroe Street, Suite No. 2550, Chicago, Illinois 60603. No officer or director
of FMA has any other affiliation with the Registrant.
Robert F. Carr III, Director, Chairman and Secretary
Patricia A. Falkowski, President & Chief Investment Officer
Robert W. Thornburgh, Jr., Executive Vice President and Treasurer
Philip E. Arnold, Chairman of Executive Committee
Lloyd J. Spicer, Senior Vice President
Albert W. Gustafson, Senior Vice President
Investment Counselors of Maryland, Inc.
Listed below are the executive officers and directors of Investment
Counselors of Maryland, Inc. ("ICM"). The business address of ICM is 803
Cathedral Street, Baltimore, Maryland 21201. No officer or director of ICM has
any other affiliation with the Registrant.
Craig Lewis, Principal and Director
Linda W. McCleary, Principal and Director
Robert D. McDorman, Jr., Principal and Director
Stephen T. Scott, Principal and Director
David E. Nelson, Principal and Director
Paul L. Borssuck, Principal
Charles W. Neuhauser, Senior Vice President
Daniel O. Shackelford, Senior Vice President
Robert F. Boyd, Executive Vice President
C.S. McKee & Company, Inc.
Listed below are the executive officers and directors of C.S. McKee &
Company, Inc. ("C.S. McKee"). The business address of C.S. McKee is One Gateway
Center, Pittsburgh, Pennsylvania 15222. No officer or director of C.S. McKee
has any other affiliation with the Registrant.
Charles E. Jacobs, Chairman
James H. Hanes, President and Director
Joseph F. Bonomo, Jr., Senior Vice President
Walter C. Bean, Senior Vice President
William J. Andrews, Vice President
Kathryn J. Murin, Senior Vice President
Joseph A. Murvar, Portfolio Manager
Malcolm G. Nimick, Portfolio Manager
Norman S. Allan, Senior Vice President
Bradford J. Hanes, Assistant Vice President
Lloyd F. Stamy, Jr., Senior Vice President
William Vescio, Vice President
Susan A. Darragh, Treasurer
<PAGE>
NWQ Investment Management Company
Listed below are the executive officers and directors of NWQ Investment
Management Company, Inc. ("NWQ"). The business address of NWQ is 655 South Hope
Street, 11th Floor, Los Angeles, California 90017. No officer or director of
NWQ has any other affiliation with the Registrant.
David A. Polak, President and Director
Edward C. Friedel, Jr., Director and Managing Director
James P. Owen, Managing Director
James H. Galbreath, Director and Managing Director
Mary-Gene Slaven, Clerk, CFO, COO and Managing Director
Michael C. Mendez, Managing Director
Phyllis G. Thomas, Managing Director
Paul R. Guastamacchio, Vice President and Portfolio Manager
Martin Pollack, Vice President and Portfolio Manager
Thomas J. Laird, Vice President and Portfolio Manager
Justin T. Clifford, Vice President
Jeffrey M. Cohen, Vice President and Portfolio Manager
Karen S. McCue, Vice President and Director of Institutional Marketing
Ronald R. Sternal, Vice President
Ronald R. Halverson, Vice President
Kathy Seraff, Vice President
Rice, Hall, James & Associates
Listed below are the executive officers and directors of Rice, Hall, James
& Associates ("RHJ"). The business address of RHJ is 600 West Broadway, Suite
1000, San Diego, California 92101. No officer or director of RHJ has any other
affiliation with the Registrant.
Walter H. Beck, Director and Senior Vice President
Hubert M. Collins, Vice President and Portfolio Manager
Charles G. King, Vice President and Portfolio Manager
Thomas W. McDowell, Director, President and Portfolio Manager
Gary S. Rice, Vice President and Portfolio Manager
David P. Tessmer, Director, Vice President and Portfolio Manager
Timothy A. Todaro, Vice President and Portfolio Manager
Samuel R. Trozzo, Chairman and Chief Executive Officer
Mitchell S. Little, Vice President
Michelle P. Connell, Vice President and Portfolio Manager
James Dickinson, Vice President and Portfolio Manager
Sirach Capital Management, Inc.
Listed below are the executive officers and directors of Sirach Capital
Management, Inc. ("Sirach"). The business address of Sirach is 3323 One Union
Square, 600 University Street, Seattle, Washington 98101. No officer or director
of Sirach has any other affiliation with the Registrant.
Harvey G. Bateman, Treasurer and Director
Barry E. Fetterman, Secretary and Director
Thomas Gillespie, Vice President and Director
George B. Kauffman, Chairman of the Board and Director
William B. Sanders, President and Director
<PAGE>
Spectrum Asset Management, Inc.
Listed below are the executive officers and directors of Spectrum Asset
Management, Inc. ("SAMI"). The business address of SAMI is 4 High Ridge Park,
Stamford, Connecticut 06905. No officer or director of SAMI has any other
affiliation with the Registrant.
Scott T. Fleming, Chairman of the Board and Chief Financial Officer
Bernard M. Sussman, Senior Vice President
L. Phillip Jacoby, IV, Vice President - Portfolio Management
Margaret S. Gilliland, Vice President
Patrick G. Hurley, Hedge Manager
Sterling Capital Management Company
Listed below are the executive officers and directors of Sterling Capital
Management Company ("Sterling"). The business address of Sterling is One First
Union Center, 301 S. College Street, Suite 3200, Charlotte, NC 28246. No officer
or director of Sterling has any other affiliation with the Registrant.
W. Olin Nisbet, III, Chairman and Chief Executive Officer
Mark W. Whalen, President
David M. Ralston, Chief Investment Officer
J. Calvin Rivers, Executive Vice President
Harry F. Wolfe, Jr., Senior Vice President
Alexander W. McAlister, Senior Vice President
James R. Norris, Senior Vice President
Brian R. Walton, Senior Vice President
Eduardo A. Brea, Vice President
Mary D. Chaney, Vice President and Secretary/Treasurer
Rebecca G. Douglass, Vice President
Mary Weeks Frutain, Vice President
Esther L. Glenn Vice President
Thompson, Siegel & Walmsley, Inc.
Listed below are the executive officers and directors of Thompson, Siegel
and Walmsley, Inc. ("TS&W"). The business address of TS&W is 5000 Monument
Avenue, Richmond, Virginia 23230. No officer or director of TS&W has any other
affiliation with the Registrant.
John T. Siegel, President, Treasurer and Director
Matthew G. Thompson, Senior Vice President and Director
S. Pierce Walmsley, IV, Senior Vice President and Director
Kathleen M. Blanton, Vice President
Lori N. Anderson, Vice President
Charles A. Gomer, III, Vice President
Paul A. Ferwerda, Vice President
Peter D. Hartman, Vice President
G.D. Rothenberg, Vice President
Horace P. Whitworth, II, Vice President and Secretary
Elizabeth Cabell Jennings, Vice President
Alan C. Ashworth, Vice President
AAM, C&B, DSI, FMA, ICM, C.S. McKee, NWQ, RHJ, Sirach, SAMI, Sterling and
TS&W are each wholly-owned affiliates of United Asset Management Corporation
("UAM"), a Delaware corporation acquiring and owning firms engaged primarily in
institutional investment management.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) UAM Fund Distributors, Inc., the firm which acts as sole distributor
of the Registrant's shares, also acts as distributor for UAM Funds
Trust (formerly The Regis Fund II).
(b) Not applicable.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 3(a) under the
Investment Company Act of 1940, as amended (the "1940 Act") and rules
promulgated thereunder will be maintained in the physical possession of the
Registrant, the Registrant's Advisers, the Registrant's Sub-Transfer and Sub-
Administrative Agent (Chase Global Funds Services Company, 73 Tremont Street,
Boston, Massachusetts 02108) and the Registrant's Custodian Bank (The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, New York 11245.)
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable
(b) (i) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified
for the Sterling Partners' Small Cap Value Portfolio within four to six months
of the effective date of such Portfolio or the commencement of operations of the
Portfolio, whichever is later.
(ii) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified
for the C & B Equity Portfolio for Taxable Investors and C & B Mid Cap Equity
Portfolio within four to six months of the effective date of such Portfolios or
the commencement of operations of each Portfolio, whichever is later.
(iii) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the Rice, Hall, James Small/Mid Cap Portfolio within four to six months of
the effective date of such Portfolio.
(iv) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the DSI Balanced Portfolio Institutional Class Shares within four to six
months of the commencement of operations of the Portfolio.
(v) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the AEW Commercial Mortgage-Backed Securities Portfolio within four to six
months of the commencement of operations of such Portfolio.
(vi) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the HJMC Equity Portfolio Institutional Class Shares within four to six
months of the commencement of operations of the Portfolio.
(vii) Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements, which need not be certified,
for the Cambiar Anticipation Portfolio Institutional Class Shares within four to
six months of the commencement of operations of the Portfolio.
<PAGE>
(c) Registrant undertakes to comply with the provisions of Section 16(c)
of the 1940 Act in regard to shareholders' rights to call a meeting of
shareholders for the purpose of voting on the removal of Directors and to assist
in shareholder communications in such matters, to the extent required by law.
Specifically, the Registrant will, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, call a meeting of shareholders
for the purpose of voting upon the question of the removal of a Director and the
Registrant will assist in shareholder communications as required by Section
16(c) of the 1940 Act.
(d) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth of
Massachusetts on the 3rd day of January, 1997.
UAM FUNDS, INC.
*
-------------------
Norton H. Reamer
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<S> <C> <C>
* , Chairman and President January 3, 1997
- -------------------------
Norton H. Reamer
* , Director January 3, 1997
- -------------------------
John T. Bennett, Jr.
* , Director January 3, 1997
- -------------------------
Philip D. English
* , Director January 3, 1997
- -------------------------
William A. Humenuk
* , Director January 3, 1997
- -------------------------
Peter M. Whitman, Jr.
/s/ Gary L. French , Treasurer and Principal January 3, 1997
- ------------------------- Financial and Accounting Officer
Gary L. French
/s/ Karl O. Hartmann January 3, 1997
- -------------------------
* Karl O. Hartmann
(Attorney-in-Fact)
</TABLE>
<PAGE>
UAM FUNDS, INC.
(FORMERLY THE REGIS FUND, INC.)
FILE NOS. 811-5683/33-25355
POST-EFFECTIVE AMENDMENT # 43
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
EX-23 Consent of Independent Accountants
EX-16 Schedules of Computation of Performance
Quotations for the period ended October
31, 1996
EX-27 Financial Data Schedules for the period
ended October 31, 1996
</TABLE>
A-1
<PAGE>
Schedule or Computation of Performance Quotations
Acadian Emerging Markets Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 06/17/93
-------- --------
P = $1,000 $1,000
T = 8.724% 6.223%
N = 1.00 years 3.38 years
ERV = $1,807 $1,226
<PAGE>
Schedule or Computation of Performance Quotations
Acadian International Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 03/29/93
-------- --------
P = $1,000 $1,000
T = 14.131% 9.475%
N = 1.00 years 3.59 years
ERV = $1,141 $1,385
<PAGE>
Schedule or Computation of Performance Quotations
C & B Balanced Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 12/29/89
--------- --------- ---------------
P = $1,000 $1,000 $1,000
T = 14.702% 10.037% 11.060%
N = 1.00 years 5.00 years 6.84 years
ERV = $1,147 $1,613 $2,050
<PAGE>
Schedule or Computation of Performance Quotations
C & B Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 5/15/90
--------- --------- ---------------
P = $1,000 $1,000 $1,000
T = 21.988% 12.450% 13.583%
N = 1.00 years 5.00 years 6.47 years
ERV = $1,220 $1,798 $2,279
<PAGE>
Schedule or Computaion of Performance Quotations
DSI Disciplined Value Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 12/12/89
--------- --------- ---------------
P = $1,000 $1,000 $1,000
T = 22.915% 14.825% 11.695%
N = 1.00 years 5.00 years 6.89 years
ERV = $1,229 $1,996 $2,143
<PAGE>
Schedule or Computation of Performance Quotations
DSI Limited Maturity Bond Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 12/18/89
--------- --------- ---------------
P = $1,000 $1,000 $1,000
T = 5.344% 5.675% 6.800%
N = 1.00 years 5.00 years 6.87 years
ERV = $1,053 $1,318 $1,572
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1)/6/-1]
Where a = dividends and interest paid during the period $175,596
b = expenses accrued during the period
(net of reimbursements) $28,084
c = the average daily number of shares outstanding
during the period 3,225,844
d = the maximum offering price per share on the
last day of the period $9.40
Yield = 5.91%
<PAGE>
Schedule or Computation of Performance Quotations
DSI Money Market Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 12/28/89
--------- --------- ---------------
P = $1,000 $1,000 $1,000
T = 5.259% 4.062% 4.816%
N = 1.00 years 5.00 years 6.85 years
ERV = $1,053 $1,220 $1,380
<PAGE>
Schedule or Computation of Performance Quotations
FMA Small Company Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 07/31/91
-------- --------- --------
P = $1,000 $1,000 $1,000
T = 22.513% 14.554% 15.002%
N = 1.00 years 5.00 years 5.26 years
ERV = $1,225 $1,973 $2,085
<PAGE>
Schedule or Computation of Performance Quotations
ICM Fixed Income Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 11/03/92
-------- --------
P = $1,000 $1,000
T = 5.168% 6.312%
N = 1.00 years 3.99 years
ERV = $1,052 $1,277
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1) -1]
Where: a = dividends and interest paid during the period $132,590
b = expenses accrued during the period (net of
reimbursements) $9,760
c = the average daily number of shares outstanding
during the period 2,316,573
d = the maximum offering price per share on the last
day of the period $10.36
Yield = 6.22%
<PAGE>
Schedule or Computation of Performance Quotations
ICM Small Company Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 04/19/89
-------- --------- --------
P = $1,000 $1,000 $1,000
T = 15.616% 18.996% 16.250%
N = 1.00 years 5.00 years 754.00 years
ERV = $1,156 $2,386 $3,112
<PAGE>
Schedule or Computation of Performance Quotations
ICM Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 10/01/93
-------- --------
P = $1,000 $1,000
T = 26.234% 16.695%
N = 1.00 years 3.08 years
ERV = $1,262 $1,610
<PAGE>
Schedule or Computation of Performance Quotations
McKee Domestic Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 03/25/95
-------- --------
P = $1,000 $1,000
T = 19.314% 20.959%
N = 1.00 years 1.00 years
ERV = $1,193 $1,374
<PAGE>
Schedule or Computation of Performance Quotations
McKee International Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 05/26/94
-------- --------
P = $1,000 $1,000
T = 8.293% 3.959%
N = 1.00 years 2.44 years
ERV = $1,083 $1,099
<PAGE>
Schedule or Computation of Performance Quotations
McKee U.S. Government Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 03/02/95
-------- --------
P = $1,000 $1,000
T = 3.768% 8.226%
N = 1.00 years 1.67 years
ERV = $1,038 $1,141
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1) -1/6/]
Where: a = dividends and interest paid during the period $129,825
b = expenses accrued during the period (net of
reimbursements) $22,007
c = the average daily number of shares outstanding
during the period 158,057
d = the maximum offering price per share on the last
day of the period $10.58
Yield = 5.73%
<PAGE>
Schedule or Computation of Performance Quotations
NWQ Balanced Portfolio
Institutional Class
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 08/02/94
-------- --------
P = $1,000 $1,000
T = 13.681% 13.206%
N = 1.00 years 2.25 years
ERV = $1,137 $1,322
<PAGE>
Schedule or Computation of Performance Quotations
NWQ Balanced Portfolio
Institutional Service Class
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
01/22/96
--------
P = $1,000
T = 8.603%
N = 0.77 years
ERV = $1,066
<PAGE>
Schedule or Computation of Performance Quotations
NWQ Value Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 09/21/94
-------- --------
P = $1,000 $1,000
T = 22.687% 19.064%
N = 1.00 years 2.11 years
ERV = $1,227 $1,446
<PAGE>
Schedule or Computation of Performance Quotations
Rice, Hall, & James Small Cap Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 07/01/94
-------- --------
P = $1,000 $1,000
T = 19.434% 31.524%
N = 1.00 years 2.34 years
ERV = $1,194 $1,897
<PAGE>
Schedule or Computation of Performance Quotations
SAMI Preferred Stock Income Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 06/23/92
-------- --------
P = $1,000 $1,000
T = 8.171% 4.735%
N = 1.00 years 4.36 years
ERV = $1,082 $1,223
SAMI Preferred Stock Income
Taxable Equivalent Yield for the twelve months ended 10/31/96 10.82%
SAMI Preferred Stock Income Portfolio
$20,669 paid to Spectrum Asset Management, Inc. for the year ended 10/31/96.
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
07/01/96
--------
P = $1,000
T = 9.800%
N = 0.33 years
ERV = $1,032
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Fixed Income Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 12/01/93
-------- --------
P = $1,000 $1,000
T = 4.207% 4.720%
N = 1.00 years 2.92 years
ERV = $1,042 $1,144
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1)-1/6/]
Where: a = dividends and interest paid during the period $106,537
b = expenses accrued during the period (net of
reimbursements) $11,962
c = the average daily number of shares outstanding
during the period 1,930,928
d = the maximum offering price per share on the last
day of the period $9.74
Yield = 6.11%
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Growth Portfolio
Institutional Class
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 12/01/93
--------- ---------------
P = $1,000 $1,000
T = 24.516% 13.514%
N = 1.00 years 2.92 years
ERV = $1,245 $1,448
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Growth Portfolio
Institutional Service Class
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
03/22/96
-------
P = $1,000
T = 9.868%
N = 0.61 years
ERV = $1,059
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Short-Term Reserves Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 12/01/93
--------- --------
P = $1,000 $1,000
T = 5.115% 4.859%
N = 1.00 years 2.92 years
ERV = $1,051 $1,148
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1) -1/6/]
Where a = dividends and interest paid during the period $69,345
b = expenses accrued during the period
(net of reimbursements) $6,757
c = the average daily number of shares outstanding
during the period 1,547,361
d = the maximum offering price per share on the
last day of the period $10.01
Yield = 4.90%
<PAGE>
Schedule or Computation fo Performance Quotations
Sirach Special Equity Portfolio
Institutional Class
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Years 10/02/89
--------- ---------- ---------------
P = $1,000 $1,000 $1,000
T = 23.615% 16.124% 16.803%
N = 1.00 years 5.00 years 7.08 years
ERV = $1,236 $2,112 $3,005
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Special Equity Portfolio
Institutional Service Class
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
3/22/96
-------
P = $1,000
T = 8.646%
N = 0.61 years
ERV = $1,052
<PAGE>
Schedule or Computation of Performance Quotations
Sirach Strategic Balanced Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 12/01/93
-------- --------
P = $1,000 $1,000
T = 15.125% 9.803%
N = 1.00 years 2.92 years
ERV = $1,151 $1,314
<PAGE>
Schedule or Computation of Performance Quotations
Sterling Partners' Balanced Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Year 03/15/91
--------- --------- ---------------
P = $1,000 $1,000 $1,000
T = 15.516% 10.124% 9.794%
N = 1.00 years 5.00 years 5.64 years
ERV = $1,155 $1,620 $1,693
<PAGE>
Schedule or Computation of Performance Quotations
Sterling Partners' Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year Five Years 05/15/91
--------- ---------- ---------------
P = $1,000 $1,000 $1,000
T = 24.762% 10.124% 13.113%
N = 1.00 years 5.00 years 5.47 years
ERV = $1,248 $1,620 $1,962
<PAGE>
Schedule or Computation of Performance Quotations
Sterling Partners' Short Term Fixed Income Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 02/10/92
--------- ---------------
P = $1,000 $1,000
T = 5.514% 5.178%
N = 1.00 years 4.73 years
ERV = $1,055 $1,269
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1)-1]/6/
Where a = dividends and interest paid during the period $117,315
b = expenses accrued during the period
(net of reimbursements) $10,426
c = the average daily number of shares outstanding
during the period 2,333,670
d = the maximum offering price per share on the
last day of the period $9.93
Yield = 5.60%
<PAGE>
Schedule or Computation of Performance Quotations
TS & W Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 07/17/92
-------- --------
P = $1,000 $1,000
T = 21.450% 12.006%
N = 1.00 years 4.29 years
ERV = $1,215 $1,627
<PAGE>
Schedule or Computation of Performance Quotations
T S & W Fixed Income Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 07/17/92
-------- --------
P = $1,000 $1,000
T = 4.403% 5.860%
N = 1.00 years 4.29 years
ERV = $1,044 $1,277
2. Yield (30 days ending October 31, 1996) Yield = 2[(a-b/cd)+1) -1/6/]
Where: a = dividends and interest paid during the period $334,629
b = expenses accrued during the period (net of
reimbursements) $42,195
c = the average daily number of shares outstanding
during the period 5,950,678
d = the maximum offering price per share on the last
day of the period $10.30
Yield = 5.79%
<PAGE>
Schedule or Computation of Performance Quotations
T S & W International Equity Portfolio
Exhibit 16
1. Average Annual Return (As of October 31, 1996)
P (1 + T)/N/ = ERV
WHERE: P = A hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at end of the period
Since Inception
One Year 12/19/92
--------- --------
P = $1,000 $1,000
T = 8.711% 10.940%
N = 1.00 years 3.87 years
ERV = $1,087 $1,495
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statements of Additional Information
constituting part of this Post-Effective Amendment No. 43 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
December 9, 1996, relating to the financial statements and financial highlights
appearing in the October 31, 1996 Annual Reports to Shareholders of the 30 funds
comprising UAM Funds, Inc., which appear in such Statements of Additional
Information and to the incorporation by reference of our reports into the
Prospectuses which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Financial Highlights,"
"Independent Accountants" and "Reports" in the Prospectuses and under the
heading "Financial Statements" in the Statements of Additional Information.
Price Waterhouse LLP
Boston, Massachusetts
December 31, 1996
<TABLE> <S> <C>
<PAGE>
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<NAME> UAM FUNDS, INC.
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<NAME> ACADIAN EMERGING MARKETS PROTFOLIO
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<ARTICLE> 6
<CIK> 0000842286
<NAME> UAM FUNDS, INC
<SERIES>
<NUMBER> 26
<NAME> ACADIAN INTERNATIONAL EQUITY PORTFOLIO
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000842286
<NAME> UAM FUNDS, INC.
<SERIES>
<NUMBER> 6
<NAME> C & B BALANCED PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 22,629
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<EXPENSES-NET> (229)
<NET-INVESTMENT-INCOME> 807
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<TABLE> <S> <C>
<PAGE>
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<SERIES>
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<NAME> DSI DISCIPLINED VALUE PORTFOLIO
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<S> <C>
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<TABLE> <S> <C>
<PAGE>
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<CIK> 0000842286
<NAME> UAM FUNDS, INC.
<SERIES>
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<NAME> DSI LIMITED MATURITY BOND PORTFOLIO
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000842286
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<NAME> DSI MONEY MARKET PORTFOLIO
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<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000842286
<NAME> UAM FUNDS, INC.
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<NUMBER> 11
<NAME> FMA SMALL COMPANY PORTFOLIO
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000842286
<NAME> UAM FUNDS, INC.
<SERIES>
<NUMBER> 27
<NAME> ICM EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1996
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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