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[LOGO OF UAM FUNDS APPEARS HERE]
The TS&W Portfolios
Institutional
Class Shares
P R O S P E C T U S
April 21, 1997
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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........................................................ 9
Other Investment Policies.................................................. 13
Investment Limitations..................................................... 19
Purchase of Shares......................................................... 20
Redemption of Shares....................................................... 23
Shareholder Services....................................................... 25
Valuation of Shares........................................................ 25
Performance Calculations................................................... 26
Dividends, Capital Gains Distributions and Taxes........................... 27
Investment Adviser......................................................... 28
Adviser's Historical Performance........................................... 30
Administrative Services.................................................... 35
Distributor................................................................ 35
Portfolio Transactions..................................................... 36
General Information........................................................ 36
UAM Funds -- Institutional Class Shares.................................... 38
</TABLE>
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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
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THE TS&W PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: THOMPSON, SIEGEL & WALMSLEY, INC.
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PROSPECTUS -- APRIL 21, 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
four diversified, no-load Portfolios of the Fund managed by Thompson, Siegel &
Walmsley, Inc.
TS&W BALANCED PORTFOLIO. The objective of the TS&W Balanced Portfolio is to
provide maximum long-term total return consistent with reasonable risk to
principal, by investing in a diversified portfolio of common stocks of estab-
lished companies and investment grade fixed income securities.
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 consistent with reasonable
risk to principal, by investing primarily in investment grade fixed income se-
curities 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 April 21, 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.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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FUND EXPENSES
The following table illustrates expenses and fees that a shareholder of the
Portfolios will 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
BALANCED EQUITY EQUITY INCOME
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>
<CAPTION>
INT'L FIXED
BALANCED EQUITY EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Investment Advisory Fees............. 0.65% 0.75% 1.00% 0.45%
Administrative Fees.................. 0.19% 0.17% 0.17% 0.19%
12b-1 Fees........................... NONE NONE NONE NONE
Distribution Costs................... NONE NONE NONE NONE
Other Expenses....................... 0.29% 0.11% 0.19% 0.15%
----- ----- ----- -----
Total Operating Expenses ............ 1.13%* 1.03%* 1.36%* 0.79%*
===== ===== ===== =====
</TABLE>
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* The annualized Total Operating Expenses includes the effect of expense off-
sets. If expense offsets were excluded, annualized Total Operating Expenses
of the International Equity Portfolio would be 1.37%. The annualized Total
Operating Expenses for the Equity and Fixed Income Portfolios would not dif-
fer. The Balanced Portfolio has not yet begun operations.
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 Equity, International Equity and Fixed Income Portfolios' operations dur-
ing the fiscal year ended October 31, 1996, except that Administrative Fees
are restated to reflect current fees. (See "ADMINISTRATIVE SERVICES" herein
and in the SAI.) The fees and expenses set forth above for the Balanced Port-
folio are estimated amounts for its first year of operations assuming average
net assets of $25 million.
1
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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>
Balanced Portfolio........................... $12 $36 * *
Equity Portfolio............................. $11 $33 $57 $126
International Equity Portfolio............... $14 $43 $75 $164
Fixed Income Portfolio....................... $ 8 $25 $44 $ 98
</TABLE>
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* As the Balanced Portfolio is not yet operational, the Fund has not pro-
jected 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
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 $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 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
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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, Fixed Income and International Equity Portfolios will be af-
fected 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 in-
terest rates: as interest rates decline, the market value of fixed income se-
curities tends to increase and vice versa; (2) The International Equity Port-
folio may invest a portion of its assets in derivatives including futures con-
tracts, options on futures contracts and options. (See "OTHER INVESTMENT POLI-
CIES."); (3) The Balanced and Fixed Income Portfolios 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 speculative by the major rating agencies. (See "INVESTMENT POLI-
CIES -- BALANCED PORTFOLIO AND FIXED INCOME PORTFOLIO."); (4) Each Portfolio
may invest in securities of foreign issuers, which are subject to certain
risks not typically associated with domestic issuers. Since the International
Equity Portfolio may invest in foreign issuers of developing countries, the
Portfolio may be subject to additional risks associated with investments in
developing countries. (See "OTHER INVESTMENT POLICIES."); (5) Although the In-
ternational 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 cap-
italization companies are more vulnerable to financial and other risks than
larger capitalization companies and the securities of such small capitaliza-
tion 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 re-
sult in additional costs and the realization of capital gains. (See "OTHER IN-
VESTMENT 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 IN-
VESTMENT 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. As of the
date of this Prospectus, the Balanced Portfolio had not commenced operations.
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>
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* 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>
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* 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>
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* 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
BALANCED PORTFOLIO. The objective of the Balanced 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 as-
sets in a diversified portfolio of common stocks of established companies and
investment grade fixed income securities. The proportion of the Portfolio's
assets invested in fixed income or common stocks will vary as market condi-
tions warrant. A typical asset mix for the Portfolio, however, is expected to
be 55% common stocks, 35% fixed income securities and 10% cash equivalents.
Cash equivalent investments will be maintained when deemed appropriate by the
Adviser. The Portfolio's total return will consist of both income and capital
return, the relative proportions of which will vary according to the Portfo-
lio's underlying investments.
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.
8
<PAGE>
INVESTMENT POLICIES
BALANCED PORTFOLIO. The 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 decisions. The Bal-
anced Portfolio seeks to achieve its objective by investing in a combination
of stocks, bonds, and other short-term cash equivalents. A typical asset mix
of the Portfolio is expected to be 55% equities, 35% fixed income securities
and 10% cash equivalents. However, depending upon market conditions, the mix
may vary, and cash equivalent investments will be maintained when deemed ap-
propriate by the Adviser. Under normal conditions, the range of exposure to
fixed income securities is expected to be 25% to 40% of the Portfolio, and the
range of exposure to equity securities is expected to be 40% 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 stocks.
The Fund intends to request permission from the Securities and Exchange Com-
mission ("SEC") to invest up to 15% of the total assets of the Balanced Port-
folio in the International Equity Portfolio. If the Fund's request is granted,
the Balanced Portfolio may invest in shares of the International Equity Port-
folio in addition to, or as an alternative to, investing in shares of foreign
based companies.
Equity and fixed income securities are selected using approaches identical
to those set forth below under "Investment Policies" for the Equity Portfolio
and the Fixed Income Portfolio.
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.
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
9
<PAGE>
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 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-convertible preferred stocks, and fixed income securities of governments,
government agencies, supranational agencies and companies when the Adviser be-
lieves 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 securi-
ties also may be held for temporary defensive purposes
10
<PAGE>
when the Adviser believes market conditions so warrant and for temporary in-
vestment. Similarly, the Portfolio may invest in cash equivalents for tempo-
rary defensive purposes and for liquidity. The Portfolio may invest in closed-
end investment companies holding foreign securities. The Portfolio may pur-
chase 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.
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
11
<PAGE>
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 securities 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 Adviser's judge-
ment, the retention of securities is warranted. In addition, the Adviser may
invest in 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 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
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
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<PAGE>
and within coupon areas are monitored, and the Portfolio will be structured to
take advantage of relative values within these areas. Marketability of indi-
vidual 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.)
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 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 SEC to deposit the daily
uninvested cash balances of the Fund's Portfolios, as well as cash for invest-
ment purposes, into one or more joint accounts and to invest the daily balance
of the joint accounts in the following short-term investments: fully collater-
alized 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 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.
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<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 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 value of the securities purchased will be
evaluated daily, 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 use of repurchase agreements involves certain
risks. For example, a default by the seller of the agreement may cause a Port-
folio to experience a loss or delay in the liquidation of the collateral se-
curing 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 managed through stringent secu-
rity selection criteria and careful monitoring procedures. The Fund has re-
ceived 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 ba-
sis. 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.")
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.
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<PAGE>
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
delivery or payment 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 Equity, International Equity and Fixed Income
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 Equity, International Equity and Fixed
Income Portfolios' historical portfolio turnover rates. It is expected that
the annual portfolio turnover rates for the equity and fixed income portions
of the Balanced Portfolio will be 35% and 50%, respectively.
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.
15
<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 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 affected favorably or unfavorably by changes in currency rates and
in exchange control regulations and may incur costs in connection with conver-
sions 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.
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<PAGE>
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 Portfolio will endeavor to achieve the most favorable execution
costs in portfolio transactions in foreign securities, commissions on many
foreign stock exchanges are generally higher than negotiated commissions on
U.S. exchanges.
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.
17
<PAGE>
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 generated by one fixed income instrument for the interest income gener-
ated by another fixed income instrument. The currency swaps in which this
Portfolio will engage will generally involve an agreement to pay interest
streams calculated by reference to interest income linked to a specified index
in one currency 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
18
<PAGE>
the Fund's Board of Directors, the Adviser determines the liquidity of such
investments by considering all relevant factors. Provided that a dealer or in-
stitutional trading market in such securities exists, these restricted securi-
ties are not treated as illiquid securities for purposes of a Portfolio's in-
vestment limitations. A Portfolio will invest no more than 10% of its net as-
sets in illiquid securities. The prices realized from the sales of these secu-
rities 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 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 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 (1) 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 (15% for
the Balanced Portfolio), or (2) 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, as amended, or the
rules and regulations or interpretations of the SEC thereunder;
(f) (1) 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 (33 1/3% for the Balanced Portfolio)
valued at the lower of market or cost, and (2) 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% (33 1/3% for the Balanced Portfolio) of its total assets at
fair market value.
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<PAGE>
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. All of the above investment limitations are fundamental for
the Equity, International Equity and Fixed Income Portfolios. With respect to
the Balanced Portfolio, only limitations (a), (b), (d), (e) and (f.1) are fun-
damental. A fundamental investment limitation may be changed only with the ap-
proval of the holders of a majority of the outstanding shares of that Portfo-
lio. A non-fundamental one may be changed by the Fund's Board of Directors
upon reasonable notice to investors. The Portfolios' investment policies de-
scribed 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.
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.
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 is $2,500. The minimum initial investment for IRA accounts is $500.
The minimum initial investment for spousal IRA accounts is $250. Certain ex-
ceptions 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.
20
<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 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 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___________________
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<PAGE>
. 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. 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 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);
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<PAGE>
. 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.
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.
23
<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 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.
24
<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 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 UAM Funds Service Center. Exchanges can only be made
with Portfolios that are qualified for sale in a shareholder's state of resi-
dence. 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 ex-
change 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 proc-
essed 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.
25
<PAGE>
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.
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 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 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.
26
<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. 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 Balanced and Equity Portfolios will normally distribute substantially
all of their net investment income (for tax purposes) to shareholders in quar-
terly dividends. The International Equity Portfolio will normally distribute
substantially all of its net investment income (for tax purposes) to share-
holders in an annual dividend. The Fixed Income Portfolio declares dividends
daily and will normally distribute substantially all of its net investment in-
come (for tax purposes) to shareholders in monthly dividends. If any net capi-
tal 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 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
27
<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
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 $4
billion in 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.
28
<PAGE>
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.
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 Balanced, Equity and Fixed Income Portfolios. G.D. Rothenberg and
Stuart R. Davies are primarily responsible for the day-to-day management of
the
29
<PAGE>
International Equity Portfolio and have been since its inception in December
of 1992. Prior to joining the Adviser in 1992, Mr. Davies served in the capac-
ities of Vice President, Portfolio Manager and Securities Analyst at Capito-
line Investment Services, Inc. Prior to joining the Adviser in 1992, Mr. Roth-
enberg was involved in international investment management at Scudder, Stevens
& Clark, Inc.
Under Investment Advisory Agreements with the Fund dated as of November 25,
1991, November 3, 1992 and April 21, 1997, 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 sub-
ject 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>
Balanced Portfolio..................................................... 0.65%
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, 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 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 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. The Fund also compensates Smith Barney for services it provides to cer-
tain defined contribution plan shareholders that are not otherwise provided by
UAMFSI.
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
30
<PAGE>
strategies as those of the Equity Portfolio. The performance data for the man-
aged accounts is net of all fees and expenses. 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 -- NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
THOMPSON, SIEGEL &
ONE YEAR PERIOD THROUGH: WALMSLEY, INC. S&P 500
- ------------------------ ------------------ --------
<S> <C> <C>
12/31/90.......................................... 0.80 % (3.30)%
12/31/91.......................................... 26.90 % 30.40 %
12/31/92.......................................... 8.50 % 7.60 %
12/31/93.......................................... 14.40 % 10.10 %
12/31/94.......................................... (0.70)% 1.30 %
12/31/95.......................................... 30.30 % 37.60 %
12/31/96.......................................... 21.90 % 23.00 %
Annualized through 12/31/96....................... 14.01 % 14.38 %
Cumulative through 12/31/96....................... 150.42 % 156.12 %
Seven-Year Mean (1/1/90-12/31/96)................. 14.59 % 15.24 %
Value of $1 invested during 7 years (12/31/89-
12/31/96)....................................... $2.50 $2.56
</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
December 31, 1989 had grown to $2.50 by December 31, 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
31
<PAGE>
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 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, poli-
cies and strategies as those of the Fixed Income Portfolio. The performance
data for the managed accounts is net of all fees and expenses. 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, 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 Fixed Income Portfolio or the return an investor might achieve by invest-
ing in the Fixed Income Portfolio.
THOMPSON, SIEGEL & WALMSLEY, INC. -- FIXED INCOME COMPOSITE
(PERCENTAGE RETURNS -- NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
THOMPSON, SIEGEL & GOVERNMENT/
ONE YEAR PERIOD THROUGH: WALMSLEY, INC. CORPORATE INDEX
- ------------------------ ------------------ ---------------
<S> <C> <C>
12/31/90................................... 8.90 % 8.30 %
12/31/91................................... 16.60 % 16.10 %
12/31/92................................... 8.30 % 7.60 %
12/31/93................................... 10.60 % 11.00 %
12/31/94................................... (3.40)% (3.50)%
12/31/95................................... 18.20 % 19.20 %
12/31/96................................... 3.10 % 2.90 %
Annualized through 12/31/96................ 8.68 % 8.56 %
Cumulative through 12/31/96................ 79.05 % 77.75 %
Seven-Year Mean (1/1/90-12/31/96).......... 8.90 % 8.80 %
Value of $1 invested during 7 years
(12/31/89-12/31/96)...................... $1.79 $1.78
</TABLE>
32
<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
December 31, 1989 had grown to $1.79 by December 31, 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.
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 performance data
for the managed accounts is net of all fees and expenses. The investment re-
turns of the Balanced Portfolio may differ from those of the separately man-
aged accounts because such separately managed accounts may have fees and ex-
penses that differ from those of the Balanced Portfolio. Further, the sepa-
rately managed accounts are not subject to investment limitations, diversifi-
cation 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 pre-
sented are not intended to predict or suggest the return to be experienced by
the Balanced Portfolio or the return an investor might achieve by investing in
the Balanced Portfolio.
33
<PAGE>
THOMPSON, SIEGEL & WALMSLEY, INC.--BALANCED COMPOSITE
(PERCENTAGE RETURNS--NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
S&P 500 INDEX/
LEHMAN BROTHERS
GOVERNMENT/
THOMPSON, SIEGEL & CORPORATE INDEX/
ONE YEAR PERIOD THROUGH: WALMSLEY, INC. CASH EQUIVALENTS
- ------------------------ ------------------ ----------------
<S> <C> <C>
12/31/90.................................. 4.70 % 2.10 %
12/31/91.................................. 20.60 % 22.80 %
12/31/92.................................. 7.60 % 7.20 %
12/31/93.................................. 11.90 % 9.70 %
12/31/94.................................. (1.50)% (0.10)%
12/31/95.................................. 23.00 % 27.60 %
12/31/96.................................. 13.40 % 13.90 %
Annualized through 12/31/96............... 11.10 % 11.49 %
Cumulative through 12/31/96............... 108.88 % 114.07 %
Seven-Year Mean (1/1/90-12/31/96)......... 11.39 % 11.89 %
Value of $1 invested during 7 years
(12/31/89-12/31/96)..................... $2.09 $2.14
</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
December 31, 1989 had grown to $2.09 by December 31, 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
numbers set forth above.
5. 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.
6. The Adviser's average annual management fee over the period shown was 0.57%
or 57 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.
34
<PAGE>
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.
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%
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 UAM, 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 re-
ceive 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
35
<PAGE>
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 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.
36
<PAGE>
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. They have non-cumulative
voting rights which means that the holders of more than 50% of the shares vot-
ing for the election of Directors can elect 100% of the Directors. A share-
holder 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.
37
<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 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
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee U.S. Government Portfolio
McKee Small Cap 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
SAMI Preferred Stock Income Portfolio
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced 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
38
<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 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.
<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
April 21, 1997
<PAGE>
PART B
UAM FUNDS
- -------------------------------------------------------------------------------
TS&W PORTFOLIOS
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- April 21, 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 April 21, 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................................................... 18
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 Balanced, TS&W Equity, TS&W International Equity and TS&W Fixed Income
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 15% 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: 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; and Presidents' Day, February 16, 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 (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 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
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, or
(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 (33 1/3% for the Balanced Portfolio)
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 (33 1/3% for the Balanced
Portfolio) 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 (15% for the Balanced
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 January 31, 1997, 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>
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; Deloitte & Touche LLP from 1985 to 1995,
formerly Senior Manager.
GORDON M. SHONE* Assistant Treasurer of the Fund; Vice President of Fund
73 Tremont Street Administration and Compliance of Chase Global Funds
Boston, MA 02108 Services Company; formerly Senior Audit Manager of Coopers
Age: 40 & Lybrand LLP from 1983 to 1996.
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: 42 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.
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 $5,100 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 January 31, 1997 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, 9.2% and The Kennedy Founda-
tion, 1700 Tower II, Corpus Christi, TX, 8.4%.
TS&W Equity Portfolio: Lewis Gale Clinic, Inc., PS Fund E, 1802 Braeburn
Dr., Salem, VA, 13.8% and Larco/Reinvest, c/o Central Fidelity Bank, P.O. Box
27602, Richmond, VA, 12.6%.
TS&W Fixed Income Portfolio: Lewis Gale Clinic, Inc., PS Fund E, 1802
Braeburn Dr., Salem, VA, 14%; Nationsbank of Virginia, NA, Trustee
for C.B. Fleet Defined Benefit Plan, Crestar Bank, 919 E. Main Street, Rich-
mond, VA, 7.9%* and Larco/Reinvest, c/o Central Fidelity Bank, P.O. Box 27602,
Richmond, VA, 7.1%.
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 Balanced Portfolio................................................ 0.65%
TS&W Equity Portfolio.................................................. 0.75%
TS&W International Equity Portfolio.................................... 1.00%
TS&W Fixed Income Portfolio............................................ 0.45%
</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 $541,000,
$180,000 and $243,000, and $602,000 and $931,000, 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 $2,888,000, 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. The basis of the fees paid to CGFSC for 1994 and 1995 and the fiscal
period to April 14, 1996 was as follows: the Fund paid a monthly fee for its
services which on an annualized basis equaled 0.20% of the first $200 million in
combined assets; plus 0.12% of the next $800 million in combined assets; plus
0.08% on assets over $1 billion but less than $3 billion; plus 0.06% on assets
over $3 billion. The fees were allocated among the Portfolios on the basis of
their relative assets and were subject to a designated minimum fee schedule per
Portfolio, which ranged from $2,000 per month upon inception of a Portfolio to
$70,000 annually after two years.
For the fiscal year ended October 31, 1994, the TS&W Equity Portfolio, the
TS&W Fixed Income Portfolio and the TS&W International Equity Portfolio paid
administrative fees of approximately $65,000, $65,000 and $58,000, respective-
ly. 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, respective-
ly. 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, respec-
tively. 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 Port-
folio paid $80,008 to CGFSC and $12,895 to UAMFSI; and TS&W International Eq-
uity Portfolio paid $106,703 to CGFSC and $32,748 to UAMFSI. The services pro-
vided by the Administrator and the basis of the fees payable to the Adminis-
trator are described in the Portfolios' Prospectus.
17
<PAGE>
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 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 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>
The Balanced Portfolio was not operational as of October 31, 1996.
Accordingly, no total return figure is available.
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).
18
<PAGE>
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%.
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
daily pricing is available. Comparisons of performance assume rein-
vestment of dividends.
19
<PAGE>
(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 per-
formance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400 secu-
rities 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.
20
<PAGE>
(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
system exclusive of those traded on an exchange; 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond In-
dex and 55% Standard & Poor's 500 Stock Index, 35% Lehman Brothers
Government/Corporate Index and 10% cash equivalents.
(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.
21
<PAGE>
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 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
22
<PAGE>
Option (income dividends in cash and capital gains distributions in additional
shares at net asset value) or the Cash Option (both income dividends and capi-
tal 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 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 of Price Waterhouse LLP,
independent accountants on the Financial Statements of the TS&W Portfolios,
also appearing herein, 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-1
<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-2
<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-3
<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-4
<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-5
<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-6
<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-7
<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-8
<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-9
<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-10
<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-11
<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-12
<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-13
<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-14
<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-15
<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-16
<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-17
<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-18
<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-19
<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-20
<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-21
<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-22
<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-23
<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-24
<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-25
<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-26
<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-27
<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 opera-
tions and of changes in net assets and the financial highlights present fair-
ly, in all material respects, the financial position of TS&W Equity Portfolio,
TS&W Fixed Income Portfolio, and TS&W International Equity Portfolio (the
"Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 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 fi-
nancial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted 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 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)
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-28
<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
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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.
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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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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
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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
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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
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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.
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