UAM FUNDS INC, 497, 1998-02-02

UAM FUNDS INC
497, 1998-02-02

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PART B

UAM FUNDS, INC.

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ACADIAN PORTFOLIOS

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STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the Acadian Portfolios dated January 22, 1998. To obtain a Prospectus, please
call the UAM Funds Service Center: 1-800-638-7983

TABLE OF CONTENTS
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INVESTMENT OBJECTIVES AND POLICIES.................. 2

PURCHASE AND REDEMPTION OF SHARES................... 16

VALUATION OF SHARES................................. 18

SHAREHOLDER SERVICES................................ 18

INVESTMENT LIMITATIONS.............................. 20

MANAGEMENT OF THE FUND.............................. 22

INVESTMENT ADVISER.................................. 26

PORTFOLIO TRANSACTIONS.............................. 28

ADMINISTRATIVE SERVICES............................. 29

CUSTODIAN........................................... 32

INDEPENDENT ACCOUNTANTS............................. 32

DISTRIBUTOR......................................... 32

PERFORMANCE CALCULATIONS............................ 32

GENERAL INFORMATION................................. 34

FINANCIAL STATEMENTS................................ 36

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS.. A-1

APPENDIX B - COMPARISONS............................ B-1
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INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and
policies of the Acadian Emerging Markets and Acadian International Equity
Portfolios (the "Acadian Portfolios") as set forth in the Acadian
Prospectus.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "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). A Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of the collateral for the loans) at fair market value would
be committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed in the Prospectus.

SHORT-TERM INVESTMENTS

In order to earn a return on uninvested assets, meet anticipated
redemptions, or for temporary defensive purposes, each Portfolio may invest a
portion of its assets in the short-term investments described below:

(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Time deposits maturing in more than seven days will not be
purchased by a Portfolio, and time

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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 commercial banks or savings and loan associations collateralized by funds
deposited 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 bankers'
acceptance is a time draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).

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 purchased
by each Portfolio;

(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, determined by the Adviser to be of comparable quality;

(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 Administration, Federal Farm Credit Banks, Federal Intermediate Credit
Bank, Federal National Mortgage Association, Federal Financing Bank, the
Tennessee Valley Authority, and others; and

(6) Repurchase agreements collateralized by securities listed above.

HEDGING STRATEGIES

Each Portfolio may engage in various portfolio strategies to hedge
against adverse movements in the equity, debt and currency markets. Each
Portfolio has authority to write

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(i.e., sell) covered put and call options on its portfolio securities, purchase
put and call options on securities and engage in transactions in stock index
options and stock index futures, and related options on such futures. Each of
these portfolio strategies is described below. Although certain risks are
involved in options and futures transactions, the Adviser believes that, because
the Portfolios will engage in options and futures transactions only for hedging
purposes, the options and futures portfolio strategies of a Portfolio will not
subject it to the risks frequently associated with the speculative use of
options and futures transactions. While each Portfolio's use of hedging
strategies is intended to reduce the volatility of the net asset value of
Portfolio shares, the Portfolios' net asset value will fluctuate. There can be
no assurance that a Portfolio's hedging transactions will be effective. Also,
the Portfolios may not necessarily be engaging in hedging activities when
movements in any particular equity, debt or currency market occur.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The U.S. dollar value of the assets of the Portfolios may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Portfolios may incur costs in connection
with conversions between various currencies. The Portfolios will conduct their
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and
no commissions are charged at any stage for such trades.

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Portfolio will be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received.

Additionally, when either of the Portfolios anticipates that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, it may enter into a forward contract for a fixed amount
of dollars, to sell the amount of foreign currency approximating the value of
some or all of such Portfolio's securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. From time to time, each
Portfolio may enter into forward contracts to protect the value of portfolio
securities and enhance Portfolio performance. The Portfolios will not enter
into such forward contracts or maintain a net exposure to such contracts where
the consummation of the contracts would obligate such Portfolio to deliver an
amount of foreign currency in excess of the value of such Portfolio securities
or other assets denominated in that currency.

Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. Except when a Portfolio enters into a forward
contract for the purchase or sale of a security denominated in a foreign
currency, which requires no segregation, a forward contract which obligates the
Portfolio to buy or sell currency will generally require the Fund's Custodian to
hold an amount of that currency or liquid securities denominated in that
currency equal to the Portfolio's obligations, or to segregate liquid high grade
assets equal to the amount of the Portfolio's obligation. If the value of the
segregated assets declines, additional liquid assets will be segregated on a
daily basis so that the value of the segregated assets will be equal to the
amount of such Portfolio's commitments with respect to such contracts.

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The Portfolios generally will not enter into a forward contract with a
term of greater than one year. At the maturity of a forward contract, a
Portfolio may either sell the portfolio security and make delivery of the
foreign currency, or it may retain the security and terminate its contractual
obligation to deliver the foreign currency by purchasing an "offsetting"
contract with the same currency trader obligating it to purchase, on the same
maturity date, the same amount of the foreign currency.

It is impossible to forecast with absolute precision the market value
of a particular portfolio security at the expiration of the contract.
Accordingly, it may be necessary for a Portfolio to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency that
such Portfolio is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency.

If a Portfolio retains the portfolio security and engages in an
offsetting transaction, such Portfolio will incur a gain or loss (as described
below) to the extent that there has been movement in forward contract prices.
Should forward prices decline during the period between a Portfolio entering
into a forward contract for the sale of a foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency,
such Portfolio will realize a gain to the extent that the price of the currency
it has agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, such Portfolio would suffer a loss to
the extent that the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.

Each of the Portfolios' dealings in forward foreign currency exchange
contracts will be limited to the transactions described above. Of course, the
Portfolios are not required to enter into such transactions with regard to their
foreign currency-denominated securities. It also should be realized that this
method of protecting the value of portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which one can achieve
at some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.

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FUTURES CONTRACTS

Each Portfolio may enter into futures contracts for the purposes of
hedging, remaining fully invested and reducing transaction costs. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government
Agency.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
("buying" a contract which has previously been "sold" or "selling" a contract
previously "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in
cash or acceptable securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure 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. Brokers 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, changes
in the contract value may reduce the required margin, resulting in a repayment
of excess margin to the contract holder. Variation margin payments are made to
and from the futures broker for as long as the contract remains open. The
Portfolios expect to earn interest income on their margin deposits.

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use futures contracts with the expectation of realizing profits from a
fluctuation in interest rates. The Portfolio intends to use futures contracts
only for hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of each Portfolio. Each Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed," that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control a Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a Portfolio will incur commission expenses in both
opening and closing out future positions, these costs are lower than transaction
costs incurred in the purchase and sale of the underlying securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

The Portfolios will not enter into futures contract transactions to
the extent that, immediately thereafter, the sum of its initial margin deposits
on open contracts exceeds 5% of the market value of its total assets. In
addition, a Portfolio will not enter into futures contracts to the extent that
its outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

The Portfolios will minimize the risk that they will be unable to
close out a futures position by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may
not be possible to close a futures position. In the event of adverse price
movements, each Portfolio would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if a Portfolio
has insufficient cash, it may have to sell securities to meet daily

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margin requirements at a time when it may be disadvantageous to do so. In
addition, a Portfolio may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close futures positions
also could have an adverse impact on a Portfolio's ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can
be substantial 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the Portfolios are engaged in only for hedging purposes, the
Adviser does not believe that a Portfolio is subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the
decline.

Utilization of futures transactions by a Portfolio does involve the
risk of imperfect or no correlation where the securities underlying the futures
contracts have different maturities than the Portfolio securities being hedged.
It is also possible that a Portfolio could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss of margin deposits in the event of bankruptcy of a broker with whom
a Portfolio has an open position in a futures contract or related option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and,
therefore, does not limit potential losses because the limit may prevent the
liquidation of unfavorable 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

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positions and subjecting some futures traders to substantial losses.

OPTIONS

The Portfolios may purchase and sell put and call options on futures
contracts for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract or securities.

WRITING COVERED OPTIONS

The principal reason for writing call options is to attempt to
realize, through the receipt of premiums, a greater return than would be
realized on the securities alone. By writing covered call options, each
Portfolio gives up the opportunity, while the option is in effect, to profit
from any price increase in the underlying security above the option exercise
price. In addition, each Portfolio's ability to sell the underlying security
will be limited while the option is in effect unless the Portfolio effects a
closing purchase transaction. A closing purchase transaction cancels out the
Portfolio's position as the writer of an option by means of an offsetting
purchase of an identical option prior to the expiration of the option it has
written. Covered call options serve as a partial hedge against the price of the
underlying security declining.

Each Portfolio writes only covered put options, which means that so
long as a Portfolio is obligated as the writer of the option it will, through
its custodian, have deposited and maintained cash securities denominated in U.S.
dollars or non-U.S. currencies with a securities depository with a value equal
to or greater than the exercise price of the underlying securities. By writing
a put, a Portfolio will be obligated to purchase the underlying security at a
price that may be higher than the market value of that security at the time of
exercise for as long as the option is outstanding. Each Portfolio may engage in
closing transactions in order to terminate put options that it has written.

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PURCHASING OPTIONS

The amount of any appreciation in the value of the underlying security
will be partially offset by the amount of the premium paid for the put option
and any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and profit or loss from the sale will depend
on whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out a Portfolio's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. In certain circumstances, a Portfolio may purchase call options
on securities held in its investment portfolio on which it has written call
options or on securities which it intends to purchase.

OPTIONS ON FOREIGN CURRENCIES

The Portfolios may purchase and write options on foreign currencies
for hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminution in the value of portfolio securities, a Portfolio may purchase
put options on the foreign currency. If the value of the currency does decline,
the Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to a Portfolio deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, a Portfolio could sustain losses on transaction in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.

Each Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, where a

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Portfolio anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates it could,
instead of purchasing a put option, write a call option on the relevant
currency. If the anticipated decline occurs, the option will most likely not be
exercised, and the diminution in value of portfolio securities will be offset by
the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, a Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.

Each Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by a Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by the Custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if a
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash or liquid debt securities in a segregated account with the
Custodian.

Each Portfolio also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A call option on a
foreign currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in the U.S. dollar value of a
security which a Portfolio owns or has the right to acquire and which is
denominated in the currency underlying the option due to an adverse change in
the exchange rate. In such circumstances, a Portfolio collateralizes the option
by maintaining in a

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segregated account with the Custodian, cash or liquid securities in an amount
not less than the value of the underlying foreign currency in U.S. dollars
marked to market daily.

RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES

Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to the regulation of the Commission. Similarly, options on currencies
may be traded over-the-counter. In an over-the-counter trading environment,
many of the protections afforded to exchange participants will not be available.
For example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting a Portfolio to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event of
adverse market movements.

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traded options of foreign currencies involve certain risks not presented by the
over-the- counter market. For example, exercise and settlement of such options
must be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises, or would
result in undue burdens on the OCC or its clearing member, impose special
procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS

Except for transactions the Portfolios have identified as hedging
transactions, each Portfolio is required for federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
forward currency and regulated futures contracts as of the end of each taxable
year as well as those actually realized during the year. In most cases, any
such gain or loss recognized with respect to a regulated futures contract is
considered to be 60% long-term capital gain or loss and 40% short-term capital
gain or loss without regard to the holding period of the contract. Realized
gain or loss attributable to a foreign currency forward contract is treated as
100% ordinary income. Furthermore, foreign currency futures contracts which are
intended to hedge against a change in the value of securities held by a
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.

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must be derived from certain qualifying income, i.e., dividends, interest,
income derived from loans of securities and gains from the sale or other
disposition of stock, securities or foreign currencies, or other related income,
including gains from options, futures and forward contracts, derived with
respect to its business investing in stock, securities or currencies. Any net
gain realized from the closing out of futures contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement.

Each Portfolio will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's taxable year) on
futures transactions. Such distribution will be combined with distributions of
capital gains realized on a Portfolio's other investments, and shareholders will
be advised on the nature of the payment.

SWAP CONTRACTS

Each Portfolio may enter into Swap Contracts. A swap is an agreement
to exchange the return generated by one instrument for the return generated by
another instrument. The payment streams are calculated by reference to a
specified index and agreed upon notional amount. The term "specified index"
includes fixed interest rates, total return on interest rate indices, fixed
income indices, and stock indices (as well as amounts derived from arithmetic
operations on these indices). For example, a Portfolio may agree to swap the
return generated by a fixed-income index for the return generated by a second
fixed-income index.

The Portfolios will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with a Portfolio receiving or paying, as the
case may be, only the net amount of the two payments. A Portfolio's obligations
under a swap agreement will be accrued daily (offset against any amounts owing
to the Portfolio) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of cash or liquid securities to avoid any potential leveraging of the
Portfolio. Since swaps will be entered into for good faith hedging purposes,
the Adviser and the Fund believe such obligations do not constitute "senior
securities" under the Investment Company Act of 1940 and, accordingly, will not
treat them as being subject to its borrowing restrictions.

Swaps do not involve the delivery of securities, other underlying
assets, or principal. Accordingly, the risk of loss with respect to swaps is
limited to the net amount of payments

-15-
<PAGE>

that a Portfolio is contractually obligated to make. If the other party to a
swap defaults, a Portfolio's risk of loss consists of the net amount of interest
payments that a Portfolio is contractually entitled to receive. If there is a
default by the counterparty, the Portfolios may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.

The use of swaps may involve investment techniques and risks different
from those associated with other portfolio transactions. If the Adviser is
incorrect in its forecast of market values, interest rates and other applicable
factors, the investment performance of the Portfolio would diminish compared to
what it would have been if this investment technique was never used.

PORTFOLIO TURNOVER

The portfolio turnover rate described in the Prospectus is calculated
by dividing the lesser of purchases or sales of portfolio securities for the
year by the monthly average of the value of the portfolio securities. The
calculation excludes all securities, including options, whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares. See "Financial Highlights" in
the Prospectus for the historical portfolio turnover rates with respect to the
Emerging Markets and International Equity Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Shares of each Portfolio may be purchased without a sales commission
at the net asset value per share next determined after an order is received in
proper form by the Fund, and payment is received by the Fund's Custodian. The
minimum initial investment required for each Portfolio is $100,000 with certain
exceptions as may be determined from time to time by the officers of the Fund.
The minimum for subsequent investments is $1,000. An order received in proper
form prior to the close of regular trading on the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern Time) will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the close of the Exchange will be executed at the price computed on the
next day the Exchange is open after proper receipt. The Exchange will be closed
on the following days:

-16-
<PAGE>

Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving Day; Christmas Day; New Year's Day and Dr. Martin Luther King, Jr.
Day.

Each Portfolio reserves the right in its sole discretion (1) to
suspend the offering of its shares, (2) to reject purchase orders when in the
judgment of management such rejection is in the best interests of the Fund, and
(3) to reduce or waive the minimum for initial and subsequent investment for
certain fiduciary accounts such as employee benefit plans or under circumstances
where certain economies can be achieved in sales of a Portfolio's shares.

Each Portfolio may suspend redemption privileges or postpone the date
of payment (1) during any period that either the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any 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 Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Portfolio. If redemptions
are paid in investment securities, such securities will be valued as set forth
in the Prospectus under "Valuation of Shares," and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.

A one percent redemption fee is charged on shares held less than 90
days. No other 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.

-17-
<PAGE>

shareowner(s) or the registered address, or (2) share transfer requests. The
purpose of signature guarantees is to verify the identity of the party who has
authorized a redemption.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institution
is available from CGFSC. Broker-dealers guaranteeing signatures must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program.

The signature guarantee must appear either: (1) on the written request
for redemption; (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed; or (3) on all
stock certificates tendered for redemption and, if shares held by the Fund are
also being redeemed, on the letter or stock power.

VALUATION OF SHARES

Equity securities listed on a securities exchange for which market
quotations 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
securities not traded on the valuation date for which market quotations are
readily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is based
upon the bid price of the foreign currency against U.S. dollars quoted by any
major bank or by a broker.

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, when the
Board of Directors determines that it reflects fair value.

The value of other assets and securities for which no quotations are
readily available (including restricted

-18-
<PAGE>

securities) is determined in good faith at fair value using methods determined
by the Fund's Board of Directors.

SHAREHOLDER SERVICES

The following supplements the information set forth under "Shareholder
Services" in the Prospectus.

EXCHANGE PRIVILEGE

Institutional Class Shares of each Acadian Portfolio may be exchanged
for Institutional Class Shares of the other Acadian Portfolio. In addition,
Institutional Class Shares of each Acadian Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in the UAM Funds which
is comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of
the UAM Funds -- Institutional Class Shares at the end of the Prospectus.)
Exchange requests should be made by calling the Fund (1-800-638-7983) or by
writing to UAM Funds, UAM Funds Service Center, c/o Chase Global Funds Services
Company, P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only
available with respect to Portfolios that are qualified for sale in the
shareholder's state of residence.

Any such exchange will be based on the respective net asset values of
the shares involved. There is no sales commission or charge of any kind.
Before making an exchange into a Portfolio, a shareholder should read its
Prospectus and consider the investment objectives of the Portfolio to be
purchased. You may obtain a Prospectus for the Portfolio(s) you are interested
in by calling the UAM Funds Service Center at 1-800-638-7983.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time) will
be processed as of the close of business on the same day. Requests received
after the close of regular trading on the Exchange will be processed on the next
business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency and to other
restrictions established by the Fund's Board of Directors to assure that such
exchanges do not disadvantage the Fund and its shareholders.

For federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or

-19-
<PAGE>

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, therefore, that a capital gain or loss would be realized on
an exchange between Portfolios. You may want to consult your tax adviser for
further information in this regard. The exchange privilege may be modified or
terminated at any time.

TRANSFER OF SHARES

Shareholders may transfer shares to another person by making a written
request to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered owners
and all stock certificates, if any, which are subject to the transfer. The
signature on the letter of request, the stock certificate or any stock power
must be guaranteed in the same manner as described under "Purchase and
Redemption of Shares." As in the case of redemptions, the written request must
be received in good order before any transfer can be made.

INVESTMENT LIMITATIONS

The following limitations supplement those set forth in the
Prospectus. A Portfolio's fundamental investment limitations cannot be changed
without approval by a "majority of the outstanding shares" (as defined in the
1940 Act) of that Portfolio. Except for the numbered investment limitations
noted as fundamental below, however, the limitations described below are not
fundamental, and may be changed without the consent of shareholders. Whenever
an investment limitation sets forth a percentage limitation on investment or
utilization of assets, such limitation shall be determined immediately after and
as a result of the Portfolio's acquisition of such security or other asset.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered when determining
whether the investment complies with the Portfolio's investment limitations.

As a matter of fundamental policy, each Portfolio will not:

(1) invest in physical commodities or contracts on physical commodities;

(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;

-20-
<PAGE>

(3) make loans except (i) by purchasing debt securities in accordance with
its investment objectives and policies, or entering into repurchase
agreements, subject to the limitation described in (f) below and (ii)
by lending its portfolio securities to banks, brokers, dealers and
other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;

(4) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer (this restriction
is not applicable to the Acadian Emerging Markets Portfolio);

(5) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in securities of any single issuer
(other than obligations issued or guaranteed as to principal and
interest by the government of the U.S. or any agency or
instrumentality thereof) (this restriction is not applicable to the
Acadian Emerging Markets Portfolio);

(6) borrow money, except (i) from banks and as a temporary measure for
extraordinary or emergency purposes or (ii) except in connection with
reverse repurchase agreements provided that (i) and (ii) in
combination do not exceed 33/1//\\3\\% of the Portfolio's total assets
(including the amount borrowed) less liabilities (exclusive of
borrowings);

(7) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of a
Portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or instruments
issued by U.S. banks when a Portfolio adopts a temporary defensive
position;

(8) underwrite the securities of other issuer; and

(9) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii)
entering into options, futures or repurchase transactions.

As a matter of non-fundamental policy, each Portfolio will not:

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<PAGE>

(a) invest in stock or bond futures and/or options on futures unless (i)
not more than 5% of the Portfolio's assets are required as deposit to
secure obligations under such futures and/or options on futures
contracts provided, however, that in the case of an option that is in-
the-money at the time of purchase, the in-the-money amount may be
excluded in computing such 5% and (ii) not more than 20% of the
Portfolio's assets are invested in stock or bond futures and options;

(b) purchase on margin or sell short except as specified in (a) above;

(d) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than 1/2
of 1% of such securities together own more than 5% of such securities;

(e) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;

(f) invest more than an aggregate of 15% of the assets of the Portfolio,
determined at the time of investment, in securities subject to legal
or contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;

(g) invest for the purpose of exercising control over management of any
company;

(h) (with respect to the Acadian Emerging Markets Portfolio) purchase the
securities of any issuer (other than obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities) if, as a
result, with respect to 50% of its total assets, more than 5% of the
value of its total assets would be invested in the securities of any
single issuer, or it would hold more than 10% of the outstanding
voting securities of such issuer, or with respect to the remaining 50%
of its total assets, more than 25% of the value of its total assets
would be invested in the securities of any single issuer; and

-22-
<PAGE>

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

The Officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Directors. The Directors set broad policies
for the Fund and elect its Officers. The following is a list of the Directors
and Officers of the Fund, their addresses and dates of birth, and a brief
statement of their present positions and principal occupations during the past
five years.

<TABLE>
<C> <S>
John T. Bennett, Jr. Director of the Fund; President of
College Road-RFD 3 Squam Investment Management Company,
Meredith, NH 03253 Inc. and Great Island Investment
1/26/29 Company, Inc.; President of Bennett
Management Company from 1988 to
1993.

Nancy J. Dunn Director of the Fund; Vice President
10 Garden Street For Finance and Administration and
Cambridge, MA 02138 Treasurer of Radcliffe College since
8/14/51 1991.

Philip D. English Director of the Fund; President and
16 West Madison Street Chief Executive Officer of
Baltimore, MD 21201 Broventure Company, Inc.; Chairman
8/5/48 of the Board of Chektec Corporation
and Cyber Scientific, Inc.

William A. Humenuk Director of the Fund; Partner in the
4000 Bell Atlantic Tower Philadelphia office of the law firm
1717 Arch Street Dechert Price & Rhoads; Director,
Philadelphia, PA 19103 Hofler Corp.
4/21/42

Norton H. Reamer* Director, President and Chairman of
One International Place the Fund; President, Chief Executive
Boston, MA 02110 Officer and a Director of United
3/21/35 Asset Management Corporation;
Director, Partner or Trustee of each
of the Investment Companies of the
Eaton Vance Group of Mutual Funds.

Charles H. Salisbury, Director of the Fund; Executive Vice
Jr.* President of United Asset Management
One International Place Corporation; formerly an executive
Boston, MA 02110 officer and Director of T. Rowe
8/24/40 Price and President and Chief
Investment Officer of T. Rowe Price
Trust Company.
</TABLE>

-23-
<PAGE>

<TABLE>
<S> <C>
Peter M. Whitman, Jr.* Director of the Fund; President and
One Financial Center Chief Investment Officer of Dewey
Boston, MA 02111 Square Investors Corporation since
7/1/43 1988; Director and Chief Executive
Officer of H.T. Investors, Inc.,
formerly a subsidiary of Dewey
Square.

William H. Park Vice President of the Fund;
One International Place Executive Vice President and Chief
Boston, MA 02110 Financial Officer of United Asset
9/19/47 Management Corporation.

Gary L. French Treasurer of the Fund; President of
211 Congress Street UAM Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President
7/4/51 of Operations, Development and
Control of Fidelity Investments in
1995; Treasurer of the Fidelity
Group of Mutual Funds from 1991 to
1995.

Robert R. Flaherty Assistant Treasurer of the Fund;
211 Congress Street Vice President of UAM Fund Services,
Boston, MA 02110 Inc., former Manager of Fund
9/18/63 Administration and Compliance of
Chase Global Fund Services Company
from 1995 to 1996; Senior Manager of
Deloitte & Touche LLP from 1985 to
1995.

Gordon M. Shone Assistant Treasurer of the Fund;
73 Tremont Street Vice President of Fund
Boston, MA 02108 Administration and Compliance of
7/30/56 Chase Global Funds Services Company;
formerly Senior Audit Manager of
Coopers & Lybrand LLP from 1983 to
1993.

Michael DeFao Secretary of the Fund; Vice
211 Congress Street President and General Counsel of UAM
Boston, MA 02110 Fund Services, Inc. and UAM Fund
2/28/68 Distributors, Inc.; Associate
Attorney of Ropes & Gray (a law
firm) from 1993 to 1995.

Karl O. Hartmann Assistant Secretary of the Fund;
73 Tremont Street Senior Vice President and General
Boston, MA 02108 Counsel of Chase Global Funds
3/7/55 Services Company.
</TABLE>

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<PAGE>

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued as Annual from
Compensation Part of Benefits Registrant
Name of Person, from Fund Upon and Fund
Position Registrant Expenses Retirement Complex
- -------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C>
John T. Bennett, $26,791 0 0 $32,750
Jr.
Director...........
Nancy J. Dunn $ 6,774 0 0 $ 8,300
Director...........
Philip D. English $26,791 0 0 $32,750
Director...........
William A. Humenuk $26,791 0 0 $32,750
Director...........
</TABLE>

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<PAGE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record 5% or more of the shares of a Portfolio:

Acadian Emerging Markets Portfolio: UNISYS, Attn: Gary Biscoll,
Township Line & Union Meeting Road, P.O. Box 500, Blue Bell, PA, 60.4%; RJR
Nabisco Inc., Defined Benefit Master Trust, 301 North Main Street, Winston
Salem, NC, 10.2% and Charles Schwab & Co. Inc., FBO Customers-Reinvest Account,
Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA, 9.3%*.

Acadian International Equity Portfolio: Bankers Trust Company,
Trustee, FBO Premark International Master Pension Trust, 34 Exchange Pl 4th
Floor, Jersey City, NJ, 69.1%*; Bankers Trust Company, Trustee, Tupperware Corp.
RSP, 34 Exchange Place MS 3048, Jersey City, NJ, 15.4% and Bankers Trust
Company, Trustee, FBO Tupperware Corp. Base Retirement Trust, 34 Exchange Place,
4th Floor, Jersey City, NJ, 5.5%*.

The persons or organizations listed above as 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

Acadian Asset Management, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.

Accordingly, after acquisition by UAM, UAM Affiliated Firms continue
to operate under their own firm name, with their

-26-
<PAGE>

own leadership and individual investment philosophy and approach. Each UAM
Affiliated Firm manages its own business independently on a day-to-day basis.
Investment strategies employed and securities selected by UAM Affiliated Firms
are separately chosen by each of them.

SERVICES PERFORMED BY ADVISER

Pursuant to an Investment Advisory Agreement ("Agreement") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreement, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreement, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error of judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services under the Agreement.

Unless sooner terminated, the Agreement shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolios. The Agreement
may be terminated at any time by a Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of a Portfolio on 60
days written notice to the Adviser. The Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days written
notice to the Fund. The Agreement will automatically and immediately terminate
in the event of its assignment.

PHILOSOPHY AND STYLE

The Adviser's investment philosophy follows a rigorous, proven
approach which it calls Enhanced Value Investing. The Adviser believes that
over the long term, empirical evidence

-27-
<PAGE>

shows that value investing results in superior returns. The Adviser enhances the
efficacy of time-proven fundamental value measures by incorporating a number of
growth-related factors, such as price momentum and trends in analysts' earnings
estimates, to target undervalued companies that also have strong prospects for
future outperformance. The Adviser's approach is implemented via a highly
disciplined and structured process, which utilizes proprietary sophisticated
technology and a multi-factor model for investment decision-making. The Adviser
maintains 25 years of proprietary data on over 16,000 securities and 40
countries. From over a decade of detailed statistical analysis of this data, the
Adviser has isolated the investment factors it believes are most likely to lead
to superior investment returns. In the Adviser's unique process, these factors
are weighted and combined on a market-by-market basis to identify the most
attractive securities in each market.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included USAir, Inc., E.I. DuPont
de Nemours Co., Inc., Fluor Corporation, RJR Nabisco and SEI Investment
Management.

In compiling this client list, the Adviser used objective criteria
such as account size, geographic location and client classification. The
Adviser did not use any performance based criteria. It is not known whether
these clients approve or disapprove of the Adviser or the advisory services
provided.

ADVISORY FEES

As compensation for services rendered by the Adviser under the
Agreement, the Portfolios pay the Adviser an annual fee, in monthly
installments, calculated by applying the following annual percentage rates to
each of the Portfolio's average daily net assets for the month:

Rate

Acadian Emerging Markets Portfolio............. 1.00%

Acadian International Equity Portfolio......... 0.75%

for the first $50 million in average daily net assets, 0.65% for the next $50
million of average daily net assets, 0.50% for the next $100 million of average
daily net assets and 0.40% of the average daily net assets in excess of $200
million.

For the fiscal year ended October 31, 1995, the Acadian Emerging
Markets Portfolio and Acadian International

-28-
<PAGE>

Equity Portfolio paid advisory fees of approximately $112,000 and $0,
respectively. During this period, the Adviser voluntarily waived advisory fees
of approximately $74,000 for the Acadian Emerging Markets Portfolio and $18,000
for the Acadian International Equity Portfolio. For the fiscal year ended
October 31, 1996, the Acadian Emerging Markets and International Equity
Portfolios paid advisory fees of $551,585 and $0, respectively. During the same
period, the Adviser voluntarily waived advisory fees of $0 and $90,328 for the
Emerging Markets and International Equity Portfolios, respectively. For the
Fiscal Year ended October 31, 1997, the Acadian Emerging Markets Portfolio and
the Acadian International Equity Portfolio paid advisory fees of approximately
$862,391 and $2,162, respectively. During this period, the Adviser voluntarily
waived fees of approximately $143,747 for the International Equity Portfolio.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, the Portfolios may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio 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, 1995, 1996 and 1997, the Acadian Emerging Markets
Portfolio paid brokerage commissions of approximately $151,912, $181,022 and
$184,776, respectively; and the Acadian International Equity Portfolio paid
brokerage commissions of approximately $870, $10,789 and $12,521, respectively.

Some securities considered for investment by the 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 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.

-29-
<PAGE>

ADMINISTRATIVE SERVICES

The Board of Directors of the Fund approved a Fund Administration
Agreement, effective April 15, 1996, ("Fund Administration Agreement") between
UAM Fund Services, Inc., a wholly owned subsidiary of UAM, and the Fund.
Pursuant to the terms of the Fund Administration Agreement, UAMFSI manages,
administers and conducts the general business activities of the Fund other than
those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Fund Administration Agreement.

UAMFSI has subcontracted some of these services to Chase Global Funds
Services Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, pursuant
to a Mutual Fund Service Agreement between UAMFSI and CGFSC (collectively, with
the Fund Administration Agreement between UAMFSI and the Fund, the
"Agreements").

Pursuant to the terms of the Agreements, each Portfolio pays UAMFSI a
two part monthly fee: a Portfolio-specific fee which is retained by UAMFSI and
a sub-administration fee which UAMFSI in turn pays to CGFSC. The following
portfolio-specific fees are calculated from the aggregate net assets of each
Portfolio:
<TABLE>
<CAPTION>
Annual Rate
<S> <C>
Emerging Markets Portfolio ............ 0.06%
International Equity Portfolio ........ 0.06%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

0.19 of 1% of the first $200 million of combined Fund net assets;

0.11 of 1% of the next $800 million of combined Fund net assets;

0.07 of 1% of combined Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined Fund net assets in excess of $3 billion.

Fees are allocated among the Portfolios on the basis of their relative
assets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years.
If a separate

-30-
<PAGE>

class of shares is added to a Portfolio, its minimum annual fee increases by
$20,000.

Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds
Service Company, provided certain administrative services to the Fund under an
Administration Agreement between the Fund and U.S. Trust Company of New York.
The basis of the fees paid to CGFSC for the period prior to April 15, 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.

During the fiscal years ended October 31, 1995, 1996 and 1997
administrative services fees paid to the Administrator by the Acadian Emerging
Markets Portfolio totaled $71,000, $105,671 and $140,787, respectively,
administrative fees paid by the Acadian International Equity Portfolio totaled
$77,000, $93,183 and $104,459, respectively. Of the fees paid in the fiscal
years ended October 31, 1996 and 1997, Acadian Emerging Markets Portfolio paid
$83,905 and $89,053 to CGFSC and $21,766 and $51,734 to UAMFSI, and Acadian
International Equity Portfolio paid $87,678 and $92,787 to CGFSC and $5,505 and
$11,672 to UAMFSI, respectively.

UAMFSI will bear all expenses in connection with the performance of
its services under the Fund Administration Agreement. Other expenses to be
incurred in the operation of the Fund will be borne by the Fund or other
parties, including taxes, interest, brokerage fees and commissions, if any,
salaries and fees of officers and members of the Board who are not officers,
directors, shareholders or employees of UAMFSI, or the Fund's investment adviser
or distributor, SEC fees and state Blue Sky fees, EDGAR filing fees, processing
services and related fees, advisory and administration fees, charges and
expenses of pricing and data services, independent public accountants and
custodians, insurance premiums including fidelity bond premiums, outside legal
expenses, costs of maintenance of corporate existence, typesetting and printing
of prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund, printing and production costs of shareholders' reports
and corporate meetings, cost and expenses of Fund stationery and forms, costs of
special telephone and data lines and devices, trade association dues and
expenses, and any extraordinary expenses and other customary Fund expenses.

-31-
<PAGE>

Unless sooner terminated, the Fund Administration Agreement shall
continue in effect from year to year provided such continuance is specifically
approved at least annually by the Board. The Fund Administration Agreement is
terminable, without penalty, by the Board or by UAMFSI, on not less than ninety
(90) days' written notice. The Fund Administration Agreement shall
automatically terminate upon its assignment by UAMFSI without the prior written
consent of the Fund.

UAMFSI will from time to time employ or associate with such person or
persons as may be fit to assist them in the performance of the Agreement. Such
person or persons may be officers and employees who are employed by both UAMFSI
and the Fund. The compensation of such person or persons for such employment
shall be paid by UAMFSI and no obligation will be incurred by or on behalf of
the Fund in such respect.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the Emerging Markets
Portfolio and International Equity Portfolio paid the Service Provider $76 and
$521, respectively, in fees pursuant to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves
as the Funds distributor. Shares of the Fund are offered continuously. While
the Distributor will use its best

-32-
<PAGE>

efforts to sell shares of the Fund, it is not obligated to sell any particular
amount of shares.

The Distributor received no compensation for its services directly or
indirectly from any of the Portfolios during the Fund's fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

Each Portfolio may from time to time quote various performance figures
to illustrate past performance. Performance quotations by investment companies
are subject to rules adopted by the Commission, which require the use of
standardized performance quotations or, alternatively, that every non-
standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the
Commission. Current yield and average annual compounded total return quotations
used by the Fund are based on the standardized methods of computing performance
mandated by the Commission. An explanation of those and other methods used to
compute or express performance follows.

TOTAL RETURN

The average annual total return of the Portfolio is determined by
finding the average annual compounded rates of return over 1, 5 and 10 year
periods that would equate an initial hypothetical $1,000 investment to its
ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each 1, 5 and 10 year period and the deduction
of all applicable Fund expenses on an annual basis. The average annual total
rates of returns for the Acadian Portfolios from inception and for the one year
period ended on the date of the Financial Statements included herein, are as
follows:

-33-
<PAGE>

Since
Inception
One Year Through Year
Ended Ended
October 31, October 31, Inception
1997 1997 Date
-------------- -------------- ----------
<S> <C> <C> <C>
Acadian International Equity
Portfolio......................... 0.25% 7.39% 3/29/93

Acadian Emerging Markets
Portfolio......................... (5.71)% 3.37% 6/17/93

</TABLE>

These figures were calculated according to the following formula:

P (1 + T)/n/ = ERV

where:
P= a hypothetical initial payment of $1,000
T= average annual total return
n= number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods (or
fractional portion thereof).

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
calculated above) to performance as reported by other investments, indices and
averages. Please see Appendix B for publications, indices and averages which
may be used.

In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a Portfolio, 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 a
Portfolio to calculate its performance. In addition, there can be no assurance
that a Portfolio will continue this performance as compared to such other
averages.

-34-
<PAGE>

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation 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 located at
One International Place, Boston, MA 02110; however, all investor correspondence
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. The Board of Directors has
classified additional classes of shares in each Portfolio, known as
Institutional Service Shares and Advisor Shares. As of the date of this
Statement of Additional Information, no Institutional Services Shares or Adviser
shares of these Portfolios have been offered by the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of each
Portfolio's net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the federal excise
tax on undistributed income and capital gains. (See discussion under
"Dividends, Capital Gains Distributions and Taxes" in the Prospectus.) The
amounts of any income dividends or capital gains distributions cannot be
predicted.

Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of such Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Prospectus.

-35-
<PAGE>

days prior to the record date that either the Income Option (income dividends in
cash and capital gains distributions in additional shares at net asset value) or
the Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an
income dividend or capital gains distribution is paid.

Each Portfolio of the Fund will be treated as a separate entity (and
hence as a separate "regulated investment company") for federal tax purposes.
Any net capital gains recognized by a Portfolio will be distributed to its
investors without need to offset (for federal income tax purposes) such gains
against any net capital losses of another Portfolio.

FEDERAL TAXES

In order for each Portfolio to continue to qualify for federal income
tax treatment as a regulated investment company under the 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.

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
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) for the Acadian
Portfolios for the fiscal year ended October 31, 1997, which appear in the
Portfolios' 1997 Annual Report to Shareholders, and the report thereon of Price
Waterhouse LLP, independent accountants, also appearing therein, are attached to
this Statement of Additional Information.

-36-
<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF RATINGS FOR CORPORATE BONDS

Moody's Investors Service, Inc. Corporate Bond Ratings:

Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge."

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. 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
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

Moody's applies numerical modifiers 1, 2, and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier 3
indicates that the issue ranks at the lower end of the rating category.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security 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
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in the class.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal

A-1
<PAGE>

payments or 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
shortcomings.

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 many real investment standing.

Standard & Poor's Ratings Services 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
principal 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
principal although the are somewhat more susceptible to the adverse effects of
changes in circumstances and economic condition that bonds in higher rated
categories.

BBB -- Debt rated BBB is regarded as having an adequate 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
conditions.

C -- The rating C is reserved for income bonds on which no interest is
being paid.

D -- Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.

A-2
<PAGE>

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of
securities which are issued or guaranteed by the United States Government, and
by various instrumentalities which have been established or sponsored by the
United States Government.

U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.

In the case of securities not backed by the full faith and credit of
the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the U.S. Treasury, if needed to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under Government supervision, but their debt securities are backed
only by the creditworthiness of those institutions, not the U.S. Government.

Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.

III. DESCRIPTION OF COMMERCIAL PAPER

Each Portfolio may invest in commercial paper (including variable
amount master demand notes) rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's. Commercial

A-3
<PAGE>

paper refers to short-term, unsecured promissory notes issued by corporations to
finance short-term credit needs. Commercial paper is usually sold on a discount
basis and has a maturity at the time of issuance not exceeding nine months.
Variable amount master demand notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangement between the issuer and a commercial bank acting as agent for the
payees of such notes whereby both parties have the right to vary the amount of
the outstanding indebtedness on the notes. As variable amount master demand
notes are direct lending arrangements between a lender and a borrower, it is not
generally contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at face value, plus accrued interest, at
any time. In connection with the Portfolio's investment in variable amount
master demand notes, the Adviser's investment management staff will monitor, on
an ongoing basis, the earning power, cash flow and other liquidity ratios of the
issuer and the borrower's ability to pay principal and interest on demand.

Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation of
the management of the issuer; (2) economic evaluation of the issuer's industry
or industries and the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of issuer of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.

IV. DESCRIPTION OF BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term

A-4
<PAGE>

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 reasonably orderly market conditions. The Portfolio
is also able to sell variable rate certificates of deposit in the secondary
market. Variable rate certificates of deposit normally carry a higher interest
rate than comparable fixed rate certificates of deposit. A banker's acceptance
is a time draft drawn on a commercial bank by a borrower usually in connection
with an international commercial transaction to finance the import, export,
transfer or storage of goods. The borrower is liable for payment as well as the
bank which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and are
traded in the secondary markets prior to maturity.

V. DESCRIPTION OF FOREIGN INVESTMENTS

Investors should recognize that investing in foreign companies
involves certain 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 favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions between
various currencies.

As foreign companies are not generally subject to uniform accounting,
auditing 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.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.

A-5
<PAGE>

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 income received from the companies comprising the Fund's Portfolios.
However, these foreign withholding taxes are not expected to have a significant
impact.

A-6
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividends.

(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.

(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance 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
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.

(g) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.

(h) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.

B-1
<PAGE>

(i) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S.
publicly-traded companies.

(j) The Salomon-Russell Broad Market Index (BMI) -- measures the
performance of approximately 4,500 institutionally investable equity
securities in 23 worldwide local markets whose combined total
available market capitalization exceeds $106 million. The BMI is
split into two major components. The Primary Market Index defines the
large stock universe, representing the top 80% of the available
capital of the BMI in each country. The Extended Market Index
represents the remaining 20% of the available capital that defines the
small stock universe.

(k) IFC Investable Index - an unmanaged emerging markets index maintained
by the International Finance Corporation. The index consists of 890
companies in 25 emerging equity markets and is designed to measure
more precisely the returns portfolio managers might receive from
investment in emerging markets equity securities by focusing on
companies and markets that are legally and practically accessible to
foreign investors.

(l) Morgan Stanley Capital International Emerging Market Indices --
represent the local industry composition in emerging market countries.
The indices aim to cover 60% of the available total market
capitalization of each local market and currently include returns on
13 emerging equity markets.

(m) The Morgan Stanley Capital International Europe 13 Index -- is an
unmanaged index composed of the securities listed on the stock
exchanges of the following countries: Australia, Belgium, Denmark,
Finland, France, Germany, Italy, the Netherlands, Norway, Spain,
Sweden, Switzerland and the United Kingdom.

(n) CDA Mutual Fund Report published by CDA Investment Technologies, Inc.
-- analyzes price, current yield, risk, total return and average rate
of return (average compounded growth rate) over specified time periods
for the mutual fund industry.

(o) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

B-2
<PAGE>

(p) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger
Investment Companies Service -- publications that rate fund
performance over specified time periods.

(q) 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.

(r) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates -
- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.

(s) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.

(t) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan Companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg
L.P.

B-3
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (96.9%)
- --------------------------------------------------------------------------------
AUSTRALIA (8.7%)
Australia & New Zealand Banking Group Ltd................... 34,600 $ 241,291
Caltex Australia Ltd........................................ 16,100 47,424
Commonwealth Bank of Australia.............................. 21,100 242,524
David Jones Ltd............................................. 86,400 109,330
Email Ltd................................................... 22,000 58,461
Foster's Brewing Group Ltd.................................. 17,000 32,268
National Australia Bank Ltd................................. 21,800 298,078
Qantas Airways Ltd.......................................... 58,900 105,587
Rothmans Holdings Ltd....................................... 7,800 38,493
Santos Ltd.................................................. 59,600 274,017
Westpac Banking Corp. ...................................... 46,700 271,832
-----------
1,719,305
- --------------------------------------------------------------------------------
AUSTRIA (0.6%)
Voest-Alpine Stahl AG....................................... 2,900 125,495
- --------------------------------------------------------------------------------
BELGIUM (2.7%)
Credit Communal Holding Dexia............................... 1,700 185,855
Electrabel S.A.............................................. 1,000 224,570
Tractebel................................................... 1,500 127,853
-----------
538,278
- --------------------------------------------------------------------------------
CANADA (5.9%)
Cascades, Inc. ............................................. 14,900 109,971
Metro-Richeliee, Inc., Class A.............................. 2,650 28,680
National Bank of Canada..................................... 21,200 301,654
Onex Corp................................................... 7,800 206,195
Stelco, Inc., Class A....................................... 14,000 107,799
Trilon Financial Corp., Class A............................. 30,300 223,632
Westcoast Energy, Inc....................................... 9,100 186,637
-----------
1,164,568
- --------------------------------------------------------------------------------
FINLAND (0.5%)
Merita Ltd., Class A........................................ 19,200 93,836
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -----------------------------------------------------------------------------
FRANCE (2.2%)
Chargeurs International S.A. ........................... 250 $ 16,733
Cie Financiere de CIC et de L'Union Europeenne.......... 300 21,900
Compagnie Generale D'Industrie et de Participations..... 637 207,654
De Dietrich et Compagnie S.A............................ 320 14,921
Eridania Beghin-Say S.A................................. 250 35,980
Pernod Ricard........................................... 2,900 134,412
-----------
431,600
- -----------------------------------------------------------------------------
GERMANY (3.5%)
BASF AG................................................. 2,800 96,403
Merck KGaA.............................................. 6,050 224,971
Otto Reichelt AG........................................ 1,850 26,830
Papierwerke Waldhof-Aschaffenburg AG.................... 800 155,099
Viag AG................................................. 100 46,699
*Viag AG (New).......................................... 84 39,106
Volkswagen AG........................................... 100 59,346
*Wuensche AG............................................ 300 32,892
-----------
681,346
- -----------------------------------------------------------------------------
HONG KONG (3.3%)
Guoco Group Ltd. ....................................... 30,000 65,589
Hang Lung Development Co................................ 116,000 159,819
Hong Kong Aircraft Engineering Co., Ltd................. 12,000 30,893
Jardine International Motor Holdings Ltd. .............. 20,000 14,489
Kumagai Gumi Ltd........................................ 177,000 162,574
Lai Sun Garment (International) Ltd. ................... 32,000 19,457
Peregrine Investment Holdings Ltd. ..................... 70,000 68,823
QPL International Holdings Ltd. ........................ 80,000 49,676
Semi-Tech (Global) Ltd.................................. 34,000 25,291
Tai Cheung Holdings Ltd. ............................... 72,000 34,929
Wing On Company International Ltd....................... 26,000 20,517
-----------
652,057
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

6
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN (27.9%)
Aoki International Co., Ltd................................. 3,000 $ 30,419
Bank of Okinawa Ltd......................................... 1,000 24,850
Cesar Co. .................................................. 4,000 9,807
Chiyoda Fire & Marine Insurance Co., Ltd.................... 14,000 50,848
Chubu Electric Power Co., Inc............................... 15,000 254,322
Chuetsu Pulp & Paper Co., Ltd. ............................. 6,000 13,514
Chugoku Electric Power Co., Ltd............................. 2,000 32,580
Cosmo Oil Co., Ltd. ........................................ 30,000 70,313
Daikyo, Inc................................................. 24,000 45,878
Daio Paper Corp............................................. 13,000 88,813
Daiwa Kosho Lease Co., Ltd. ................................ 12,000 73,005
Dowa Fire & Marine Insurance Co. ........................... 10,000 39,977
Fuji Fire & Marine Insurance................................ 10,000 31,915
Fuji Heavy Industries Ltd. ................................. 44,000 175,166
Fuji Photo Film Co., Ltd.................................... 6,000 217,420
Fujita Corp. ............................................... 79,000 62,375
Gunze Ltd................................................... 18,000 53,108
Hitachi Ltd. ............................................... 34,000 261,386
Hokkaido Bank............................................... 35,000 33,743
Idec Izumi.................................................. 3,000 17,329
Itochu Fuel Corp............................................ 7,000 25,598
Jaccs....................................................... 8,000 51,529
Kamei....................................................... 4,000 35,572
Kansai Electric Power Company, Inc.......................... 13,000 230,136
Kikkoman Corp. ............................................. 20,000 122,673
Kita-Nippon Bank............................................ 500 27,011
Kyudenko Co., Ltd........................................... 6,000 38,448
Lion Corp. ................................................. 22,000 83,743
Matsumura-Gumi.............................................. 13,000 26,795
Matsushita Electric Industrial Co., Ltd. ................... 19,000 318,983
*Mitsui O.S.K. Lines Ltd. .................................. 93,000 149,177
Mitsui Wood Systems, Inc. .................................. 2,000 9,059
NEC Corp.................................................... 23,000 252,327
Nichiei (Fudosan)........................................... 10,000 13,547
Nichimen Corp............................................... 25,000 54,646
</TABLE>
The accompanying notes are an integral part of the financial statements.

7
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Nintendo Corp., Ltd......................................... 500 $ 43,218
Nippon Metal Industry....................................... 9,000 14,212
Nippon Oil Co., Ltd......................................... 27,000 110,630
Nippon Shinpan Co. ......................................... 24,000 50,266
Nissan Motor Co., Ltd....................................... 44,000 234,408
Nissho Iwai Corp............................................ 1,000 8,303
Orient Corp................................................. 29,000 71,825
Osaka Stadium............................................... 8,000 32,247
Seino Transportation Co., Ltd............................... 19,000 164,229
Sekisui House Ltd. ......................................... 26,000 222,573
Shionogi & Co. ............................................. 10,000 60,755
Snow Brand Milk Products Co................................. 9,000 34,408
Suntelephone Co., Ltd....................................... 2,000 8,145
Takashimaya Co.............................................. 6,000 56,848
Tokyo Construction Co....................................... 25,000 34,491
Tokyo Electric Power Co. ................................... 18,000 344,083
Toppan Printing Company Co., Ltd............................ 18,000 225,898
Toshiba Corp................................................ 41,000 185,713
Toyo Seikan Kaisha.......................................... 16,000 251,330
Toyota Tsusho Corp.......................................... 8,000 30,652
Uchida Yoko................................................. 7,000 21,410
Yamaichi Securities Co...................................... 11,000 20,845
Yasuda Fire & Marine Insurance.............................. 45,000 249,460
-----------
5,501,961
- --------------------------------------------------------------------------------
MALAYSIA (0.7%)
MBF Capital Bhd............................................. 7,000 4,121
Malaysian Airline System Bhd................................ 25,000 33,043
Multi-Purpose Holdings Bhd.................................. 43,000 22,605
Oriental Holdings Bhd....................................... 6,400 13,073
Perlis Plantations Bhd. .................................... 34,750 63,675
-----------
136,517
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
NETHERLANDS (6.8%)
Boskalis Westminster N.V. .................................. 5,049 $ 85,581
DSM N.V. ................................................... 2,578 232,830
ING Groep N.V. ............................................. 6,192 259,994
International-Muller N.V.................................... 3,690 117,297
KLM Royal Dutch Air Lines N.V. ............................. 9,009 305,406
Koninklijke Hoogovens N.V................................... 4,200 192,581
Koninklijke Van Ommeren N .V. .............................. 4,200 150,386
-----------
1,344,075
- --------------------------------------------------------------------------------
NEW ZEALAND (0.9%)
Lion Nathan, Ltd. .......................................... 69,900 168,775
- --------------------------------------------------------------------------------
NORWAY (4.0%)
Den Norske Bank A.S......................................... 33,100 149,528
Elkem ASA................................................... 7,400 112,310
Nera ASA.................................................... 15,500 100,503
Norske Skogindustrier ASA, Class A.......................... 4,600 145,200
Orkla ASA, Class A.......................................... 2,300 210,754
Sparebanken NOR............................................. 1,000 34,558
Unitor ASA.................................................. 2,100 33,218
-----------
786,071
- --------------------------------------------------------------------------------
SINGAPORE (0.9%)
Fraser & Neave Ltd.......................................... 17,000 85,351
Hotel Properties Ltd........................................ 34,000 25,714
Singapore Land Ltd.......................................... 8,000 22,777
Wing Tai Holdings, Ltd...................................... 40,000 50,842
-----------
184,684
- --------------------------------------------------------------------------------
SWEDEN (1.2%)
Hoganas AB, Class B......................................... 1,300 48,195
SSAB Svenkst Stal AB, Class B............................... 6,000 100,018
Sparbanken Sverige AB, Class A.............................. 3,900 88,415
-----------
236,628
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SWITZERLAND (2.7%)
Keramik Holding AG Laufen.................................. 140 $ 67,576
Novartis AG................................................ 130 204,956
PubliGroupe S.A............................................ 860 187,290
Union Bank of Switzerland.................................. 320 73,802
-----------
533,624
- --------------------------------------------------------------------------------
UNITED KINGDOM (24.4%)
Abbey National plc......................................... 24,100 383,233
Allied Domecq plc.......................................... 28,600 233,392
B.A.T. Industries plc...................................... 39,600 346,407
Bank of Scotland........................................... 40,200 331,763
Bemrose Corp. plc.......................................... 7,200 48,611
Boots Company plc.......................................... 23,200 332,340
Bristol Water Holding plc.................................. 1,100 23,525
British Airways plc........................................ 27,700 270,421
British Sky Broadcasting Group plc......................... 6,100 43,282
Cowie Group plc............................................ 21,700 129,401
General Accident plc....................................... 16,000 272,276
Guinness plc............................................... 8,600 76,889
*Halifax plc............................................... 22,300 252,491
Heywood Williams Group plc................................. 9,300 37,440
Hyder plc.................................................. 3,600 54,318
Kwik Fit Holdings plc...................................... 5,436 29,498
Marks & Spencer plc........................................ 17,700 179,625
McBride plc................................................ 28,800 83,575
National Westminster Bank plc.............................. 18,700 268,819
Nothern Foods plc.......................................... 52,100 202,751
Paragon Group Companies plc................................ 7,800 23,158
Premier Oil plc............................................ 265,900 214,090
Prudential Corp. plc....................................... 10,300 109,883
Royal & Sun Alliance Insurance Group plc................... 35,645 341,705
RJB Mining plc............................................. 11,700 35,130
Siebe plc.................................................. 4,853 93,208
Southern Electric plc, Class B............................. 12,600 6,340
Standard Chartered plc..................................... 11,100 120,466
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UNITED KINGDOM--(CONTINUED)
Unigate plc.............................................. 25,400 $ 245,837
*Waste Management International plc...................... 5,200 17,445
Yorkshire Water plc, Class B............................. 22,600 13,647
-----------
4,820,966
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $20,185,376).................... 19,119,786
- -------------------------------------------------------------------------------
PREFERRED STOCKS (0.4%)
- -------------------------------------------------------------------------------
GERMANY (0.4%)
*Villeroy & Boch AG (COST $63,839)....................... 450 73,355
- -------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
- -------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.0%)
- -------------------------------------------------------------------------------
HONG KONG (0.0%)
*Semi-Tech (Global) Ltd. (expiring 7/31/98) (COST $0).... 3,400 74
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.5%)
Chase Securities, Inc. 5.60% dated 10/31/97, due 11/3/97,
to be repurchased at $303,141, collaterialized by
$290,508 of various U.S. Treasury Notes, 5.50%-8.75%,
due from 5/15/00-6/30/02, valued at $303,171
(COST $303,000)......................................... $303,000 303,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.8%) (COST $20,552,215) (A).......... 19,496,215
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.2%)....................... 234,805
- -------------------------------------------------------------------------------
NET ASSETS (100%)......................................... $19,731,020
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $20,538,938. At October 31,
1997, net unrealized depreciation for all securities based on tax cost was
$1,042,723. This consisted of aggregate gross unrealized appreciation for
all securities of $2,441,497 and aggregate gross unrealized depreciation
for all securities of $3,484,220.

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

At October 31, 1997 sector diversification of the Portfolio was as follows:

<TABLE>
<CAPTION>
% OF NET MARKET
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense......................................... 0.2% $ 33,043
Automotive.................................................. 1.9 381,465
Banks....................................................... 14.9 2,942,522
Beverages, Food & Tobacco................................... 5.6 1,096,581
Broadcasting & Publishing................................... 1.4 269,180
Building Materials.......................................... -- 9,059
Capital Equipment........................................... 0.2 30,893
Chemicals................................................... 0.1 21,410
Commercial Services......................................... 3.0 582,226
Construction................................................ 5.1 1,005,781
Consumer Durables........................................... 2.2 438,660
Consumer Non-Durables....................................... 2.6 521,380
Electronics................................................. 7.1 1,399,310
Energy...................................................... 3.3 645,921
Entertainment & Leisure..................................... 0.2 32,247
Financial Services.......................................... 6.1 1,199,457
Holding Company............................................. 6.0 1,191,716
Home Furnishings & Appliances............................... 1.4 281,034
Industrial.................................................. 1.4 283,020
Insurance................................................... 5.5 1,096,064
Iron & Steel................................................ 0.5 107,799
Lodging & Restaurants....................................... 0.1 25,713
Manufacturing............................................... 0.6 117,297
Metals...................................................... 2.0 400,229
Mining...................................................... 0.2 35,130
Multi-Industry.............................................. 0.1 16,733
Oil & Gas................................................... 3.5 694,648
Paper & Packaging........................................... 3.9 763,927
Pharmaceuticals............................................. 1.4 285,726
Real Estate................................................. 0.7 129,304
Repurchase Agreement........................................ 1.5 303,000
Services.................................................... 1.3 255,053
Technology.................................................. 2.2 425,461
Telecommunications.......................................... 0.6 108,648
Textiles & Apparel.......................................... 1.3 262,422
Transportation.............................................. 5.8 1,145,205
Utilities................................................... 4.9 958,951
- ---------------------------------------------------------------------------------
Total Investments......................................... 98.8% $19,496,215
Other Assets and Liabilities (Net).......................... 1.2 234,805
- ---------------------------------------------------------------------------------
Net Assets................................................ 100.0% $19,731,020
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Value (Cost $20,552,215)......................... $19,496,215
Foreign Currency, at Value (Cost $214,949)....................... 218,089
Cash............................................................. 113
Dividends Receivable............................................. 56,141
Foreign Withholding Tax Reclaim Receivable....................... 28,348
Receivable for Investments Sold.................................. 5,043
Deferred Organization Costs--Note A.............................. 224
Other Assets..................................................... 513
- -------------------------------------------------------------------------------
Total Assets.................................................... 19,804,686
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investment Advisory Fees--Note B..................... 3,685
Payable for Custodian Fees--Note D............................... 37,205
Payable for Administrative Fees--Note C.......................... 7,896
Payable for Directors' Fees--Note G.............................. 649
Other Liabilities................................................ 24,231
- -------------------------------------------------------------------------------
Total Liabilities............................................... 73,666
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $19,731,020
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $19,485,449
Undistributed Net Investment Income.............................. 286,992
Accumulated Net Realized Gain.................................... 1,012,467
Unrealized Depreciation.......................................... (1,053,888)
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $19,731,020
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)..................................................... 1,640,730
Net Asset Value, Offering and Redemption Price Per Share......... $ 12.03
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For The Year Ended October 31, 1997

<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 617,968
Interest................................................ 14,416
Less Foreign Taxes Withheld............................. (74,263)
- --------------------------------------------------------------------------------
Total Income........................................... 558,121
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............................................. $145,909
Less: Fees Waived...................................... (143,747) 2,162
--------
Administrative Fees--Note C............................. 104,459
Custodian Fees--Note D.................................. 32,588
Printing Fees........................................... 19,025
Registration and Filing Fees............................ 14,474
Audit Fees.............................................. 13,793
Directors' Fees--Note G................................. 2,218
Legal Fees.............................................. 1,354
Amortization of Organizational Cost..................... 558
Account Services Fees--Note F........................... 521
Other Expenses.......................................... 3,486
- --------------------------------------------------------------------------------
Total Expenses......................................... 194,638
Expense Offset--Note A.................................. --
- --------------------------------------------------------------------------------
Net Expenses........................................... 194,638
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................... 363,483
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON:
Investments............................................. 941,286
Foreign Exchange Transactions........................... (17,464)
- --------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN EX-
CHANGE TRANSACTIONS..................................... 923,822
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments............................................. (1,355,438)
Foreign Exchange Translations........................... (5,728)
- --------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION............................... (1,361,166)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS AND FOREIGN EXCHANGE TRANSAC-
TIONS................................................... (437,344)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ (73,861)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 363,483 $ 225,677
Net Realized Gain..................................... 923,822 661,922
Net Change in Unrealized Appreciation/Depreciation.... (1,361,166) 130,947
- ----------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (73,861) 1,018,546
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (410,681) --
Net Realized Gain..................................... (847,856) (45,051)
- ----------------------------------------------------------------------------------
Total Distributions.................................. (1,258,537) (45,051)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued................................................ 4,414,711 15,377,297
--In Lieu of Cash Distributions..................... 1,235,841 45,051
Redemption Fees--Note J............................... 825 --
Redeemed.............................................. (1,667,058) (1,791,361)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 3,984,319 13,630,987
- ----------------------------------------------------------------------------------
Total Increase........................................ 2,651,921 14,604,482
Net Assets:
Beginning of Year..................................... 17,079,099 2,474,617
- ----------------------------------------------------------------------------------
End of Year (including undistributed net investment
income of $286,992 and $351,096, respectively)....... $19,731,020 $17,079,099
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 355,447 1,243,285
In Lieu of Cash Distributions........................ 101,883 3,824
Shares Redeemed...................................... (136,493) (141,721)
- ----------------------------------------------------------------------------------
320,837 1,105,388
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED MARCH 29,
OCTOBER 31, 1993** TO
----------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 12.94 $ 11.54 $12.37 $11.77 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss).................... 0.23 0.17 (0.01) (0.04) (0.04)
Net Realized and Unrealized
Gain (Loss)............... (0.19) 1.44 (0.56) 0.95 1.81
- -------------------------------------------------------------------------------
Total from Investment Op-
erations................. 0.04 1.61 (0.57) 0.91 1.77
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income...... (0.31) -- -- -- --
Net Realized Gain.......... (0.64) (0.21) (0.26) (0.31) --
- -------------------------------------------------------------------------------
Total Distributions....... (0.95) (0.21) (0.26) (0.31) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD..................... $ 12.03 $ 12.94 $11.54 $12.37 $11.77
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN+............... 0.25% 14.13% (4.58)% 8.02% 17.70%**
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................ $19,731 $17,079 $2,475 $2,427 $2,264
Ratio of Expenses to Average
Net Assets................. 1.00% 1.06% 2.54% 2.50% 2.50%*
Ratio of Net Investment
Income (Loss) to Average
Net Assets................. 1.87% 1.87% (0.11)% (0.38)% (0.76)%*
Portfolio Turnover Rate..... 70% 80% 76% 56% 44%
Average Commission Rate #... $0.0033 $0.0043 N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntarily Waived Fees and
Expenses Assumed by the Ad-
viser per share............ $ 0.09 $ 0.11 $ 0.46 $ 0.21 $ 0.14
Ratio of Expenses to Average
Net Assets Including
Expense Offsets............ 1.00% 1.05% 2.50% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
*Annualized
**Commencement of Operations
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The Acadian
International Equity Portfolio (the "Portfolio"), a portfolio of UAM Funds,
Inc., is a diversified, open-end management investment company. At October 31,
1997, the UAM Funds were comprised of forty-two active portfolios. The
financial statements of the remaining portfolios are presented separately. The
objective of the Portfolio is to provide maximum long-term total return
consistent with reasonable risk to principal that is superior over the long
term to the performance of the Benchmark Index (Morgan Stanley Capital
International Index for Europe, Australia and the Far East or "EAFE") by
investing in a diversified portfolio of equity securities of primarily non-
United States issuers.

A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.

1. SECURITY VALUATION: Securities listed on a United States securities
exchange for which market quotations are readily available are valued at
the last quoted sales price as of the close of the exchange on the day the
valuation is made or, if no sale occurred on such day, at the bid price on
such day. Securities listed on a foreign exchange are valued at their
closing price. Price information on listed securities is taken from the
exchange where the securities are primarily traded. Over-the-counter and
unlisted securities are valued at the current bid prices. Short-term
investments that have remaining maturities of sixty days or less at time of
purchase are valued at amortized cost, if it approximates market value. The
value of other assets and securities for which no quotations are readily
available is determined in good faith at fair value using methods
determined by the Board of Directors.

2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements. The
Portfolio may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on either income or gains earned or
repatriated. The Portfolio accrues such taxes when the related income is
earned.

3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.

Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash balances
into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same
collateral requirements as discussed above.

17
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

4. FOREIGN CURRENCY TRANSLATION: The books and records of the Portfolio are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars on the date of valuation. The Portfolio does not isolate that
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 transactions represent net foreign exchange gains or losses from
forward foreign currency exchange contracts, disposition of foreign
currencies, currency gains or losses realized between trade and settlement
dates on securities transactions and the difference between the amount of
the investment income and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received
or paid.

5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolio may enter
into forward foreign currency exchange contracts to protect the value of
securities held and related receivables and payables against changes in
future foreign exchange rates. A forward currency contract is an agreement
between two parties to buy and sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market daily using the
current forward rate and the change in market value is recorded by the
Portfolio as unrealized gain or loss. The Portfolio recognizes realized
gain or loss when the contract is closed, equal to the difference between
the value of the contract at the time 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 Portfolio will normally distribute
substantially all of its net investment income annually. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.

The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations,
which may differ from generally accepted accounting principles. These
differences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments, foreign
currency transactions and in-kind transactions.

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications of $16,906 to decrease
undistributed net investment income, and $401,005 to increase accumulated
net realized gain, with a decrease to paid in capital of $384,099.

Current year permanent book-tax differences are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the financial highlights.

7. ORGANIZATION COST: Costs incurred by the Portfolio in connection with
its organization have been deferred and are being amortized on a straight-
line basis over a five year period.

18
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

on the accrual basis. Most expenses of the UAM Funds can be directly
attributed to a particular portfolio. Expenses which cannot be directly
attributed are apportioned among the portfolios of the UAM Funds based on
their relative net assets. Custodian fees for the Portfolio have been
increased to include expense offsets, if any for custodian balance credits.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Acadian Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at a monthly fee calculated at an annual rate of
0.75% of the first $50 million of average daily net assets, 0.65% of the next
$50 million of average daily net assets, 0.50% of the next $100 million of
average daily net assets and 0.40% of the average daily net assets in excess
of $200 million. The Adviser has voluntarily agreed to waive a portion of its
advisory fees and to assume expenses on behalf of the Portfolio, if necessary,
in order to keep the Portfolio's total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 1.00% of average daily
net assets.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 annual fee payable monthly of
0.06% of average daily net assets of the Portfolio. The Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent
services. Pursuant to the Mutual Funds Service Agreement, the Administrator
pays CGFSC a monthly fee. For the year ended October 31, 1997, UAM Fund
Services, Inc. earned $104,459 from the Portfolio as Administrator of which
$92,787 was paid to CGFSC for its services.

D. CUSTODIAN: The Chase Manhattan Bank, an affiliate of CGFSC, is custodian
for the Portfolio's assets held in accordance with the custodian agreement.

E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.

19
<PAGE>

ACADIAN INTERNATIONAL EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

services for participants in a self-directed, defined contribution plan, and
for whom the Service Provider provides participant recordkeeping. Pursuant to
the Services Agreement, the Service Provider is entitled to receive, after the
end of each month, a fee at the annual rate of 0.15% of the average aggregate
daily net asset value of shares of the UAM Funds in the accounts for which
they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds, and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $16,927,793 and sales of $13,180,221 of investment
securities other than long-term U.S. Government and short-term securities.
There were no purchases or sales of long-term U.S. Government securities.

I. LINE OF CREDIT: The Portfolio, along with certain other Portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
Capital shares. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% 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, 1997, the Portfolio had no borrowings under the agreement.

J. OTHER: At October 31, 1997, 86.1% of total shares outstanding were held by
2 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

The Portfolio retains a redemption fee of 1.00% on redemptions of capital
shares held for less than 90 days in the Portfolio.

At October 31, 1997, the net assets of the Portfolio were substantially
comprised of foreign denominated securities and/or currency. Changes in
currency exchange rates will affect the value of and investment income from
such securities and currency.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision and regulation of foreign securities markets and the
possibility of political or economic instability.

20
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees of
UAM Funds Trust and Shareholders of
Acadian International Equity Portfolio

In our opinion, the accompanying statement of assets and liabilities including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Acadian International Equity
Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October
31, 1997, and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED):

Foreign taxes during the fiscal year ended October 31, 1997 for the Acadian
International Equity Portfolio, amounted to $74,263 are expected to be passed
through to the shareholders as foreign tax credits on Form 1099 Dividend for
the year ending December 31, 1997, which shareholders of the Acadian
International Equity Portfolio will receive in late January, 1998.

Acadian International Equity Portfolio hereby designates $357,689 as a long-
term capital gain dividend for the purpose of the dividend paid deduction on
its federal income tax return. In addition, for the year ended October 31,
1997, gross income derived from sources within foreign countries amounted to
$617,584 for the Portfolio.

21
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (84.7%)
- -------------------------------------------------------------------------------
ARGENTINA (4.3%)
Astra Cia Argentina de Petro.......................... 178,280 $ 278,289
Banco de Galicia y Buenos Aires S.A., Class B......... 70,069 434,697
*Bansud S.A., Class B................................. 4,201 37,412
Capex S.A., Class A................................... 8,500 45,078
Central Puerto S.A., Class B.......................... 78,000 171,707
Cia Naviera Perez Companc, Class B.................... 44,900 281,248
Citicorp Equity Investments S.A., Class B............. 30,567 122,344
Garovaglio y Zorraquin S.A. .......................... 26,100 74,431
Juan Minetti S.A. .................................... 30,266 99,940
Molinos Rio de la Plata S.A., Class B................. 56,583 139,847
Siderar S.A., Class A................................. 9,316 48,100
Siderca S.A., Class A................................. 249,838 599,983
Telecom Argentina S.A., Class B....................... 23,100 115,572
Transportadora de Gas del Sur S.A., Class B........... 138,200 262,743
YPF S.A., Class D..................................... 22,100 705,427
-----------
3,416,818
- -------------------------------------------------------------------------------
BRAZIL (5.0%)
Albarus S.A. ......................................... 212,000 144,231
Alparagatas S.A. ..................................... 980,000 48,893
Brahma................................................ 305,172 205,404
Brasilit S.A. ........................................ 229,250 513,650
Cia Acos Especiais-Acesita............................ 14,335,000 19,505
Cia Antarctica Paulista-Industria..................... 1,400 121,916
Cia Siderurgica Nacional.............................. 13,300,000 482,583
Cia Vidraria Santa Marina............................. 37,000 71,825
Cigarros Souza Cruz................................... 11,000 89,505
Eletrobras............................................ 2,000,000 807,329
Gerdau Metalurgica S.A. .............................. 497,729 19,640
Light Participacoes S.A. ............................. 1,015,000 259,643
Light Servicos Electricas............................. 1,000,000 332,003
Mineracao da Trindade-Samitri......................... 4,735,500 128,869
Santista Alimentos S.A. .............................. 137,000 279,617
*Serrana S.A. ........................................ 131,000 152,105
*Sociedade de Participacoes Cimente................... 131,000 236,475
Telebras.............................................. 1,511,794 134,380
-----------
4,047,573
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CHINA (4.5%)
Guangdong Electric Power Development Co., Ltd., Class
B.................................................... 242,400 $ 136,723
Jilin Chemical Industrial Co., Ltd., Class H.......... 1,500,000 269,728
Maanshan Iron & Steel Co., Class H.................... 2,540,000 404,166
Qingling Motors Co., Class H.......................... 1,074,000 701,643
Shanghai Dajiang Group Co., Ltd., Class B............. 198,979 43,377
*Shanghai Dazhong Taxi Co., Class B................... 346,910 274,059
Shanghai Jinqiao Export Processing Zone Development
Co., Ltd., Class B................................... 365,300 184,842
Shanghai Petrochemical Co., Ltd., Class H............. 2,324,000 623,842
*Shanghai Shangling Electric Appliances Co., Ltd.,
Class B.............................................. 284,000 53,392
Shanghai Tyre & Rubber Co., Ltd., Class B............. 500,000 144,000
Shanghai Waigaoqiao Free Trade Zone Development Co.,
Ltd., Class B ....................................... 353,360 165,372
Shanghai Yaohua Pilkington Glass Co., Ltd., Class B... 313,000 90,770
*Shenzhen China Bicycle Co., Ltd., Class B............ 624,000 154,184
*Tsingtao Brewing Co., Ltd., Class H.................. 992,000 336,869
-----------
3,582,967
- -------------------------------------------------------------------------------
CZECH REPUBLIC (0.9%)
*CEZ A.S.............................................. 4,100 130,617
Ceska Sporitelna A.S. ................................ 4,700 35,936
Komercni Banka A.S. .................................. 2,200 96,787
*SPT Telecom A.S. .................................... 2,000 230,589
*Skoda Plzen A.S. .................................... 4,100 106,981
*Unipetrol A.S. ...................................... 37,400 124,459
-----------
725,369
- -------------------------------------------------------------------------------
GREECE (2.8%)
Alpha Credit Bank..................................... 8,994 593,520
Commercial Bank of Greece S.A. ....................... 16,440 696,028
Hellenic Bottling Co. S.A. ........................... 15,000 618,835
Heracles General Cement Co. S.A. ..................... 4,700 91,349
*Ionian Bank.......................................... 3,399 67,309
*National Bank of Greece.............................. 440 45,986
Titan Cement Co. ..................................... 3,200 156,192
-----------
2,269,219
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

6
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
HUNGARY (1.2%)
*Danubius Hotels Rt................................... 5,300 $ 165,940
EGIS Rt............................................... 5,900 277,012
Gedeon Richter Ltd. GDS............................... 2,700 251,100
Pick Szeged Rt GDR.................................... 2,100 172,817
Primagaz Rt........................................... 2,475 101,711
-----------
968,580
- -------------------------------------------------------------------------------
INDONESIA (2.4%)
Argha Karya Prima Industry (Foreign).................. 27,500 13,214
Astra International (Foreign)......................... 86,400 64,379
Bank Dagang Nasional (Foreign)........................ 364,000 50,696
Dharmaal Intiland (Foreign)........................... 41,500 28,322
Gajah Tunggal (Foreign)............................... 348,000 58,162
Hanjaya Mandala Sampoerna (Foreign)................... 52,500 91,765
Indah Kiat Pulp & Paper Co. (Foreign)................. 356,776 136,648
Indosat (Foreign)..................................... 107,500 243,297
Mulialand (Foreign)................................... 77,000 57,911
Pabrik Kertas Tjiwi Kimia (Foreign)................... 218,517 80,651
Polysindo Eka Perkasa (Foreign)....................... 108,000 42,117
Putra Surya Perkasa (Foreign)......................... 515,500 276,417
SMART Corp. (Foreign)................................. 9,600 2,540
Telekomunikasi Indonesia.............................. 811,500 757,249
Tempo Scan Pacific (Foreign).......................... 54,000 38,733
-----------
1,942,101
- -------------------------------------------------------------------------------
ISRAEL (1.6%)
Bank Hapoalim Ltd. ................................... 177,600 419,263
Bank Leumi Le-Israel.................................. 252,000 385,689
Delek Israel Fuel Corp., Ltd. ........................ 4,500 136,221
Koor Industries Ltd. ................................. 3,500 360,555
-----------
1,301,728
- -------------------------------------------------------------------------------
KOREA (5.9%)
Central Investment & Finance.......................... 3,612 20,318
Cheil Industrial, Inc. ............................... 14,500 98,177
Commercial Bank of Korea.............................. 108,000 420,750
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
KOREA--(CONTINUED)
Daewoo Corp. ......................................... 27,100 $ 177,844
Dongbu Steel Co. ..................................... 3,960 40,012
Hanjin Shipping Co., Ltd. ............................ 4,000 33,750
*Hanjin Transportation Co. ........................... 2,123 24,105
Hyundai Electronics Industries Co. ................... 4,000 83,333
*Hyundai Engineering & Construction Co. .............. 5,100 75,969
Keum Kang Development Industries Co. ................. 17,932 179,694
*Kia Motors Corp. .................................... 11,000 85,135
Korea Electric Power Corp. ADR........................ 36,000 513,750
Korea Exchange Bank................................... 83,000 383,875
Korea Express (The) Co. .............................. 8,365 89,749
Korea Kumho Petrochemical Co. ........................ 16,000 91,667
Korea Long Term Credit Bank........................... 14,975 121,048
LG Electronics........................................ 32,700 442,812
LG International Corp. ............................... 22,000 119,396
LG Metal.............................................. 11,000 98,542
LG Semiconductor Co. ................................. 9,680 160,325
Mando Machinery Corp. ................................ 2,100 64,531
Samsung Corp. ........................................ 16,000 130,000
Samsung Display Devices Co. .......................... 4,000 122,917
Samsung Electro-Mechanics Co. ........................ 9,000 145,312
Samsung Electronics................................... 4,212 166,286
Shinhan Investment & Finance.......................... 16,114 293,745
Shinsegae Department Store Co. ....................... 4,000 69,167
Ssangyong Cement Co., Ltd. ........................... 12,000 84,375
Ssangyong Oil Refining Co., Ltd. ..................... 13,780 188,040
Tai Han Electric Wire Co. ............................ 6,700 59,323
Tongyang Investment & Finance......................... 112 892
Yuhan Corp. .......................................... 1,349 45,248
Yukong Ltd. .......................................... 9,405 127,359
-----------
4,757,446
- -------------------------------------------------------------------------------
MALAYSIA (11.9%)
AMMB Holdings Bhd. ................................... 180,000 294,683
Angkasa Marketing Bhd. ............................... 103,000 64,356
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MALAYSIA--(CONTINUED)
Austral Enterprises Bhd. .............................. 181,000 $ 243,581
Bandar Raya Developments Bhd. ......................... 563,000 248,606
Berjaya Capital Bhd. .................................. 211,000 114,722
Berjaya Group Bhd. .................................... 394,000 171,613
Boustead Holdings Bhd. ................................ 132,000 150,676
Cement Industries of Malaysia Bhd. .................... 60,000 72,815
Commerce Asset Holding Bhd. ........................... 120,000 93,722
*Datuk Keramat Holdings Bhd. .......................... 171,000 113,007
Edaran Otomobil Nasional Bhd. ......................... 55,000 173,476
Genting Bhd. .......................................... 248,000 700,270
Golden Hope Plantations Bhd. .......................... 303,000 396,840
Guinness Anchor Bhd. .................................. 87,000 102,968
Guthrie Ropel Bhd. .................................... 79,000 79,261
Hicom Holdings Bhd. ................................... 88,000 74,809
Highlands & Lowlands Bhd. ............................. 160,000 181,676
Ho Hup Construction Co. Bhd. .......................... 44,000 48,904
Hong Leong Credit Bhd. ................................ 46,000 64,392
Hong Leong Properties Bhd. ............................ 172,000 66,134
IOI Properties Bhd. ................................... 67,000 53,133
Jaya Tiasa Holdings Bhd. .............................. 59,000 124,061
Kuala Lumpur Kepong Bhd. .............................. 139,000 334,034
Kulim (Malaysia) Bhd. ................................. 176,000 198,786
LARUT Consolidated Bhd. ............................... 96,000 34,028
Lion Land Bhd. ........................................ 141,000 46,591
MBF Capital Bhd. ...................................... 143,000 84,193
Malaysian Airline System Bhd. ......................... 285,000 376,690
Malaysian Industrial Development Finance Bhd. ......... 142,000 80,192
Malaysian International Shipping Bhd. (Foreign)........ 149,000 250,646
Malaysian Oxygen Bhd. ................................. 17,000 53,620
Multi-Purpose Holdings Bhd. ........................... 740,000 389,006
Negara Properties (Malaysia) Bhd. ..................... 36,000 110,303
*PPB Oil Palms Bhd. ................................... 129,000 127,876
Pan Pacific Asia Bhd. ................................. 35,000 38,690
Pelangi Bhd. .......................................... 197,000 95,275
Perlis Plantations Bhd. ............................... 61,750 113,150
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MALAYSIA--(CONTINUED)
Pernas International Holdings Bhd. ................... 240,000 $ 113,908
Perusahaan Otomobil Nasional Bhd. .................... 66,000 158,606
Petronas Dagangan Bhd. ............................... 101,000 141,382
Petronas Gas Bhd. .................................... 147,000 397,417
Pilecon Engineering Bhd. ............................. 53,000 21,811
RHB Capital Bhd. ..................................... 326,000 274,196
Rothmans of Pall Mall Bhd. ........................... 39,000 313,382
*Rashid Hussain Bhd. ................................. 169,000 291,904
Shangri-La Hotels Malaysia Bhd. ...................... 89,000 35,023
Sime Darby Bhd. ...................................... 558,000 804,566
Southern Bank Bhd. (Foreign) ......................... 50,250 33,963
Southern Steel Bhd. .................................. 58,000 79,796
*Tongkah Holdings Bhd. ............................... 129,000 75,176
Telekom Malaysia Bhd. ................................ 122,000 317,002
Tenaga Nasional Bhd. ................................. 80,000 173,025
*Westmont Industries Bhd. ............................ 481,000 164,716
*YTL Power International Bhd. ........................ 195,000 156,398
-----------
9,519,056
- -------------------------------------------------------------------------------
MEXICO (10.9%)
Apasco S.A. de C.V., Class A.......................... 51,000 311,497
*Banacci, Class B..................................... 34,000 67,511
Carso Global Telecom, Class A......................... 80,000 266,347
*Cemex S.A., Class B.................................. 13,837 60,899
*Cemex S.A. CPO....................................... 191,000 758,281
Cifra S.A. de C.V., Class A........................... 33,322 61,057
Cifra S.A. de C.V., Class B........................... 22,688 45,267
Cifra S.A. de C.V., Class C........................... 220,000 382,036
Coca-Cola Femsa S.A., Class L......................... 64,000 279,761
Controladora Comercial Mexicana S.A. de C.V........... 358,000 358,429
Empresas ICA Sociedad Controladora.................... 208,800 467,612
Grupo Carso S.A. de C.V., Series A1................... 80,000 510,659
Grupo Casa Autrey S.A. de C.V. ....................... 110,000 197,605
Grupo Celanese S.A., Class B1......................... 200,000 431,138
Grupo Financiero Inbursa S.A. de C.V., Class B........ 87,791 310,160
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MEXICO--(CONTINUED)
Grupo Industrial Bimbo S.A. de C.V., Class A.............. 22,000 $ 166,252
Grupo Industrial Maseca, Class B.......................... 239,000 231,844
Grupo Mexico S.A., Class B................................ 48,000 186,826
*Grupo Televisa S.A. CPO.................................. 30,600 480,072
Industrias Penoles S.A. .................................. 78,000 310,599
Kimberly-Clark de Mexico S.A. de C.V., Class A............ 200,000 880,240
Telefonos de Mexico S.A. de C.V., Class L................. 885,300 1,929,636
Transportacion Maritima Mexicana S.A. de C.V., Class L.... 8,000 61,317
----------
8,755,045
- --------------------------------------------------------------------------------
PHILIPPINES (2.6%)
Ayala Corp., Class B...................................... 136,000 50,371
First Philippine Holdings Corp., Class B.................. 42,450 35,677
JG Summit Holding, Inc. .................................. 863,700 92,276
Manila Electric Co. ...................................... 166,944 513,674
Metro Pacific Corp. ...................................... 1,798,000 120,891
Metropolitan Bank & Trust Co. ............................ 97,320 679,299
Philippine Long Distance Telephone Co. ................... 19,200 478,633
*Primetown Property Group, Inc. .......................... 445,900 82,574
SM Prime Holdings, Inc. .................................. 149,800 26,460
----------
2,079,855
- --------------------------------------------------------------------------------
PORTUGAL (4.1%)
Banco Comercial Portugues S.A. ........................... 17,767 361,808
Banco Espirito Santo e Comercial de Lisboa................ 18,840 546,553
Banco Portugues de Investimento (Registered).............. 12,352 277,885
Banco Totta & Acores, Class B (Registered)................ 4,690 90,705
Cimpor Cimentos de Portugal S.A. ......................... 1,900 48,094
Corticeira Amorim S.A. ................................... 16,000 191,126
Credito Predial Portugues, S.A. .......................... 11,550 118,194
Estabelecimentos Jeronimo Martins & Filho SGPS S.A. ...... 7,598 497,025
*Inparsa-Industria e Participacoes SGPS S.A. ............. 6,000 118,089
Modelo Continente SGPS S.A. .............................. 3,200 150,153
Portugal Telecom S.A. (Registered)........................ 11,842 486,007
Sonae Industria e Investimento............................ 12,000 448,464
----------
3,334,103
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

11
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SOUTH AFRICA (12.6%)
ABSA Group Ltd. ....................................... 86,800 $ 513,876
Allied Electronics Corp., Ltd. ........................ 40,600 71,687
Anglo-American Gold Investment Co., Ltd. .............. 1,200 53,345
Anglo-American Industrial Corp., Ltd. ................. 14,000 418,779
Anglovaal Industries Ltd. ............................. 89,267 207,684
Barlow Ltd. ........................................... 43,900 442,283
Driefontein Consolidated Ltd. ......................... 27,400 195,511
*Eastvaal Gold Holdings Ltd. .......................... 136,100 128,636
Edgars Stores Ltd. .................................... 2,900 65,783
Ellerine Holdings Ltd. ................................ 17,510 132,762
First National Bank Holdings Ltd. ..................... 12,300 92,876
Free State Consolidated Gold Mines Ltd. ............... 10,800 55,077
*Harmony Gold Mining Co., Ltd. ........................ 8,500 29,310
Johannesburg Consolidated ............................. 34,000 381,388
Kersaf Investments Ltd. ............................... 20,100 125,051
Kloof Gold Mining Co., Ltd. ........................... 29,500 125,623
Liberty Life Association of Africa Ltd. ............... 42,800 1,066,888
LibLife Strategic Investments Ltd. .................... 121,850 379,674
Malbak Ltd. ........................................... 39,500 46,113
Murray & Roberts Holdings Ltd. ........................ 75,500 141,151
Nampak Ltd. ........................................... 67,000 208,766
Nedcor Ltd. ........................................... 49,000 1,028,043
Pick'n Pay Stores Ltd. ................................ 27,300 41,115
Pick'n Pay Stores Ltd., Class N........................ 54,600 74,857
Polfin Ltd. ........................................... 103,600 193,685
Premier Group (The) Ltd. .............................. 101,090 111,296
Rembrandt Group Ltd. .................................. 61,300 502,981
Safmarine & Rennies Holdings Ltd. ..................... 39,900 87,027
Sappi Ltd. ............................................ 36,100 228,718
Sasol Ltd. ............................................ 83,300 1,003,614
South African Breweries Ltd. .......................... 13,400 356,294
South African Iron & Steel Industrial Corp., Ltd. ..... 218,600 113,523
Standard Bank Investment Corp., Ltd. .................. 13,400 567,844
Sun International (South Africa) Ltd. ................. 251,200 140,889
Tongaat-Hulett Group Ltd. ............................. 26,200 356,481
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SOUTH AFRICA--(CONTINUED)
Toyota South Africa Ltd. ............................. 16,700 $ 104,071
Vaal Reefs Exploration & Mining Co., Ltd. ............ 1,100 47,437
Wooltru Ltd., Class N................................. 58,800 195,430
*Woolworths Holdings Ltd. ............................ 50,568 87,711
-----------
10,123,279
- -------------------------------------------------------------------------------
SRI LANKA (0.8%)
Blue Diamond Jewelry World............................ 96,642 13,344
Development Finance Corp. of Ceylon................... 48,400 204,941
Hayleys Ltd. ......................................... 36,000 132,552
John Keells Holdings Ltd. ............................ 35,525 181,341
Sampath Bank Ltd. .................................... 105,000 110,711
-----------
642,889
- -------------------------------------------------------------------------------
THAILAND (5.6%)
*Advance Agro Public Co., Ltd. ....................... 81,000 79,024
*Advance Agro Public Co., Ltd. (Foreign).............. 80,300 78,342
Advanced Info Service Public Co., Ltd. (Foreign)...... 155,600 819,746
Asia Credit Co., Ltd. (Foreign)....................... 32,000 42,927
Bangchak Petroleum Public Co., Ltd. (Foreign)......... 80,800 17,342
*Bangkok Expressway Public Co., Ltd. (Foreign)........ 284,500 208,171
BEC World Public Co., Ltd. (Foreign).................. 73,000 373,903
Ch. Harnchang Public Co., Ltd. (Foreign).............. 48,900 64,405
Dhana Siam Finance and Securities Public Co., Ltd.
(Foreign)............................................ 200,000 87,805
Electricity Generating Public Co., Ltd. (Foreign)..... 58,400 95,434
First Bangkok City Bank Ltd. (Foreign)................ 272,600 103,056
Hemaraj Land and Development Public Co., Ltd. (For-
eign)................................................ 103,500 138,841
I.C.C. International Public Co., Ltd. (Foreign)....... 34,000 66,342
Italian-Thai Development Corp. (Foreign).............. 16,300 19,480
Krungthai Thanakit plc (Foreign)...................... 66,200 34,311
Land and House Co., Ltd. (Foreign).................... 87,176 74,419
National Finance & Securities Co., Ltd. (Foreign)..... 286,900 124,207
Nava Finance and Securities Public Co., Ltd. (For-
eign)................................................ 167,300 61,207
PTT Exploration & Production (Foreign)................ 19,800 198,000
Precious Shipping plc (Foreign)....................... 26,700 20,676
Samart Corp. plc (Foreign)............................ 29,600 37,541
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
THAILAND--(CONTINUED)
Shinawatra Satellite Public Co., Ltd. (Foreign)....... 94,600 $ 29,995
Siam City Cement Co., Ltd. (Foreign).................. 11,700 97,595
Siam Commercial Bank Co., Ltd. (Foreign).............. 86,700 165,999
Siam Makro Public Co., Ltd. (Foreign)................. 73,100 90,929
Siam Pulp & Paper Public Co., Ltd. (Foreign).......... 271,200 277,815
*TelecomAsia Corp. Public Co., Ltd. (Foreign)......... 507,800 219,840
Thai Airways International Ltd. ...................... 354,000 397,171
Thai Petrochemical Industry Public Co., Ltd. (For-
eign)................................................ 708,940 146,975
Thai Plastic & Chemical Public Co., Ltd. (Foreign).... 68,200 133,905
*Thai Telephone & Communication Public Co., Ltd. (For-
eign)................................................ 126,450 25,290
United Communication Industry (Foreign)............... 87,200 142,498
-----------
4,473,191
- -------------------------------------------------------------------------------
TURKEY (5.3%)
Akbank TAS............................................ 7,931,000 540,495
Aksa Akrilik Kimya Sanayii AS......................... 793,352 68,124
Cimentas AS........................................... 481,068 60,979
Eregli Demir Ve Celik Fabrikalari TAS................. 3,152,000 515,538
Finans Bank AS........................................ 3,093,254 64,928
*Ihlas Holding AS..................................... 2,912,450 408,874
*Netas Telekomunik.................................... 646,000 193,708
Tat Konserve Sanayii AS............................... 1,504,997 82,873
Tofas Turk Otomobil Fabrikasi AS...................... 13,105,500 910,997
*Turk Hava Yollari A.O. .............................. 719,069 150,933
Turkiye Garanti Bankasi AS............................ 10,553,000 546,579
Yapi ve Kredi Bankasi AS.............................. 22,323,000 681,544
-----------
4,225,572
- -------------------------------------------------------------------------------
VENEZUELA (2.3%)
CANTV................................................. 21,000 122,309
Corporacion Venezolana de Cementos, S.A.C.A. ......... 26,020 52,222
Electricidad de Caracas............................... 771,867 1,014,677
Manufacturas Textiles................................. 53,130 1,333
Siderurgica Venezolana Sivensa........................ 1,528 8,617
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
VENEZUELA--(CONTINUED)
Siderurgica Venezolana Sivensa, Class A............... 909,000 $ 496,223
Venezolana de Cementos................................ 55,881 113,162
-----------
1,808,543
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $79,885,390)................. 67,973,334
- -------------------------------------------------------------------------------
PREFERRED STOCKS (13.9%)
- -------------------------------------------------------------------------------
BRAZIL (13.9%)
Banco Bradesco........................................ 74,097,003 551,157
Banco Do Brasil S.A. ................................. 46,000,000 388,062
Banco Itau S.A. ...................................... 1,118,000 451,297
Bombril S.A. ......................................... 102,520,000 863,943
Brahma................................................ 830,909 520,072
Brasmotor S.A. ....................................... 1,100,000 154,663
Ceval Alimentos S.A. ................................. 20,000,000 159,470
Cia Acos Especiais Itabira............................ 19,740,000 29,545
Cia Brasil Petroleo Ipiranga.......................... 26,700,000 387,518
Cia Brasileira de Frigorificos........................ 272,000 148,041
Cia Brasileira de Petroleo Ipiranga................... 30,600,000 516,292
Cia Energetica de Minas Gerais........................ 15,600,000 622,641
*Cia Energetica de Sao Paulo ......................... 7,500,000 469,430
Cia Siderurgica Tubarao, Class B...................... 6,400,000 81,277
Cia Vale do Rio Doce.................................. 19,960 385,657
Eletrobras, Class B................................... 945,602 409,155
*Eletropaulo.......................................... 2,000,000 341,074
Fertilizantes Fosfatados.............................. 109,300,000 436,248
Gerdau Metalurgica S.A. .............................. 8,821,960 351,150
Gerdau S.A. .......................................... 20,216,866 313,596
Globex Utilidades S.A. ............................... 6,000 65,312
Itausa Investimentos Itau S.A. ....................... 800,000 544,267
Mineracao da Trindade-Samitri......................... 3,003,000 83,084
Petrobras............................................. 1,358,666 252,655
Petrobras Distribuidora S.A. ......................... 11,250,000 203,080
Refinaria de Petroleo Ipiranga........................ 16,800,000 143,099
Ripasa S.A. .......................................... 164,000 53,556
Sadia Concordia S.A. ................................. 215,000 156,023
</TABLE>

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- --------------------------------------------------------------------------------
PREFERRED STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
BRAZIL--(CONTINUED)
Telebras............................................... 6,880,060 $ 686,508
Telemig, Class B....................................... 1,300,000 162,736
Telepar S.A. .......................................... 150,000 78,237
Telesp S.A. ........................................... 3,453,782 902,294
*Uniao de Industrias Pertoquimicas S.A., Class B....... 191,875 59,178
Usiminas............................................... 22,520 168,532
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $9,773,763)................ 11,138,849
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- --------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS (0.0%)
- --------------------------------------------------------------------------------
BRAZIL (0.0%)
*Telepar S.A., expiring 11/12/97....................... 7,316 --
*Telesp S.A., expiring 11/12/97........................ 115,486 3,133
-----------
3,133
- --------------------------------------------------------------------------------
GREECE (0.0%)
*National Bank of Greece, expiring 11/14/97............ 440 1,775
- --------------------------------------------------------------------------------
MALAYSIA (0.0%)
*Affin Holdings Bhd., expiring 12/12/97................ 65,800 --
*Southern Bank Bhd., expiring 12/1/97.................. 16,750 2,013
-----------
2,013
- --------------------------------------------------------------------------------
TOTAL RIGHTS (0.0%) (COST $0)........................... 6,921
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
- --------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.0%)
- --------------------------------------------------------------------------------
MALAYSIA (0.0%)
*Affin Holdings Bhd., expiring 11/15/99 (COST $0)...... 32,900 12,551
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (4.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.3%)
Chase Securities, Inc. 5.60% dated 10/31/97, due
11/03/97, to be repurchased at $3,407,589,
collateralized by $3,265,580 of various
U.S. Treasury Notes, 5.50-8.75%, due from 5/15/00-
6/30/02, valued at $3,407,921 (COST $3,406,000)..... $3,406,000 $ 3,406,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.9%) (COST $93,065,153) (A)..... 82,537,655
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.9%).................. (2,318,073)
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $80,219,582
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $93,065,153. At October 31,
1997, net unrealized depreciation for all securities based on tax cost was
$10,527,498. This consisted of aggregate gross unrealized appreciation for
all securities of $13,657,599 and aggregate gross unrealized depreciation
for all securities of $24,185,097.

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

At October 31, 1997 sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF
NET MARKET
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Automotive................................................ 3.0 $ 2,407,070
Banks..................................................... 11.8 9,462,513
Beverages, Food & Tobacco................................. 6.0 4,781,806
Building Materials........................................ 0.9 754,185
Building Related.......................................... 0.2 159,470
Capital Equipment......................................... 0.4 310,599
Chemicals................................................. 3.5 2,831,318
Construction.............................................. 4.1 3,300,575
Consumer Cyclical......................................... 0.2 157,271
Consumer Durables......................................... 0.4 309,407
Electronics............................................... 1.9 1,521,383
Energy.................................................... 4.3 3,428,766
Entertainment & Leisure................................... 0.3 265,940
Financial Services........................................ 10.0 8,027,197
Forest Products & Paper................................... 0.1 53,556
Holding Company........................................... 8.4 6,721,410
Home Furnishings & Appliances............................. 0.3 208,055
Industrial................................................ 0.7 563,376
Insurance................................................. 1.3 1,066,888
Iron & Steel.............................................. 1.9 1,532,965
Lodging & Restaurants..................................... 0.2 200,962
Manufacturing............................................. 2.2 1,790,855
Metals.................................................... 1.6 1,292,944
Mining.................................................... 0.8 634,939
Multi-Industry............................................ 2.6 2,126,143
Oil & Gas................................................. 1.9 1,496,088
Paper & Packaging......................................... 2.4 1,891,179
Pharmaceuticals........................................... 1.0 809,697
Real Estate............................................... 2.0 1,635,101
Repurchase Agreement...................................... 4.3 3,406,000
Retail.................................................... 3.1 2,461,855
Services.................................................. 1.0 832,960
Telecommunications........................................ 10.2 8,209,126
Textiles & Apparel........................................ 0.3 208,418
Transportation............................................ 2.4 1,895,884
Utilities................................................. 7.2 5,781,754
- --------------------------------------------------------------------------------
Total Investments........................................ 102.9% $82,537,655
Other Assets and Liabilities (Net)........................ (2.9) (2,318,073)
- --------------------------------------------------------------------------------
Net Assets............................................... 100.0% $80,219,582
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Value (Cost $93,065,153) ....................... $ 82,537,655
Foreign Currency, at Value (Cost $768,754) ..................... 741,505
Receivable for Investments Sold................................. 2,648,428
Dividends Receivable............................................ 68,322
Receivable for Portfolio Shares Sold............................ 58,990
Foreign Withholding Tax Reclaim Receivable...................... 816
Interest Receivable............................................. 530
Deferred Organization Costs--Note A............................. 344
Other Assets.................................................... 2,297
- -------------------------------------------------------------------------------
Total Assets................................................... 86,058,887
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased............................... 4,777,522
Payable for Shares Redeemed..................................... 40
Payable to Custodian--Note D.................................... 658,610
Payable for Custodian Fees--Note D.............................. 278,704
Payable for Investment Advisory Fees--Note B.................... 77,852
Payable for Administrative Fees--Note C......................... 13,143
Payable for Directors' Fees--Note G............................. 821
Payable for Account Service Fees--Note F........................ 11
Other Liabilities............................................... 32,602
- -------------------------------------------------------------------------------
Total Liabilities.............................................. 5,839,305
- -------------------------------------------------------------------------------
NET ASSETS....................................................... $ 80,219,582
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................. $ 86,448,554
Undistributed Net Investment Income............................. 816,556
Accumulated Net Realized Gain................................... 3,580,938
Unrealized Depreciation......................................... (10,626,466)
- -------------------------------------------------------------------------------
NET ASSETS....................................................... $ 80,219,582
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000).................................................... 7,111,123
Net Asset Value, Offering and Redemption Price Per Share........ $ 11.28
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

19
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
- ---------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends........................................................ $ 2,372,537
Interest......................................................... 187,747
Less Foreign Taxes Withheld...................................... (142,637)
- ---------------------------------------------------------------------------------
Total Income.................................................... 2,417,647
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................. 862,391
Custodian Fees--Note D........................................... 193,906
Administrative Fees--Note C...................................... 140,787
Printing Fees.................................................... 20,045
Registration and Filing Fees..................................... 19,847
Audit Fees....................................................... 18,330
Legal Fees....................................................... 7,142
Directors' Fees--Note G.......................................... 3,129
Amortization of Organizational Costs--Note A..................... 559
Account Services Fees--Note F.................................... 76
Other Expenses................................................... 27,522
- ---------------------------------------------------------------------------------
Total Expenses.................................................. 1,293,734
Expense Offset--Note A........................................... (233)
- ---------------------------------------------------------------------------------
Net Expenses.................................................... 1,293,501
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................. 1,124,146
- ---------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments...................................................... 3,598,763
Foreign Exchange Transactions.................................... (211,261)
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN EXCHANGE TRANS-
ACTIONS.......................................................... 3,387,502
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments...................................................... (11,318,067)
Foreign Exchange Translations.................................... (65,718)
- ---------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION.......... (11,383,785)
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN EXCHANGE TRANSACTIONS......... (7,996,283)
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ (6,872,137)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

20
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 1,124,146 $ 710,560
Net Realized Gain.................................... 3,387,502 62,405
Net Change in Unrealized Appreciation/Depreciation... (11,383,785) 2,004,764
- ----------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations......................................... (6,872,137) 2,777,729
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (690,005) (60,888)
Net Realized Gain.................................... (195,793) (182,665)
- ----------------------------------------------------------------------------------
Total Distributions................................. (885,798) (243,553)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................... 23,222,058 36,059,283
--In Lieu of Cash Distributions.................... 855,408 241,843
Redemption Fees--Note J.............................. 14,952 --
Redeemed............................................. (5,764,196) (3,130,062)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 18,328,222 33,171,064
- ----------------------------------------------------------------------------------
Total Increase....................................... 10,570,287 35,705,240
Net Assets:
Beginning of Year.................................... 69,649,295 33,944,055
- ----------------------------------------------------------------------------------
End of Year (including undistributed net investment
income of $816,556 and $606,127, respectively)...... $ 80,219,582 $69,649,295
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 1,726,498 2,951,393
In Lieu of Cash Distributions....................... 73,049 22,372
Shares Redeemed..................................... (432,801) (251,153)
- ----------------------------------------------------------------------------------
1,366,746 2,722,612
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

21
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 31, JUNE 17, 1993**
----------------------------------- TO OCTOBER 31,
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 12.12 $ 11.23 $ 14.00 $11.34 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)................ 0.16 0.13 0.05 (0.03) (0.01)
Net Realized and
Unrealized Gain
(Loss)................ (0.85) 0.84 (2.82) 2.74 1.35
- -------------------------------------------------------------------------------
Total from Investment
Operations........... (0.69) 0.97 (2.77) 2.71 1.34
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.. (0.12) (0.02) -- -- --
Net Realized Gain...... (0.03) (0.06) -- (0.05) --
- -------------------------------------------------------------------------------
Total Distributions... (0.15) (0.08) -- (0.05) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 11.28 $ 12.12 $ 11.23 $14.00 $11.34
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN............ (5.71)% 8.72% (19.79)% 23.97%+ 13.40%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Pe-
riod (Thousands)....... $80,220 $69,649 $33,944 $5,558 $3,927
Ratio of Expenses to
Average Net Assets..... 1.50% 1.79% 1.78% 2.07% 2.43%*
Ratio of Net Investment
Income (Loss) to Aver-
age Net Assets......... 1.31% 1.29% 0.86% (0.25)% (0.37)%*
Portfolio Turnover
Rate................... 28% 11% 21% 9% 2%
Average Commission Rate
#...................... $0.0003 $0.0004 N/A N/A N/A
- -------------------------------------------------------------------------------
Voluntarily Waived Fees
and Expenses Assumed by
the Adviser Per Share.. N/A N/A $ 0.02 $ 0.12 $ 0.04
Ratio of Expenses to Av-
erage Net Assets In-
cluding Expense Off-
sets................... 1.50% 1.79% 1.77% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

22
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The Acadian
Emerging Markets Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc.,
is a diversified, open-end management investment company. At October 31, 1997,
the UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the Portfolio is to seek long-term capital appreciation by investing
primarily in common stocks of emerging country issuers.

23
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO

NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

U.S. dollars on the date of valuation. The Portfolio does not isolate that
portion of realized or unrealized gains and losses resulting from changes
in the foreign exchange rate from fluctuations arising from changes in the
market prices of the securities. These gains and losses are included in net
realized and unrealized gain and loss on investments on the statement of
operations. Net realized and unrealized gains and losses on foreign
currency transactions represent net foreign exchange gains or losses from
forward foreign currency exchange contracts, disposition of foreign
currencies, currency gains or losses realized between trade and settlement
dates on securities transactions and the difference between the amount of
the investment income and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received
or paid.

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications of $223,712 to decrease
undistributed net investment income, and $224,270 to increase accumulated
net realized gain, with a decrease to paid in capital of $558.

Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.

7. ORGANIZATION COST: Costs incurred by the Portfolio in connection with
its organization have been deferred and are being amortized on a straight-
line basis over a five year period.

8. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. 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

24
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

on their relative net assets. Custodian fees for the Portfolio have been
increased to include expense offsets for custodian balance credits, if any.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Acadian Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at a monthly fee calculated at an annual rate of
1.00% of average daily net assets for the month. The Adviser has voluntarily
agreed to waive a portion of its advisory fees and to assume expenses, if
necessary, in order to keep the Portfolio's total annual operating expenses,
after the effect of expense offset arrangements, from exceeding 2.50% of
average daily net assets.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 annual fee payable monthly of
0.06% of average daily net assets of the Portfolio. The Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent
services. Pursuant to the Mutual Funds Service Agreement, the Administrator
pays CGFSC a monthly fee. For the year ended October 31, 1997, UAM Fund
Services, Inc. earned $140,787 from the Portfolio as Administrator of which
$89,053 was paid to CGFSC for its services.

D. CUSTODIAN: The Chase Manhattan Bank, an affiliate of CGFSC, is custodian
for the Portfolio's assets held in accordance with the custodian agreement. As
part of the custodian agreement, the custodian bank has a lien on the
securities of the Portfolio to cover any advances made by the custodian to the
Portfolio. At October 31, 1997, the payable to the custodian bank represents
the amount due for cash advanced for shareholder redemptions.

F. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered into
an Account Services Agreement (the "Services Agreement") with UAM Retirement
Plan Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of
UAM. Under the Services Agreement, the Service Provider agrees to perform
certain services for participants in a self-directed, defined contribution
plan, and for whom the Service Provider provides participant record keeping.
Pursuant to the Services Agreement, the Service Provider is entitled to
receive, after

25
<PAGE>

ACADIAN EMERGING MARKETS PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

the end of each month, a fee at the annual rate of 0.15% of the average
aggregate daily net asset value of shares of the UAM Funds in the accounts for
which they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $40,782,429 and sales of $22,698,079 of investment
securities other than long-term U.S. Government and short-term securities.
There were no purchases or sales of long-term U.S. Government securities.

J. OTHER: At October 31, 1997, 69.7% of total shares outstanding were held by
2 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

The Portfolio retains a redemption fee of 1.00% on redemptions of capital
shares held for less than 90 days in the Portfolio.

26
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Acadian Emerging Markets Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Acadian Emerging
Markets Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at
October 31, 1997, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED)

Foreign taxes during the fiscal year ended October 31, 1997 amounted to
$142,637 are expected to be passed through to the shareholders as foreign tax
credits on Form 1099-DIV for the year ending December 31, 1997 which
shareholders of this Portfolio will receive in late January, 1998. Acadian
Emerging Markets Portfolio hereby designates $80,621 as a long-term capital
gain dividend for purposes of the dividend paid deduction on its federal
income tax return. In addition, for the year ended October 31, 1997, gross
income derived from sources within foreign countries amounted to $2,373,685
for the Portfolio.

27
<PAGE>

PART B

UAM FUNDS, INC.

- --------------------------------------------------------------------------------
C & B PORTFOLIOS
- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the C
& B Portfolios dated January 22, 1998. To obtain a Prospectus, please call the
UAM Funds Service Center: 1-800-638-7983

TABLE OF CONTENTS
<TABLE>

<S> <C>
INVESTMENT OBJECTIVES AND POLICIES....................................... 2

PURCHASE AND REDEMPTION OF SHARES........................................ 8

VALUATION OF SHARES...................................................... 9

SHAREHOLDER SERVICES..................................................... 10

INVESTMENT LIMITATIONS................................................... 11

MANAGEMENT OF THE FUND................................................... 14

INVESTMENT ADVISER....................................................... 18

PORTFOLIO TRANSACTIONS................................................... 20

ADMINISTRATIVE SERVICES.................................................. 21

CUSTODIAN................................................................ 23

INDEPENDENT ACCOUNTANTS.................................................. 24

DISTRIBUTOR.............................................................. 24

PERFORMANCE CALCULATIONS................................................. 24

GENERAL INFORMATION...................................................... 26

FINANCIAL STATEMENTS..................................................... 28

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS....................... 1

APPENDIX B - COMPARISONS................................................. 1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and policies of
the C & B Equity, C & B Balanced, C & B Equity Portfolio for Taxable Investors
and C & B Mid Cap Equity Portfolios (the "Portfolios") as set forth in the C & B
Portfolios' Prospectus.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "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 any include the Portfolio investing any
cash collateral in interest bearing short-term investments). A Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of the collateral for the loan) at fair market value would
be committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed in the Prospectus.

SHORT TERM INVESTMENTS

-2-
<PAGE>

maturing from two business days through seven calendar days will not exceed 10%
of the total assets of a Portfolio.

Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other 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 purchased by each
Portfolio;

(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, determined by the Adviser to be of comparable
quality;

(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;

(6) Repurchase agreements collateralized by securities listed above.

FUTURES CONTRACTS

In order to remain fully invested and to reduce transactions costs, the
Balanced Portfolio may invest in stock and bond futures and options and interest
rate futures contracts

-3-
<PAGE>

and the Equity, Equity Portfolio for Taxable Investors and Mid Cap Portfolios
may invest in stock futures and options. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount of
a specific security at a specified future time and at a specified price. Futures
contracts which are standardized as to maturity date and underlying financial
instrument are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission ("CFTC"), a U.S. Government agency.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions 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.
Brokers 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, changes in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures market primarily to offset unfavorable
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

-4-
<PAGE>

from a fluctuation in interest rates. Each Portfolio intends to use futures
contracts only for hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contract purchases will be "completed"; that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the use
of futures contracts may be a more effective means of hedging this exposure.
While a Portfolio will incur commission expenses in both opening and closing out
futures positions, these costs are lower than transaction costs incurred in the
purchase and sale of the underlying securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

A Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts exceeds 5% of the market value of its total assets. In addition, a
Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specified time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements, a
Portfolio would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if the Portfolio has insufficient cash,
it may have to sell Portfolio securities to meet daily margin requirements at a
time when it may be disadvantageous to

-5-
<PAGE>

do so. In addition, the Portfolio may be required to make delivery of the
instruments underlying futures contracts it holds. The inability to close
options and futures positions also could have an adverse impact on the
Portfolio's ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can be
substantial, 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the
Adviser does not believe that the Portfolios are subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.

Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that the Portfolio could lose money on futures contracts and also
experience a decline in value of Portfolio securities. There is also the risk of
loss by the Portfolio of margin deposits in the event of bankruptcy of a broker
with whom the Portfolio has an open position in a futures contract or related
option.

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 unfavorable
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

-6-
<PAGE>

positions and subjecting some futures traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions a Portfolio has identified as hedging transactions,
the Portfolio is required for federal income tax purposes to recognize as 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 recognized with respect to a futures
contract is considered to be 60% long-term capital gain or loss and 40% short-
term capital gain or loss, without regard to the holding period of the contract.
Furthermore, sales of futures contracts which are intended to hedge against a
change in the value of securities held by the Portfolio may affect the holding
period of such securities and, consequently, the nature of the gain or loss on
such securities upon disposition.

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income, for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. 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.

The Portfolios will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectus are calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average of the value of the portfolio securities. The
calculation excludes all securities, including options, whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of

-7-
<PAGE>

shares. See "Financial Highlights" in the Prospectus for the historical
portfolio turnover rates with respect to the Equity, Equity Portfolio for
Taxable Investors, MidCap Equity and Balanced Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Shares of the C & B Portfolios may be purchased without a sales commission,
at the net asset value per share next determined after an order is received in
proper form by the Fund and payment is received by the Fund's Custodian. The
minimum initial investment required is $2,500 with certain exceptions as may be
determined from time to time by the officers of the Fund. Other investment
minimums are: initial IRA investment, $500; initial spousal IRA investment,
$250; minimum additional investment for all accounts, $100. An order received in
proper form prior to the close of regular trading on the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern Time) will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the close of the Exchange will be executed at the price computed on the
next day the Exchange is open after proper receipt. The Exchange will be closed
on the following days: Presidents' Day; Good Friday; Memorial Day; Independence
Day; Labor Day; Thanksgiving Day; Christmas Day; New Year's Day and Dr. Martin
Luther King, Jr. Day.

Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interest of the Fund, and (3) to reduce
or waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of a Portfolio's shares.

The Portfolios may suspend redemption privileges or postpone the day of
payment (1) during any period that either the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any 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

-8-
<PAGE>

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 Directors may deem advisable; however,
payment will be made wholly in cash unless the Directors believe that economic
or market conditions exist which would make such a practice detrimental to the
best interests of the Portfolio. If redemptions are paid in investment
securities, such securities will be valued as set forth in the Prospectus under
"Valuation of Shares," and a redeeming shareholder would normally incur
brokerage expenses if these securities were converted to cash.

No charge is made by the Equity, MidCap and Balanced Portfolios for
redemptions. Shares of the Equity Portfolio for Taxable Investors held for less
than one year will be subject to a 1% redemption fee. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account.
Signature guarantees are required for (1) all redemptions when the proceeds are
to be paid to someone other than the registered owner(s) and/or registered
address, and (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Administrator. Broker-dealers guaranteeing signatures must
be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.

The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.

VALUATION OF SHARES

-9-
<PAGE>

Equity securities listed on a securities exchange for which market
quotations 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 securities
not traded on the valuation date for which market quotations are readily
available are valued neither exceeding the current asked prices nor less than
the current bid prices. Quotations of foreign securities in a foreign currency
are converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major bank
or by a broker.

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost when the
Board of Directors determines that amortized cost reflects fair value.

The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods determined by the Directors.

SHAREHOLDER SERVICES

The following supplements the shareholder services information set forth in
the Portfolios' Prospectus.

EXCHANGE PRIVILEGE

Institutional Class Shares of each C & B Portfolio may be exchanged for
Institutional Class Shares of other C & B Portfolios. In addition, Institutional
Class Shares of each C & B Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds -- Institutional Class Shares in the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM Funds,
UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O. Box
2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are qualified for sale in the shareholder's state of
residence.

Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or

-10-
<PAGE>

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
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading of the Exchange (generally 4:00 p.m. Eastern Time) will
be processed as of the close of business on the same day. Requests received
after the close of regular trading on the Exchange will be processed on the next
business day. Neither the Fund nor the Administrator will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency, and to other
restrictions established by the Board of Directors to assure that such exchanges
do not disadvantage the Fund and its shareholders.

For federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.

TRANSFER OF SHARES

Shareholders may transfer shares of the Fund's Portfolios to another person
by making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificates or any
stock power must be guaranteed in the same manner as described under "Purchase
and Redemption of Shares." As in the case of redemptions, the written request
must be received in good order before any transfer can be made.

INVESTMENT LIMITATIONS

The Portfolios are subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) at least 67% of the voting securities of the Portfolio present at a
meeting if the holders

-11-
<PAGE>

of more than 50% of the outstanding voting securities of the Portfolio are
present or represented by proxy, or (2) more than 50% of the outstanding voting
securities of the Portfolio. Whenever an investment limitation sets forth a
percentage limitation on investment or utilization of assets such limitation
shall be determined immediately after and as a result of a Portfolio's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, net assets or other circumstances
will not be considered when determining whether the investment complies with a
Portfolio's investment limitations. Each Portfolio will not:

(1) invest in commodities except that each Portfolio may invest in
futures contracts and options to the extent that not more than 5%
of a Portfolio's assets are required as deposit to secure
obligations under futures contracts;

(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;

(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in (10) below) which are publicly
distributed, and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so long
as such loans are not inconsistent with the 1940 Act or the rules
and regulations or interpretations of the Commission thereunder;

(4) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit a Portfolio from
(i) making any permitted borrowings, mortgages or pledges, or
(ii) entering into options, futures or repurchase transactions;

(5) purchase on margin or sell short except as specified in (1)
above;

(6) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer;

(7) with respect to 75% of its assets, purchase securities of any
issuer (except obligations of

-12-
<PAGE>

the United States Government and its instrumentalities) if as a
result more than 5% of the Portfolio's total assets, at the time
of purchase, would be invested in the securities of such issuer;

(8) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;

(9) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in
excess of 10% of the Portfolio's gross assets valued at the lower
of market or cost, and a Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross assets;

(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;

(11) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the net assets of the Portfolio, determined
at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;

(12) invest for the purpose of exercising control over management of
any company;

(13) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years;

(14) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, or instruments issued by U.S. banks when such

-13-
<PAGE>

Portfolio adopts a temporary defensive position; and

(15) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

<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 Company
1/26/29 from 1988 to 1993.

Nancy J. Dunn Director of the Fund; Vice President for Finance and
10 Garden Street Administration and Treasurer of Radcliffe College
Cambridge, MA 02138 since 1991.
8/14/51

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,
8/5/48 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
4/21/42

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, Partner
3/21/35 or Trustee of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.
</TABLE>

-14-
<PAGE>

<TABLE>
<C> <S>
Charles H. Salisbury, Director of the Fund; Executive Vice President of
Jr.* United Asset Management Corporation; formerly an
One International Place executive officer and Director of T. Rowe Price and
Boston, MA 02110 President and Chief Investment Office of T. Rowe Price
8/24/40 Trust Company.

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.
7/1/43 Investors, Inc., formerly a subsidiary of Dewey
Square.

William H. Park Vice President of the Fund; Executive Vice President
One International Place and Chief Financial Officer of United Asset Management
Boston, MA 02110 Corporation.
9/19/47

Gary L. French Treasurer of the Fund; President of UAM Fund Services,
211 Congress Street Inc. and UAM Fund Distributors, Inc.; Vice President
Boston, MA 02110 of Operations, Development and Control of Fidelity
7/4/51 Investments in 1995; Treasurer of the Fidelity Group
of Mutual Funds from 1991 to 1995.

Robert R. Flaherty Assistant Treasurer of the Fund; Vice President of UAM
211 Congress Street Fund Services, Inc.; former Manager of Fund
Boston, MA 02110 Administration and Compliance of Chase Global Fund
9/18/63 Services Company from 1995 to 1996; Senior Manager of
Deloitte & Touche LLP from 1985 to 1995.

Gordon M. Shone Assistant Treasurer of the Fund; Vice President of
73 Tremont Street Fund Administration and Compliance of Chase Global
Boston, MA 02108 Funds Services Company, formerly Senior Audit Manager
7/30/56 of Coopers & Lybrand LLP from 1983 to 1993.

Michael DeFao Secretary of the Fund; Vice President and General
211 Congress Street Counsel of UAM Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Associate Attorney of Ropes & Gray
2/28/68 (a law firm) from 1993 to 1995.
</TABLE>

-15-
<PAGE>

<TABLE>
<C> <S>
Karl O. Hartmann Assistant Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Chase Global Funds Services
Boston, MA 02108 Company.
3/7/55
</TABLE>

- ----------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned less
than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

-16-
<PAGE>

<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation
Name of Person, Compensation Accrued as Part of Benefits Upon from Registrant and
Position From Registrant Fund Expenses Retirement Fund Complex
-------- --------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr., $ 26,791 0 0 $ 32,750
Director

Nancy J. Dunn, $ 6,774 0 0 $ 8,300
Director

Philip D. English, $ 26,791 0 0 $ 32,750
Director

William A. Humenuk, $ 26,791 0 0 $ 32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held of
record or beneficially 5% or more of the shares of a Portfolio, as noted.

C & B Equity Portfolio: First Union National Bank, Trustee, for Defined
Benefit Pension Plan for Cadmus, 1525 West WT Harris Boulevard CMG 1151,
Charlotte, NC, 13.0%*; Commonwealth Energy System and Subsidiary Companies Post,
Retirement Benefit Program Group 1, One Main Street, Cambridge, MA, 12.0%*;
Hudson Valley District Council of Carpenters Pension Fund, R.D. 8, Box 327,
Middletown, NY, 7.9%* and Saxon & Co., FBO W. PA Team & MTR Carrier, P.O. Box
7780-1888, Philadelphia, PA, 5.9%.

C&B Equity Portfolio for Taxable Investors: Ann Hauptman and Cynthia
Jacobs Trste, FBO Ann Haupman, Hunter A. Haupman Trust, 4 Briga Lane, White
Plains, NY, 22.3%; S. Sanford Schlitt, TOD FBO Patricia Schlitt, 491 Meadow Lark
Drive, Sarasota, FL, 16.0%; Bruce A. Boulware and Lizabeth A. Boulware, JTTEN,
6805 Langley Springs, CT, McLean, VA, 12.6%; John J. Medveckis, The Barclay 22-
c, Philadelphia, PA, 9.0%; Mac & Co., Mutual Fund Operations, P.O. Box 3198,
Pittsburgh, PA, 7.4%; Charles Schwab & Co. Inc., Reinvestment Account, Attn:
Mutual Funds, 101 Montgomery Street, San Francisco, CA, 7.3% and Donaldson
Lufkin Janrette, Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ,
5.2%.

-17-
<PAGE>

C & B Balanced Portfolio: UFCW Local 56 & Food Industry Employers Money
Purchase Pension Trust, c/o Corestates Bank, P.O. Box 7829, Philadelphia, PA,
29.2%; Baptist Health System, Inc., D/B/A Coosa Valley Baptist Medical Center,
315 West Hickory Street, Sylacauga, AL, 14.6%; Charles J. Prizer, 4325 Gulf of
Mexico Drive, Longboat Key, FL, 11.9%*; Stanley B. Tulin, c/o Coopers & Lybrand,
717 Spring Mill Rd., Villanova, PA 19085, 6.4% and St. Andrews Church, Memorial
Endowment Fund, P.O. Box 1287, Edgartown, MA 02539, 5.6%.

As of December 24, 1997, C & B owned one share of the Taxable Equity and
Mid Cap Portfolios representing 100% of each Portfolio's shares issued.

The persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have the
ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.

- ----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

Cooke & Bieler, Inc. (the "Adviser") is a wholly-owned subsidiary of UAM, a
holding company incorporated in Delaware in December 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment
management. Since its first acquisition in August 1983, UAM has acquired or
organized approximately 45 such wholly-owned affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to retain
control over their investment advisory decisions is necessary to allow them to
continue to provide investment management services that are intended to meet the
particular needs of their respective clients. Accordingly, after acquisition by
UAM, UAM Affiliated Firms continue to operate under their own firm name, with
their own leadership and individual investment philosophy and approach. Each
UAM Affiliated Firm manages its own business independently on a day-to-day
basis. Investment strategies employed and securities selected by UAM Affiliated
Firms are separately chosen by each of them.

-18-
<PAGE>

SERVICES PERFORMED BY ADVISER

Pursuant to Investment Advisory Agreements ("Agreements") between the Fund
and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties under
the Agreements, (ii) reckless disregard by the Adviser of its obligations and
duties under the Agreements, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services, the
Adviser shall not be subject to any liability whatsoever to the Fund, for any
error of judgment, mistake of law or any other act or omission in the course of,
or connected with, rendering services under the Agreements.

Unless sooner terminated, the Agreements shall continue for periods of one
year so long as such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Board of Directors of the Fund
who are not parties to the Agreements or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Board of Directors of the Fund or (c) by vote of a majority of
the outstanding voting securities of the Portfolios. The Agreements may be
terminated at any time by a Portfolio, without the payment of any penalty, by
vote of a majority of the entire Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of a Portfolio on 60 days' written
notice to the Adviser. The Agreements may be terminated by the Adviser at any
time, without the payment of any penalty, upon 90 days' written notice to the
Fund. The Agreements will automatically and immediately terminate in the event
of their assignment.

PHILOSOPHY AND STYLE

The Adviser bases its philosophy and process on selecting high quality,
risk averse stocks. An emphasis on value is designed to protect assets in down
markets. The stock selection process is geared towards finding companies with
high quality earnings which are sustainable in a wide range of economic
environments. Key criteria include companies with strong balance sheets, a
proven management team and low debt. On the fixed income side, the Adviser is a
conservative, quality-oriented bond manager.

-19-
<PAGE>

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included Baptist Health System, Mayo
Foundation, Wisconsin Energy Corp. and Princeton University.

In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.

ADVISORY FEES

As compensation for services rendered by the Adviser under the Agreements,
each C & B Portfolio pays the Adviser an annual fee, in monthly installments,
calculated by applying the following annual percentage rates to each C & B
Portfolio's average net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
Equity Portfolio............................ 0.625%
Balanced Portfolio.......................... 0.625%
Equity Portfolio
for Taxable Investors.................. 0.625%
Mid Cap Equity Portfolio.................... 0.625%
</TABLE>

For the periods ended October 31, 1995, 1996 and 1997, the C & B Equity
Portfolio paid advisory fees of approximately $1,418,000, $1,345,533 and
$882,890, respectively, to the Adviser.

For the periods ended October 31, 1995, 1996 and 1997, the C & B Balanced
Portfolio paid advisory fees of approximately $182,000, $77,383 and $89,715,
respectively, to the Adviser. During these periods, the Adviser voluntarily
waived advisory fees of approximately $9,000, $66,224 and $54,862, respectively.

For the period from February 12, 1997 (commencement of operations) to
October 31, 1997, the C&B Equity Portfolio for Taxable Investors paid advisory
fees of $0. During this period, the Adviser voluntarily waived advisory fees of
$3,003.

-20-
<PAGE>

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund's C & B Portfolios and directs the Adviser to use its
best efforts to obtain the best execution with respect to all transactions for
the Portfolios. In doing so, a Portfolio may pay higher commission rates than
the lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to
allocate brokerage or principal business on the basis of sales of shares which
may be made through broker-dealer firms. However, the Adviser may place
portfolio 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, 1995, 1996 and 1997,
the C&B Balanced Portfolio paid brokerage commissions of approximately $18,097,
$10,972 and $14,006, respectively, and the C&B Equity Portfolio paid brokerage
commissions of approximately $190,407, $196,212 and $170,908, respectively.
During the period ended October 31, 1997, the C&B Equity Portfolio for Taxable
Investors paid brokerage commissions of approximately $1,054.

Some securities considered for investment by the 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 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

The Board of Directors of the Fund approved a Fund Administration
Agreement, effective April 15, 1996, ("Fund Administration Agreement") between
UAM Fund Services, Inc. ("UAMFSI"), a wholly owned subsidiary of UAM, and the
Fund. Pursuant to the terms of the Fund Administration Agreement, UAMFSI
manages, administers and conducts the general business activities of the Fund
other than those that have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Agreement.

UAMFSI has subcontracted some of these services to Chase Global Funds
Services Company ("CGFSC"), an affiliate of The

-21-
<PAGE>

Chase Manhattan Bank, pursuant to a Mutual Fund Service Agreement between UAMFSI
and CGFSC (collectively, with the Fund Administration Agreement between UAMFSI
and the Fund, the "Agreements").

Pursuant to the terms of the Agreements, each Portfolio pays UAMFSI a two-
part monthly fee: a Portfolio-specific fee which is retained by UAMFSI and a
sub-administration fee which UAMFSI in turn pays to CGFSC. The following
Portfolio-specific fees are calculated from the aggregate net assets of each
Portfolio:

<TABLE>
<CAPTION>
Annual Rate
-----------
<S> <C>
Equity Portfolio........................ 0.04%
Balanced Portfolio...................... 0.06%
Equity Portfolio for
Taxable Investors..................... 0.04%
Mid Cap Portfolio....................... 0.04%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized basis
as follows:

0.19 of 1% of the first $200 million of combined Fund net assets;

0.11 of 1% of the next $800 million of combined Fund net assets;

0.07 of 1% of combined Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined Fund net assets in excess of $3 billion.

-22-
<PAGE>

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.

During the fiscal years ended October 31, 1995, 1996 and 1997 the C & B
Equity Portfolio paid administrative services fees of approximately: $264,000,
$271,427 and $194,278, respectively; the C&B Balanced Portfolio paid
administrative services fees of $79,000, $84,334 and $90,736, respectively. Of
these amounts, for the fiscal year ended October 31, 1996 and 1997, C & B
Balanced Portfolio paid $77,007 and $76,870, respectively, to Chase and $7,327
and $13,866 to UAMFSI, respectively, and C & B Equity Portfolio paid $230,298
and $137,773, respectively, to Chase and $41,129 and $56,505, respectively, to
UAMFSI. For the period February 12, 1997 (commencement of operations) to
October 31, 1997, the C&B Equity Portfolio for Taxable Investors paid
administrative services fees of approximately $23,712. Of this amount, the C &
B Equity Portfolio for Taxable Investors paid $23,521 to Chase and $191 to
UAMFSI.

UAMFSI bears all expenses in connection with the performance of its
services under the Fund Administration Agreement. Other expenses to be incurred
in the operation of the Fund will be borne by the Fund or other parties,
including taxes, interest, brokerage fees and commissions, if any, salaries and
fees of officers and members of the Board who are not officers, directors,
shareholders or employees of UAMFSI, or the Fund's investment adviser or
distributor, SEC fees and state Blue Sky fees, EDGAR filing fees, processing
services and related fees, advisory and administration fees, charges and
expenses of pricing and data services, independent public accountants and
custodians, insurance premiums including fidelity bond premiums, outside legal
expenses, costs of maintenance of corporate existence, typesetting and printing
of prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund, printing and production costs of shareholders' reports
and corporate meetings, cost and expenses of Fund stationery and forms, costs of
special telephone and data lines and devices, trade association dues and
expenses, and any extraordinary expenses and other customary Fund expenses.

Unless sooner terminated as provided herein, the Fund Administration
Agreement shall continue in effect from year to year provided such continuance
is specifically approved at least annually by the Board. The Fund
Administration Agreement is terminable, without penalty, by the Board or by
UAMFSI, on not less than ninety (90) days' written notice. The Fund
Administration Agreement shall automatically terminate upon its

-23-
<PAGE>

assignment by UAMFSI without the prior written consent of the Fund.

UAMFSI will from time to time employ or associate with such person or
persons as may be fit to assist them in the performance of the Fund
Administration Agreement. Such person or persons may be officers and employees
who are employed by both UAMFSI and the Fund. The compensation of such person
or persons for such employment shall be paid by UAMFSI and no obligation will be
incurred by or on behalf of the Fund in such respect.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. The Service Provider received no compensation during the fiscal year
ended October 31, 1997 from any of the Portfolios.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase Metro Tech Center, Brooklyn, NY 11245,
provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, serves as
independent accountants for the Fund.

DISTRIBUTOR

UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves as
the Funds' Distributor. Shares of the Fund are offered continuously. While the
Distributor will use its best efforts to sell shares of the Fund, it is not
obligated to sell any particular amount of shares.

The Distributor received no compensation for its services directly or
indirectly from any of the Portfolios during the Fund's fiscal year ended
October 31, 1997.

-24-
<PAGE>

PERFORMANCE CALCULATIONS

PERFORMANCE

The Fund may from time to time quote various performance figures to
illustrate the Fund's past performance.

Performance quotations by investment companies are subject to rules adopted
by the Commission which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by the Fund be accompanied by certain standardized performance information
computed as required by the Commission. Current yield and average annual
compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by the Fund to compute or express
performance follows.

YIELD

A yield figure is obtained using the following formula:

Yield = 2[(a - b + 1)/6/ - 1]
-----
cd

where:

a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
income distributions
d = the maximum offering price per share on the last
day of the period.

TOTAL RETURN

The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5 and 10 year periods that would equate an
initial hypothetical $1,000

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<PAGE>

investment to its ending redeemable value. The calculation assumes that all
dividends and distributions are reinvested when paid. The quotation assumes the
amount was completely redeemed at the end of each 1, 5 and 10 year period and
the deduction of all applicable Fund expenses on an annual basis.

The average annual total rates of return for the C & B Equity Portfolio,
C & B Balanced Portfolio and C & B Equity Portfolio for Taxable Investors from
inception and for the one and five year period ended on the date of the
Financial Statements included herein are as follows:

<TABLE>
<CAPTION>
Since
Inception
Through
One Year Five Years Year
Ended Ended Ended
October October October
31, 31, 31, Inception
1997 1997 1997 Date
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
C & B Equity 30.43% 16.20% 15.70% 5/15/90
Portfolio

C & B Balanced 20.39% 11.90% 12.20% 12/29/89
Portfolio

C & B Equity N/A N/A 15.54% 2/12/97
Portfolio for
Taxable Investors
</TABLE>

These figures were calculated according to the following formula:

P (1 + T)/n/ = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion
thereof).

COMPARISONS

-26-
<PAGE>

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
calculated above) to performance as reported by other investments, indices and
averages. Please see Appendix B for publications, indices and averages which
may be used.

In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a Portfolio, 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 a
Portfolio to calculate its performance. In addition, there can be no assurance
that a Portfolio 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
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund
changed to "UAM Funds, Inc." The Fund's principal executive office is located
at One International Place, Boston, MA 02110; however, all investor
correspondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation authorize the Directors to issue 3,000,000,000
shares of common stock, $.001 par value. The Board of Directors has the power
to designate one or more series (Portfolios) or classes of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. The Board of Directors has classified
additional classes of shares in each Portfolio, known as Institutional Service
Shares and Advisor shares. As of the date of this Statement of Additional
Information, no Institutional Service Shares or Advisor Shares of these
Portfolios have been offered by the Fund.

The shares of each Portfolio of the Fund, when issued and paid for as
provided for in the Prospectus, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the

-27-
<PAGE>

Directors if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his or her name on the books of the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of each Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the Federal excise tax on undistributed
income and capital gains (see discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus). The amounts of any income
dividends or capital gains distributions cannot be predicted.

Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of that Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.

As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of that Portfolio at net asset value (as of the business
day following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an 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 investors
without need to offset (for federal income tax purposes) such gains against any
net capital losses of another Portfolio.

FEDERAL TAXES

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company under the Code, at least 90% of its
gross income for a taxable year must be

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<PAGE>

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.

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes. Shareholders
will be advised on the nature of the payments.

CODE OF ETHICS

The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the C & B Equity, C &
B Balanced, C & B Equity Portfolio for Taxable Investors and C & B Mid Cap
Portfolios for the fiscal year ended October 31, 1997, which appear in the C & B
Portfolios' 1997 Annual Report to Shareholders, and the report thereon of Price
Waterhouse LLP, independent accountants, also appearing therein, are attached to
this Statement of Additional Information.

-29-
<PAGE>

APPENDIX A - 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
standards. 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 protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal

A-1
<PAGE>

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
shortcomings.

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 numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier 3
indicates that the issue ranks at the lower end of the rating category.

Standard & Poor's Ratings Services 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
principal 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
principal 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
interest 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

A-2
<PAGE>

are outweighed by large uncertainties or major risk exposures to adverse
conditions.

C -- The rating C is reserved for income bonds on which no interest is
being paid.

D -- Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.

II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES

Mortgage-backed securities represent ownership interests in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to investors such
as the C & B Balanced Portfolio. Most issuers or poolers provide guarantees of
payments, regardless of whether or not the mortgagor actually makes the payment.
The guarantees made by issuers or poolers are supported by various forms of
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 obligations under the policies.
Mortgage-backed securities issued by private issuers, 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 by the C
& B Balanced Portfolio will be rated investment grade by Moody's or S&P.

UNDERLYING MORTGAGES

Pools consist of whole mortgage loans or participations in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate, fixed-
term mortgages, the C & B Balanced Portfolio may purchase mortgage-backed
securities representing interests in pools of variable rate mortgages (VRM),
growing equity mortgages (GEM), graduated payment mortgages (GPM) and other
types where the principal and interest payment procedures vary. VRM's are
mortgages which reset the mortgage's interest rate on pools of VRM's. GPM and
GEM pools maintain constant interest with varying levels of principal repayment
over the life of the mortgage. These different interest and principal payment
procedures should not impact a Portfolio's net asset value since the prices at
which these securities are valued each day will reflect the payment procedures.

A-3
<PAGE>

All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit
standards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.

AVERAGE LIFE

The average life of pass-through pools varies with the maturities of the
underlying 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
including 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 maturities
or different characteristics will have varying assumptions for average life.

RETURNS ON MORTGAGE-BACKED SECURITIES

Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life
assumption. 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 payments
received by a Portfolio will increase its yield to shareholders, compared to
bonds that pay interest semiannually.

ABOUT MORTGAGE-BACKED SECURITIES

A-4
<PAGE>

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
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S.
Government and was created by Congress in 1970 for the purpose of increasing the
availability 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 portfolio.
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
Government National Mortgage Association (GNMA). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
Government and Government-related pools because there are no direct or indirect
Government guarantees of payments in the former pools. However, timely payment
of interest and principal of these pools is supported by various 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

A-5
<PAGE>

insurers can meet their obligations under the policies. Mortgage-backed
securities purchased for the C & B Balanced Portfolio will, however, be rated of
investment grade quality by Moody's or S&P.

The C & B Balanced Portfolio expects that Governmental or private entities
may create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is mortgage instruments whose principal
or interest payment may vary or whose terms to maturity may be shorter than
previously customary. As new types of mortgage-backed securities are developed
and offered to investors, the Portfolios will, consistent with their investment
objective and policies, consider making investments in such new types of
securities.

III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.

U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.

In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or
instrumentality 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
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and

A-6
<PAGE>

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
include the Export-Import Bank of the United States, Farmers Home
Administration, 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 A-2 by S&P or Prime-1 or Prime-2 by Moody's.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding 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.

A-7
<PAGE>

factors considered by Moody's in assigning ratings are the following: (1)
evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and the appraisal of speculative-type risks
which may be inherent in certain areas; (3) evaluation of the issuer's products
in relation to completion and customer acceptance; (4) liquidity; (5) amount and
quality of long term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by the management of issuer of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations.

V. DESCRIPTION OF BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution 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 reasonably orderly market conditions. The Portfolios are also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.

VI. DESCRIPTION OF FOREIGN INVESTMENTS

A-8
<PAGE>

foreign currencies, the Fund's Portfolios may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.

As foreign companies are not generally subject to uniform accounting,
auditing and financing reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more
volatile than securities of comparable domestic companies. There is generally
less government supervision and regulation of stock exchanges, brokers and
listed companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.

Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.

Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recovered portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.

A-9
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.

(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.

(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance 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 performance of
over 900 securities listed on the stock exchanges of countries in Europe,
Australia and the Far East, and over 1,400 securities listed on the stock
exchanges of these continents, including North America.

(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by screening
for convertible issues of 100 million or greater in market capitalization. The
index is priced monthly.

(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.

(i) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It is a value-
weighted, total return index,

B-1
<PAGE>

including approximately 800 issues with maturities of 12 years or greater.

(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment grade
corporate bonds rated BBB or better. U.S. Treasury/agency issues and mortgage
pass-through securities.

(k) Lehman Brothers Government/Corporate Index -- is a combination of the
Government and Corporate Bond Indices. The Government Index includes public
obligations of the U.S. Treasury, issues of Government agencies, and corporate
debt backed by the U.S. Government. The Corporate Bond Index includes fixed-
rate nonconvertible corporate debt. Also included are Yankee Bonds and
nonconvertible debt issued by or guaranteed by foreign or international
governments and agencies. All issues are investment grade (BBB) or higher, with
maturities of at least one year and an outstanding par value of at least $100
million for U.S. Government issues and $25 million for others. Any security
downgraded during the month is held in the index until month-end and then
removed. All returns are market value weighted inclusive of accrued income.

(l) Lehman Brothers Long-Term Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of 10 years
or greater.

(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only and does
not include income.

(n) Value Line -- composed of over 1,600 stocks in the Value Line
Investment 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. publicly-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 Index, and 60% Standard & Poor's 500 Stock
Index and 40% Lehman Brothers Government/Corporate Index.

(q) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
- -- analyzes price, current yield, risk, total return and average rate of return
(average annual compounded

B-2
<PAGE>

growth rate) over specified time periods for the mutual fund industry.

(r) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper Analytical Services, Inc.,
Morningstar, Inc., New York Times, Personal Investor, Wall Street Journal and
Weisenberger Investment Companies Service -- 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 Associates -
- - 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.

B-3
<PAGE>

C & B EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (96.4%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (5.9%)
Boeing Co................................................ 92,900 $ 4,447,587
Raytheon Co. ............................................ 81,000 4,394,250
------------
8,841,837
- -------------------------------------------------------------------------------
AUTOMOTIVE (5.3%)
Eaton Corp. ............................................. 29,000 2,802,125
Genuine Parts Co. ....................................... 147,000 4,602,937
Snap-On, Inc............................................. 14,000 602,000
------------
8,007,062
- -------------------------------------------------------------------------------
BANKS (1.5%)
Wachovia Corp............................................ 30,000 2,259,375
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (5.6%)
Anheuser-Busch Cos., Inc................................. 91,000 3,634,313
McDonald's Corp.......................................... 36,000 1,613,250
UST, Inc. ............................................... 105,300 3,152,419
------------
8,399,982
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (2.5%)
McGraw-Hill Cos., Inc.................................... 57,300 3,745,987
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (4.6%)
Dover Corp. ............................................. 76,300 5,150,250
General Signal Corp...................................... 42,000 1,685,250
------------
6,835,500
- -------------------------------------------------------------------------------
CHEMICALS (3.8%)
Eastman Chemical Co. .................................... 47,500 2,832,188
Hercules, Inc............................................ 47,000 2,156,125
Nalco Chemical Co. ...................................... 17,400 696,000
------------
5,684,313
- -------------------------------------------------------------------------------
CONSTRUCTION (6.0%)
Fluor Corp............................................... 92,000 3,783,500
Sherwin-Williams Co...................................... 185,000 5,133,750
------------
8,917,250
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>

C & B EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES (4.5%)
Corning, Inc............................................. 80,000 $ 3,610,000
Rubbermaid, Inc.......................................... 131,000 3,152,187
------------
6,762,187
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (5.0%)
Hasbro, Inc. ............................................ 144,000 4,176,000
International Flavors & Fragrances, Inc.................. 39,500 1,910,813
NIKE, Inc., Class B...................................... 27,700 1,301,900
------------
7,388,713
- -------------------------------------------------------------------------------
ELECTRONICS (5.0%)
AMP, Inc................................................. 88,000 3,960,000
Grainger (W.W.), Inc..................................... 23,000 2,011,063
Motorola, Inc............................................ 25,000 1,543,750
------------
7,514,813
- -------------------------------------------------------------------------------
ENERGY (10.5%)
Burlington Resources, Inc................................ 110,500 5,407,594
Exxon Corp............................................... 74,000 4,546,375
Royal Dutch Petroleum Co. (NY Shares).................... 109,200 5,746,650
------------
15,700,619
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (13.0%)
EXEL Ltd. ............................................... 86,000 5,197,625
Marsh & McLennan Cos., Inc............................... 86,200 6,120,200
MBIA, Inc................................................ 72,000 4,302,000
State Street Corp........................................ 70,000 3,902,500
------------
19,522,325
- -------------------------------------------------------------------------------
MANUFACTURING (3.6%)
Dana Corp................................................ 68,900 3,225,381
Pall Corp. .............................................. 107,200 2,217,700
------------
5,443,081
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (3.9%)
National Service Industries, Inc. ....................... 28,700 1,269,975
Whitman Corp............................................. 176,000 4,620,000
------------
5,889,975
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

4
<PAGE>

C & B EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
OFFICE EQUIPMENT (8.7%)
International Business Machines Corp. ............... 43,400 $ 4,255,913
Pitney Bowes, Inc.................................... 55,000 4,362,187
Xerox Corp........................................... 56,000 4,441,500
------------
13,059,600
- -------------------------------------------------------------------------------
PAPER & PACKAGING (0.4%)
Sonoco Products Co. ................................. 18,000 579,375
- -------------------------------------------------------------------------------
PHARMACEUTICALS (3.4%)
Bristol-Myers Squibb Co. ............................ 36,000 3,159,000
Merck & Co., Inc..................................... 17,000 1,517,250
Schering-Plough Corp................................. 8,300 465,318
------------
5,141,568
- -------------------------------------------------------------------------------
SERVICES (3.2%)
Service Corp. International.......................... 148,500 4,519,969
Sysco Corp........................................... 5,500 220,000
------------
4,739,969
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $109,600,186)............... 144,433,531
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.8%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $7,172,346,
collateralized by $6,873,443 of various
U.S. Treasury Notes, 5.50%-8.75% due from 5/15/00-
6/30/02, valued at $7,173,044 (COST $7,169,000)..... $7,169,000 7,169,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%) (COST $116,769,186)(A)..... 151,602,531
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.2%).................. (1,754,213)
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $149,848,318
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
(a) The cost for federal income tax purposes was $116,790,073. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$34,812,458. This consisted of aggregate gross unrealized appreciation for
all securities of $36,860,034 and aggregate gross unrealized depreciation
for all securities of $2,047,576.

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

C & B EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................. $116,769,186
============
Investments, at Value............................................ $151,602,531
Cash............................................................. 911
Receivable for Investments Sold.................................. 902,916
Dividends Receivable............................................. 115,148
Receivable for Fund Shares Sold.................................. 5,100
Interest Receivable.............................................. 1,115
Other Assets..................................................... 3,579
- -------------------------------------------------------------------------------
Total Assets.................................................... 152,631,300
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................ 2,449,627
Payable for Fund Shares Redeemed................................. 199,200
Payable for Investment Advisory Fees--Note B..................... 82,269
Payable for Administrative Fees--Note C.......................... 17,060
Payable for Custodian Fees--Note D............................... 7,956
Payable for Directors' Fees--Note F.............................. 939
Other Liabilities................................................ 25,931
- -------------------------------------------------------------------------------
Total Liabilities............................................... 2,782,982
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $149,848,318
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $ 79,885,124
Undistributed Net Investment Income.............................. 217,315
Accumulated Net Realized Gain.................................... 34,912,534
Unrealized Appreciation.......................................... 34,833,345
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $149,848,318
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)..................................................... 8,969,352
Net Asset Value, Offering and Redemption Price Per Share......... $ 16.71
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

C & B EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
- ----------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends............... $ 2,670,430
Interest................ 583,680
- ----------------------------------------
Total Income........... 3,254,110
- ----------------------------------------
EXPENSES
Investment Advisory
Fees--Note B........... 882,890
Administrative Fees--
Note C................. 194,278
Custodian Fees--Note D.. 14,914
Directors' Fees--Note F. 3,746
Other Expenses.......... 77,671
- ----------------------------------------
Total Expenses......... 1,173,499
Expense Offset--Note A.. (117)
- ----------------------------------------
Net Expenses........... 1,173,382
- ----------------------------------------
NET INVESTMENT INCOME.... 2,080,728
- ----------------------------------------
NET REALIZED GAIN ON IN-
VESTMENTS............... 35,177,992
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON INVESTMENTS.......... 242,155
- ----------------------------------------
NET GAIN ON INVESTMENTS.. 35,420,147
- ----------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM OP-
ERATIONS................ $37,500,875
- ----------------------------------------
- ----------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

C & B EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 2,080,728 $ 4,139,389
Net Realized Gain.................................. 35,177,992 45,211,776
Net Change in Unrealized Appreciation/Depreciation. 242,155 (3,731,843)
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 37,500,875 45,619,322
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (2,213,453) (4,276,922)
Net Realized Gain.................................. (39,513,464) (11,481,231)
- ----------------------------------------------------------------------------------
Total Distributions............................... (41,726,917) (15,758,153)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................. 25,737,881 16,594,738
--In Lieu of Cash Distributions.................. 35,929,474 14,951,054
Redeemed........................................... (76,637,337) (138,175,569)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions...... (14,969,982) (106,629,777)
- ----------------------------------------------------------------------------------
Total Decrease..................................... (19,196,024) (76,768,608)
Net Assets:
Beginning of Period................................ 169,044,342 245,812,950
- ----------------------------------------------------------------------------------
End of Period (including undistributed net invest-
ment income of $217,315 and $350,040, respective-
ly)............................................... $149,848,318 $ 169,044,342
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued..................................... 1,709,189 987,019
In Lieu of Cash Distributions..................... 2,681,613 944,442
Shares Redeemed................................... (4,870,660) (8,159,088)
- ----------------------------------------------------------------------------------
(479,858) (6,227,627)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

C & B EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 17.89 $ 15.68 $ 13.13 $ 13.06 $ 13.29
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income....... 0.25 0.36 0.34 0.31 0.28
Net Realized and Unrealized
Gain....................... 3.82 2.94 2.55 0.28 0.24
- --------------------------------------------------------------------------------
Total From Investment Oper-
ations.................... 4.07 3.30 2.89 0.59 0.52
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....... (0.26) (0.35) (0.34) (0.30) (0.26)
Net Realized Gain........... (4.99) (0.74) -- (0.18) (0.49)
In Excess of Net Realized
Gain....................... -- -- -- (0.04) --
- --------------------------------------------------------------------------------
Total Distributions........ (5.25) (1.09) (0.34) (0.52) (0.75)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERI-
OD.......................... $ 16.71 $ 17.89 $ 15.68 $ 13.13 $ 13.06
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN................. 30.43% 21.99% 22.28% 4.67% 4.05%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $149,848 $169,044 $245,813 $208,937 $209,153
Ratio of Expenses to Average
Net Assets.................. 0.83% 0.81% 0.79% 0.82% 0.82%
Ratio of Net Investment
Income to Average
Net Assets.................. 1.47% 1.92% 2.35% 2.39% 2.28%
Portfolio Turnover Rate...... 55% 29% 42% 46% 21%
Average Commission Rate #.... $ 0.0509 $ 0.0508 N/A N/A N/A
- --------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... 0.83% 0.80% 0.78% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

C & B EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The C & B
Equity Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1997, the
UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the Portfolio is to provide maximum long-term total return with minimal
risk to principal by investing in common stocks which have a consistency and
predictability in their earnings growth.

1. SECURITY VALUATION: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the mean of the bid and asked prices.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid prices. Short-term investments that have
remaining maturities of sixty days or less at time of purchase are valued
at amortized cost, if it approximates market value. The value of other
assets and securities for which no quotations are readily available is
determined in good faith at fair value using methods determined by the
Board of Directors.

4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income quarterly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.

10
<PAGE>

C & B EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

differences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments and in-kind
transactions.

Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital.

Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Cooke & Bieler, Inc. (the "Adviser"), a wholly-owned subsidiary of United
Asset Management Corporation ("UAM"), provides investment advisory services to
the Portfolio at a monthly fee calculated at an annual rate of 0.625% of
average daily net assets for the month. The Adviser has voluntarily agreed to
waive a portion of its advisory fees and to assume expenses, if necessary, in
order to keep the Portfolio's total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 1.00% of average daily
net assets.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 at an annual rate
of 0.04% of average daily net assets of the Portfolio. The Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent
services. Pursuant to the Mutual Funds Service Agreement, the Administrator
pays CGFSC a monthly fee. For the year ended October 31, 1997, UAM Fund
Services, Inc. earned $194,278 from the Portfolio as Administrator of which
$137,773 was paid to CGFSC for its services as sub-Administrator.

11
<PAGE>

C & B EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

F. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

G. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $72,908,020 and sales of $122,359,666 of investment
securities other than long-term U.S. Government and short-term securities.
There were no purchases or sales of long-term U.S. Government securities.

H. LINE OF CREDIT: The Portfolio, along with certain other Portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
Capital shares. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% 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, 1997, the Portfolio had no borrowings under the agreement.

I. OTHER: At October 31, 1997, 24.6% of total shares outstanding were held by
2 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

12
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
C & B Equity Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the C & B Equity
Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October
31, 1997, and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED)

The C & B Equity Portfolio hereby designates $38,563,811 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return. For the year ended October 31, 1997, the percentage
of dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 68.8%.

13
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (96.4%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.6%)
Boeing Co. .................................................... 400 $ 19,150
Raytheon Co. .................................................. 300 16,275
--------
35,425
- --------------------------------------------------------------------------------
AUTOMOTIVE (1.9%)
Genuine Parts Co. ............................................. 600 18,787
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (5.2%)
Anheuser-Busch Cos., Inc. ..................................... 400 15,975
UST, Inc. ..................................................... 1,200 35,925
--------
51,900
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (5.3%)
Dover Corp. ................................................... 300 20,250
General Signal Corp. .......................................... 800 32,100
--------
52,350
- --------------------------------------------------------------------------------
CHEMICALS (4.6%)
Eastman Chemical Co. .......................................... 300 17,888
Hercules, Inc. ................................................ 600 27,525
--------
45,413
- --------------------------------------------------------------------------------
CONSTRUCTION (6.3%)
Fluor Corp. ................................................... 700 28,787
Sherwin-Williams Co. .......................................... 1,200 33,300
--------
62,087
- --------------------------------------------------------------------------------
CONSUMER DURABLES (4.4%)
Corning, Inc. ................................................. 600 27,075
Rubbermaid, Inc. .............................................. 700 16,844
--------
43,919
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (7.7%)
Hasbro, Inc. .................................................. 1,000 29,000
International Flavors & Fragrances, Inc. ...................... 600 29,025
NIKE, Inc., Class B............................................ 400 18,800
--------
76,825
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

3
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ELECTRONICS (5.9%)
AMP, Inc. ..................................................... 500 $ 22,500
Grainger (W.W.), Inc. ......................................... 200 17,487
Motorola, Inc. ................................................ 300 18,525
--------
58,512
- --------------------------------------------------------------------------------
ENERGY (9.6%)
Burlington Resources, Inc. .................................... 900 44,044
Exxon Corp. ................................................... 400 24,575
Royal Dutch Petroleum Co. (NY Shares).......................... 500 26,312
--------
94,931
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (13.7%)
EXEL Ltd. ..................................................... 700 42,306
Marsh & McLennan Cos., Inc. ................................... 500 35,500
MBIA, Inc. .................................................... 600 35,850
State Street Corp. ............................................ 400 22,300
--------
135,956
- --------------------------------------------------------------------------------
MANUFACTURING (5.1%)
Dana Corp. .................................................... 600 28,088
Pall Corp. .................................................... 1,100 22,756
--------
50,844
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (5.8%)
National Service Industries, Inc. ............................. 600 26,550
Whitman Corp. ................................................. 1,200 31,500
--------
58,050
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (7.7%)
International Business Machines Corp. ......................... 300 29,419
Pitney Bowes, Inc. ............................................ 300 23,794
Xerox Corp. ................................................... 300 23,794
--------
77,007
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

4
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
PHARMACEUTICALS (4.0%)
Bristol-Myers Squibb Co...................................... 200 $ 17,550
Schering-Plough Corp. ....................................... 400 22,425
--------
39,975
- -------------------------------------------------------------------------------
SERVICES (5.6%)
Service Corp. International.................................. 1,300 39,569
Sysco Corp. ................................................. 400 16,000
--------
55,569
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $880,207)........................... 957,550
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.5%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due 11/3/97, to
be repurchased at $35,016, collateralized by $33,557 of
various U.S. Treasury Notes,
5.50%-8.75% due from 5/15/00-6/30/02, valued at $35,020
(COST $35,000).............................................. $35,000 35,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%) (COST $915,207)(A).................. 992,550
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)........................... 642
- -------------------------------------------------------------------------------
NET ASSETS (100%)............................................. $993,192
================================================================================
</TABLE>
+ See Note A to Financial Statements.
(a) The cost for federal income tax purposes was $915,387. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$77,163. This consisted of aggregate gross unrealized appreciation for all
securities of $98,852 and aggregate gross unrealized depreciation for all
securities of $21,689.

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
STATEMENT OF OPERATIONS
For the Period from February 12, 1997* to October 31, 1997

<TABLE>
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends..................................................... $ 8,421
Interest...................................................... 3,946
- ---------------------------------------------------------------------------------
Total Income................................................. 12,367
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B..............................
Basic Fees................................................... $3,003
Less: Fees Waived............................................ (3,003) --
------
Administrative Fees--Note C................................... 23,712
Registration and Filing Fees.................................. 27,674
Audit Fees.................................................... 15,667
Printing Fees................................................. 12,776
Directors' Fees--Note F....................................... 1,655
Custodian Fees--Note D........................................ 418
Other Expenses................................................ 3,726
Expenses Assumed by the Adviser--Note B....................... (80,823)
- ---------------------------------------------------------------------------------
Total Expenses............................................... 4,805
Expense Offset--Note A........................................ --
- ---------------------------------------------------------------------------------
Net Expenses................................................. 4,805
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME.......................................... 7,562
- ---------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENTS............................... (6,820)
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVEST-
MENTS......................................................... 77,343
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS........................................ 70,523
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ 78,085
=================================================================================
</TABLE>
* Commencement of Operations

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FEBRUARY 12,
1997* TO
OCTOBER 31,
1997
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................................. $ 7,562
Net Realized Loss................................................. (6,820)
Net Change in Unrealized Appreciation/Depreciation ............... 77,343
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............. 78,085
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................................. (6,319)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................................ 934,577
--In Lieu of Cash Distributions.............................. 3,375
Redeemed.......................................................... (16,526)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions..................... 921,426
- --------------------------------------------------------------------------------
Total Increase.................................................... 993,192
Net Assets:
Beginning of Period............................................... -
- --------------------------------------------------------------------------------
End of Period (including undistributed net investment income of
$1,243).......................................................... $993,192
===============================================================================
(1) Shares Issued and Redeemed:
Shares Issued................................................. 88,006
In Lieu of Cash Distributions................................. 301
Shares Redeemed............................................... (1,594)
- --------------------------------------------------------------------------------
86,713
===============================================================================
</TABLE>
* Commencement of Operations

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
FEBRUARY 12, 1997***
TO
OCTOBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................... $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................... 0.11
Net Realized and Unrealized Gain......................... 1.44
- -------------------------------------------------------------------------------
Total From Investment Operations........................ 1.55
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.................................... (0.10)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............................ $ 11.45
===============================================================================
TOTAL RETURN.............................................. 15.54%+**
===============================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)..................... $ 993
Ratio of Expenses to Average Net Assets................... 1.00%*
Ratio of Net Investment Income to Average Net Assets...... 1.57%*
Portfolio Turnover Rate................................... 3%
Average Commission Rate................................... $0.0502
- -------------------------------------------------------------------------------
Voluntarily Waived Fees and Expenses Assumed by the Ad-
viser Per Share.......................................... $ 1.27
Ratio of Expenses to Average Net Assets Including Expense
Offsets.................................................. 1.00%*
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
*** Commencement of Operations
+ Total return would have been lower had certain fees not been waived and
assumed during the period.

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The C & B
Equity Portfolio for Taxable Investors (the "Portfolio"), a portfolio of UAM
Funds, Inc., is a diversified, open-end management investment company. At
October 31, 1997, the UAM Funds were comprised of forty-two active portfolios.
The financial statements of the remaining portfolios are presented separately.
The objective of the Portfolio is to provide maximum long-term, after tax
total return consistent with minimizing risk to principal by investing in
common stocks of companies which have a consistency and predictability in
their earnings growth.

At October 31, 1997 the C & B Equity Portfolio for Taxable Investors had
available a capital loss carryover for Federal income tax purposes of
$6,641 which will expire on October 31, 2005.

10
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments and in-kind transactions.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 at an annual rate
of 0.04% of average daily net assets of the Portfolio. 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,

11
<PAGE>

C & B EQUITY PORTFOLIO FOR TAXABLE INVESTORS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

including but not limited to, administration, fund accounting, dividend
disbursing and transfer agent services. Pursuant to the Mutual Funds Service
Agreement, the Administrator pays CGFSC a monthly fee. For the period ended
October 31, 1997, UAM Fund Services, Inc. earned $23,712 from the Portfolio as
Administrator of which $23,521 was paid to CGFSC for its services as sub-
Administrator.

D. CUSTODIAN: The Chase Manhattan Bank (the "Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

G. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $903,286 and sales of $16,258 of investment securities other
than long-term U.S. Government and short-term securities. There were no
purchases or sales of long-term U.S. Government securities.

H. OTHER: At October 31, 1997, 57.1% o f total shares outstanding were held by
3 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

12
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors ofUAM Funds, Inc. and Shareholders of
C & B Equity Portfolio for Taxable Investors

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the C & B Equity
Portfolio for Taxable Investors (the "Portfolio"), a Portfolio of the UAM
Funds, Inc., at October 31, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the period
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at October 31, 1997 by correspondence with the custodian,
provides a reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED)

For the period from February 12, 1997 to October 31, 1997, the percentage of
dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 100.0%.

13
<PAGE>

C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (58.0%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.6%)
Boeing Co.................................................. 9,000 $ 430,875
Raytheon Co................................................ 8,000 434,000
-----------
864,875
- -------------------------------------------------------------------------------
AUTOMOTIVE (3.5%)
Eaton Corp................................................. 3,100 299,538
Genuine Parts Co........................................... 14,000 438,375
Snap-On, Inc. ............................................. 2,000 86,000
-----------
823,913
- -------------------------------------------------------------------------------
BANKS (0.9%)
Wachovia Corp.............................................. 3,000 225,938
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.2%)
Anheuser-Busch Cos., Inc................................... 9,000 359,438
McDonald's Corp............................................ 3,000 134,438
UST, Inc. ................................................. 9,000 269,438
-----------
763,314
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (1.4%)
McGraw-Hill Cos., Inc...................................... 5,000 326,875
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (2.9%)
Dover Corp................................................. 8,000 540,000
General Signal Corp........................................ 3,700 148,462
-----------
688,462
- -------------------------------------------------------------------------------
CHEMICALS (2.3%)
Eastman Chemical Co........................................ 4,600 274,275
Hercules, Inc.............................................. 5,000 229,375
Nalco Chemical Co. ........................................ 1,000 40,000
-----------
543,650
- -------------------------------------------------------------------------------
CONSTRUCTION (3.6%)
Fluor Corp................................................. 9,000 370,125
Sherwin-Williams Co........................................ 18,000 499,500
-----------
869,625
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

4
<PAGE>

C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER DURABLES (2.5%)
Corning, Inc. .............................................. 7,000 $ 315,875
Rubbermaid, Inc............................................. 12,300 295,969
-----------
611,844
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.0%)
Hasbro, Inc. ............................................... 13,550 392,950
International Flavors & Fragrances, Inc..................... 4,000 193,500
NIKE, Inc., Class B......................................... 3,000 141,000
-----------
727,450
- --------------------------------------------------------------------------------
ELECTRONICS (3.1%)
AMP, Inc.................................................... 9,000 405,000
Grainger (W.W.), Inc........................................ 2,600 227,337
Motorola, Inc. ............................................. 2,000 123,500
-----------
755,837
- --------------------------------------------------------------------------------
ENERGY (6.3%)
Burlington Resources, Inc................................... 10,000 489,375
Exxon Corp.................................................. 7,500 460,781
Royal Dutch Petroleum Co. (NY Shares)....................... 10,700 563,087
-----------
1,513,243
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (7.3%)
EXEL Ltd. .................................................. 7,000 423,062
Marsh & McLennan Cos., Inc. ................................ 8,400 596,400
MBIA, Inc................................................... 6,800 406,300
State Street Corp........................................... 6,000 334,500
-----------
1,760,262
- --------------------------------------------------------------------------------
MANUFACTURING (2.1%)
Dana Corp................................................... 6,500 304,281
Pall Corp................................................... 10,000 206,875
-----------
511,156
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.5%)
National Service Industries, Inc........................ 4,000 $ 177,000
Whitman Corp............................................ 16,500 433,125
-----------
610,125
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (5.1%)
International Business Machines Corp. .................. 4,300 421,669
Pitney Bowes, Inc. ..................................... 5,200 412,425
Xerox Corp.............................................. 5,000 396,562
-----------
1,230,656
- --------------------------------------------------------------------------------
PAPER & PACKAGING (0.4%)
Sonoco Products Co. .................................... 2,700 86,906
- --------------------------------------------------------------------------------
PHARMACEUTICALS (1.9%)
Bristol-Myers Squibb Co. ............................... 3,300 289,575
Merck & Co., Inc. ...................................... 2,000 178,500
-----------
468,075
- --------------------------------------------------------------------------------
SERVICES (2.4%)
Service Corp. International............................. 14,000 426,125
Sysco Corp.............................................. 4,000 160,000
-----------
586,125
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $10,332,620)................... 13,968,331
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (11.9%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.1%)
Boeing Co. 6.35%, 6/15/03............................... $ 500,000 501,705
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.2%)
Coca Cola Co. 7.875%, 9/15/98........................... 1,000,000 1,017,640
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.5%)
Clorox Co. 8.80%, 7/15/01............................... 1,000,000 1,081,010
- --------------------------------------------------------------------------------
ENERGY (1.1%)
Amoco, Canada 7.25%, 12/1/02............................ 250,000 262,300
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $2,748,240)............ 2,862,655
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

C & B BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES (28.2%)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (6.6%)
7.50%, 2/11/02........................................ $1,500,000 $ 1,585,785
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (6.5%)
8.25%, 5/15/05........................................ 400,000 423,248
7.50%, 11/15/16....................................... 1,000,000 1,144,220
-----------
1,567,468
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (15.1%)
7.00%, 4/15/99........................................ 1,000,000 1,019,060
7.50%, 11/15/01....................................... 1,000,000 1,061,560
6.50%, 10/15/06....................................... 500,000 520,080
6.125%, 8/15/07....................................... 1,000,000 1,021,720
-----------
3,622,420
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(COST $6,473,783)...................................... 6,775,673
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.0%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.0%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $250,117, collateralized
by $239,693 of various U.S. Treasury Notes, 5.50%-
8.75% due from 5/15/00-6/30/02,
valued at $250,141 (COST $250,000).................... 250,000 250,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.1%) (COST $19,804,643)(A)......... 23,856,659
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.9%)..................... 209,171
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $24,065,830
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
(a) The cost for federal income tax purposes was $19,828,281. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$4,028,378. This consisted of aggregate gross unrealized appreciation for
all securities of $4,225,573 and aggregate gross unrealized depreciation
for all securities of $197,195.

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

C & B BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost.............................................. $19,804,643
===========
Investments, at Value............................................. $23,856,659
Cash.............................................................. 247,216
Interest Receivable............................................... 182,864
Receivable for Investments Sold................................... 224,290
Dividends Receivable.............................................. 11,312
Other Assets...................................................... 548
- -------------------------------------------------------------------------------
Total Assets..................................................... 24,522,889
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................. 402,134
Payable for Investment Advisory Fees--Note B...................... 21,301
Payable for Administrative Fees--Note C........................... 7,327
Payable for Custodian Fees--Note D................................ 1,931
Payable for Directors' Fees--Note F............................... 656
Other Liabilities................................................. 23,710
- -------------------------------------------------------------------------------
Total Liabilities................................................ 457,059
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $24,065,830
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $17,253,801
Undistributed Net Investment Income............................... 75,050
Accumulated Net Realized Gain..................................... 2,684,963
Unrealized Appreciation........................................... 4,052,016
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $24,065,830
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)...................................................... 1,749,926
Net Asset Value, Offering and Redemption Price Per Share.......... $ 13.75
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

8
<PAGE>

C & B BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 709,123
Dividends................................................. 261,162
- ---------------------------------------------------------------------------------
Total Income............................................. 970,285
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............................................... $144,577
Less: Fees Waived........................................ (54,862) 89,715
--------
Administrative Fees--Note C............................... 90,736
Audit Fees................................................ 15,244
Printing Fees............................................. 13,847
Registration and Filing Fees.............................. 10,459
Custodian Fees--Note D.................................... 3,031
Directors' Fees--Note F................................... 2,268
Other Expenses............................................ 6,211
- ---------------------------------------------------------------------------------
Total Expenses........................................... 231,511
Expense Offset--Note A.................................... (248)
- ---------------------------------------------------------------------------------
Net Expenses............................................. 231,263
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME...................................... 739,022
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS........................... 2,730,755
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON IN-
VESTMENTS................................................. 807,467
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.................................... 3,538,222
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $4,277,244
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

9
<PAGE>

C & B BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 739,022 $ 807,161
Net Realized Gain..................................... 2,730,755 1,918,101
Net Change in Unrealized Appreciation/Depreciation.... 807,467 435,301
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 4,277,244 3,160,563
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (766,500) (804,110)
Net Realized Gain..................................... (1,921,313) (2,579,017)
- ----------------------------------------------------------------------------------
Total Distributions.................................. (2,687,813) (3,383,127)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued................................................ 1,175,046 328,108
--In Lieu of Cash Distributions..................... 2,546,229 3,033,780
Redeemed.............................................. (3,873,517) (4,657,088)
- ----------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions......... (152,242) (1,295,200)
- ----------------------------------------------------------------------------------
Total Increase (Decrease)............................. 1,437,189 (1,517,764)
Net Assets:
Beginning of Period................................... 22,628,641 24,146,405
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $75,050 and $102,528, respectively)........ $24,065,830 $22,628,641
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 90,365 26,277
In Lieu of Cash Distributions....................... 209,198 251,778
Shares Redeemed..................................... (297,984) (368,527)
- ----------------------------------------------------------------------------------
1,579 (90,472)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

C & B BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 12.94 $ 13.13 $ 11.86 $ 12.68 $ 12.57
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income........ 0.42 0.45 0.52 0.48 0.45
Net Realized and Unrealized
Gain (Loss) ................ 1.98 1.29 1.51 (0.39) 0.40
- --------------------------------------------------------------------------------
Total From Investment Opera-
tions ..................... 2.40 1.74 2.03 0.09 0.85
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........ (0.44) (0.45) (0.52) (0.47) (0.44)
Net Realized Gain............ (1.15) (1.48) (0.24) (0.44) (0.30)
- --------------------------------------------------------------------------------
Total Distributions......... (1.59) (1.93) (0.76) (0.91) (0.74)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERI-
OD........................... $ 13.75 $ 12.94 $ 13.13 $ 11.86 $ 12.68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.................. 20.39%+ 14.70%+ 17.83%+ 0.74%+ 7.01%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................. $24,066 $22,629 $24,146 $32,077 $42,974
Ratio of Expenses to Average
Net Assets................... 1.00% 1.00% 1.00% 1.00% 0.90%
Ratio of Net Investment Income
to Average Net Assets........ 3.20% 3.51% 3.80% 3.84% 3.65%
Portfolio Turnover Rate....... 35% 21% 22% 24% 22%
Average Commission Rate #..... $0.0510 $0.0511 N/A N/A N/A
- --------------------------------------------------------------------------------
Voluntary Waived Fees and Ex-
penses Assumed by the Adviser
Per Share.................... $ 0.031 $ 0.037 $ 0.004 $ 0.001 N/A
Ratio of Expenses to Average
Net Assets Including Expense
Offsets...................... 1.00% 1.00% 1.00% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
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.

11
<PAGE>

C & B BALANCED PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The C & B
Balanced Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1997, the
UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the Portfolio is to provide maximum long-term total return with minimal
risk to principal by investing in a combined portfolio of common stocks which
have a consistency and predictability in their earnings growth and investment
grade fixed income securities.

1. SECURITY VALUATION: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the mean of the bid and
asked prices. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and
unlisted equity securities are valued at the current bid prices. Fixed
income securities are stated on the basis of valuations provided by brokers
and/or a pricing service which uses information with respect to
transactions in fixed income securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments that have remaining
maturities of sixty days or less at time of purchase are valued at
amortized cost, if it approximates market value. The value of other assets
and securities for which no quotations are readily available is determined
in good faith at fair value using methods determined by the Board of
Directors.

12
<PAGE>

C & B BALANCED PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Discounts and premiums
on securities purchased are amortized using the effective yield basis over
their respective lives. Most expenses of the UAM Funds can be directly
attributed to a particular portfolio. Expenses which cannot be directly
attributed are apportioned among the portfolios of the UAM Funds based on
their relative net assets. Custodian fees for the Portfolio have been
increased to include expense offsets, if any, for custodian balance
credits.

13
<PAGE>

C & B BALANCED PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the year ended October 31, 1997, UAM Fund Services, Inc. earned
$90,736 from the Portfolio as Administrator of which $76,870 was paid to CGFSC
for its services as sub-Administrator.

D. CUSTODIAN: The Chase Manhattan Bank (the "Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

G. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $5,529,241 and sales of $8,595,815 of investment securities
other than long-term U.S. Government and short-term securities. Purchases and
sales of long-term U.S. Government securities were $2,025,543 and $617,531,
respectively.

I. OTHER: At October 31, 1997, 54.2% of total shares outstanding were held by
3 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

14
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors ofUAM Funds, Inc. and Shareholders of
C & B Balanced Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of C & B Balanced
Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October
31, 1997, and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)

The C & B Balanced Portfolio hereby designates $1,921,313 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return. For the year ended October 31, 1997, the percentage
of dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 25.8%. The percentage of income earned from direct
treasury obligations for the year ended October 31, 1997 is 48.7%.

15
<PAGE>

PART B

UAM FUNDS, INC.
- --------------------------------------------------------------------------------
DSI PORTFOLIOS

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the DSI Portfolios Institutional Class Shares dated January 22, 1998 and the
Prospectus relating to the DSI Disciplined Value Portfolio Institutional Service
Class Shares (the "Service Class Shares") dated January 22, 1998. To obtain a
Prospectus, please call the UAM Funds Service Center: 1-800-638-7983

TABLE OF CONTENTS
Page
----
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES......................................... 2

PURCHASE AND REDEMPTION OF SHARES.......................................... 15

VALUATION OF SHARES........................................................ 16

SHAREHOLDER SERVICES....................................................... 18

INVESTMENT LIMITATIONS..................................................... 19

MANAGEMENT OF THE FUND..................................................... 21

INVESTMENT ADVISER......................................................... 25

SERVICE AND DISTRIBUTION PLANS............................................. 28

PORTFOLIO TRANSACTIONS..................................................... 32

ADMINISTRATIVE SERVICES.................................................... 33

CUSTODIAN.................................................................. 35

INDEPENDENT ACCOUNTANTS.................................................... 36

DISTRIBUTOR................................................................ 36

PERFORMANCE CALCULATIONS................................................... 36

GENERAL INFORMATION........................................................ 39

FINANCIAL STATEMENTS....................................................... 41

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS......................... A-1

APPENDIX B - COMPARISONS................................................... B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and
policies of the DSI Disciplined Value, DSI Limited Maturity Bond, DSI Balanced
and DSI Money Market Portfolios (the "Portfolios") as set forth in the DSI
Portfolios' Prospectuses.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC" or the "Commission") thereunder, which currently
require that (a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). A Portfolio will not loan securities to the extent that greater
than one-third of its assets (including the value of the collateral for the
loan) at fair market value would be committed to loans. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. These risks are similar to the ones involved with repurchase
agreements as discussed in the Prospectus.

SHORT-TERM INVESTMENTS

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<PAGE>

deposits maturing from two business days through seven calendar days will not
exceed 10% (15% for the Balanced Portfolio) of the total assets of a
Portfolio.

Certificates of deposit are negotiable short-term obligations issued
by commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

(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, determined by the Adviser to be of comparable
quality;

(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;

(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 Administration, Federal Farm Credit Banks, Federal Intermediate Credit
Bank, Federal National Mortgage Association, Federal Financing Bank, the
Tennessee Valley Authority, and others; and

(6) Repurchase agreements collateralized by securities listed above.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The U.S. dollar value of the assets of the DSI Limited Maturity Bond
and DSI Balanced Portfolios may be affected

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<PAGE>

favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Portfolios may incur costs in connection
with conversions between various currencies. The Portfolios will conduct their
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.

The Portfolios may enter into forward foreign currency exchange
contracts in several circumstances. When a Portfolio enters into a contract for
the purchase or sale of a security denominated in a foreign currency, or when a
Portfolio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Portfolio may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract
for a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.

Additionally, when a Portfolio anticipates that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
such Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. From time to time, each Portfolio may
enter into forward contracts to protect the value of portfolio securities and

-4-
<PAGE>

enhance Portfolio performance. The Portfolios will not enter into such forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate such Portfolio to deliver an amount of foreign
currency in excess of the value of such portfolio securities or other assets
denominated in that currency.

Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. Except when a Portfolio enters into a forward
contract for the purchase or sale of a security denominated in a foreign
currency, which requires no segregation, a forward contract which obligates the
Portfolio to buy or sell currency will generally require the Fund's custodian to
hold an amount of that currency or liquid securities denominated in that
currency equal to the Portfolio's obligations, or to segregate liquid assets
equal to the amount of the Portfolio's obligation. If the value of the
segregated assets declines, additional liquid assets will be segregated on a
daily basis so that the value of the segregated assets will be equal to the
amount of such Portfolio's commitments with respect to such contracts.

-5-
<PAGE>

decline during the period between a Portfolio entering into a forward contract
for the sale of a foreign currency and the date it enters into an offsetting
contract for the purchase of the foreign currency, such Portfolio will realize a
gain to the extent that the price of the currency it has agreed to sell exceeds
the price of the currency it has agreed to purchase. Should forward prices
increase, such Portfolio would suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.

FUTURES CONTRACTS

Each Portfolio (except the DSI Money Market Portfolio) may enter into
futures contracts, options, and interest rate futures contracts for the purpose
of remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government
agency.

-6-
<PAGE>

Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure 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. Brokers 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
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable 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 interest rates. Each Portfolio intends to use futures contracts only for
hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of the
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contract purchases will be "completed"; that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control a Portfolio's exposure to market
fluctuations, the use of futures contracts may be a

-7-
<PAGE>

more effective means of hedging this exposure. While a Portfolio will incur
commission expenses in both opening and closing out futures positions, these
costs are lower than transaction costs incurred in the purchase and sale of the
underlying securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

A Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. In addition,
a Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

A Portfolio will minimize the risk that it will be unable to close out
a futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Portfolio has
insufficient cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures
positions also could have an adverse impact on the Portfolio's ability to
effectively hedge.

The risk of loss in trading futures contracts in some strategies can
be substantial, 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the
Adviser

-8-
<PAGE>

does not believe that the Portfolios are subject to the risks of loss frequently
associated with futures transactions. A Portfolio would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying financial instrument and sold it after the decline.

Utilization of futures transactions by a Portfolio does involve the
risk of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the Portfolio securities being hedged.
It is also possible that the Portfolio could lose money on futures contracts and
also experience a decline in value of Portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option.

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 unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days, with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.

OPTIONS

The Portfolios (except the DSI Money Market Portfolio) may purchase
and sell put and call options on futures contracts for hedging purposes.
Investments in options involve some of the same considerations that are involved
in connection with investments in futures contracts (e.g., the existence of a
liquid secondary market). In addition, the purchase of an option also entails
the risk that changes in the value of the underlying security or contract will
not be fully reflected in the value of the option purchased. Depending on the
pricing of the option compared to either the futures contract on which it is
based or the price of the securities being hedged, an option may or may not be
less risky than ownership of the futures contract or such securities. In
general, the market prices of options can be expected to be more volatile than
the market prices on the underlying futures contract or securities.

WRITING COVERED OPTIONS

-9-
<PAGE>

Each Portfolio writes only covered put options, which means that so
long as a Portfolio is obligated as the writer of the option it will, through
its custodian, have deposited and maintained cash or liquid securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities. By writing a put, a Portfolio will be obligated to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of exercise for as long as the option is outstanding. Each
Portfolio may engage in closing transactions in order to terminate put options
that it has written.

PURCHASING OPTIONS

OPTIONS ON FOREIGN CURRENCIES

The DSI Limited Maturity Bond and DSI Balanced Portfolios may purchase
and write options on foreign currencies for hedging purposes in a manner similar
to that in which futures

-10-
<PAGE>

contracts on foreign currencies, or forward contracts, will be utilized. For
example, a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant. In order to protect
against such diminution in the value of portfolio securities, a Portfolio may
purchase put options on the foreign currency. If the value of the currency does
decline, the Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on its portfolio which otherwise would have resulted.

Each Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, where a Portfolio anticipates a decline
in the dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the premium
received.

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<PAGE>

currencies, a Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
exchange rates.

Each Portfolio may write covered call options on foreign currencies.
A call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Custodian) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if a Portfolio has a call
on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Portfolio in cash or
liquid securities in a segregated account with the Custodian.

Each Portfolio also may write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign currency
is for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which a Portfolio
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, a Portfolio collateralizes the option by maintaining in a
segregated account with the Custodian, cash or liquid securities in an amount
not less than the value of the underlying foreign currency in U.S. dollars
marked to market daily.

RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES

Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to the regulation of the Commission. Similarly, options on currencies
may be traded over-the-counter. In an over-the-counter trading environment,
many of the protections afforded to exchange participants will not be available.
For example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot lose more than the amount of the
premium plus

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<PAGE>

related transaction costs, this entire amount could be lost. Moreover, the
option writer and a trader of forward contracts could lose amounts substantially
in excess of their initial investments, due to the margin and collateral
requirements associated with such positions.

The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.

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<PAGE>

upon economic events occurring in foreign markets during nonbusiness hours in
the United States, (iv) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States, and (v)
lesser trading volume.

-14-
<PAGE>

FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS

In order for each Portfolio to continue to qualify for federal income
tax treatment as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), at least 90% of each Portfolio's gross income
for a taxable year must be derived from certain qualifying income, i.e.,
dividends, interest, income derived from loans of securities and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business investing in stock, securities or
currencies. Any net gain realized from the closing out of futures contracts
will, therefore, generally be qualifying income for purposes of the 90%
requirement.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectus are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements

-15-
<PAGE>

for redemptions of shares. See "Financial Highlights" in the Prospectus for the
historical portfolio turnover rates with respect to the DSI Disciplined Value,
and Limited Maturity Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Both classes of shares of the Portfolios may be purchased without a
sales commission at the net asset value per share next determined after an order
is received in proper form by the Fund and payment is received by the Fund's
custodian. The minimum initial investment required is $2,500 for the DSI
Portfolios Institutional Class Shares and Service Class Shares with certain
exceptions as may be determined from time to time by officers of the Fund.
Other Institutional Class investment minimums are: initial IRA investment,
$500; initial spousal IRA investment, $250; minimum additional investment for
all accounts, $100. For each of the DSI Portfolios (except the DSI Money
Market Portfolio), an order received in proper form prior to the close of
regular trading on the New York Stock Exchange ("Exchange") (generally 4:00 p.m.
Eastern Time) will be executed at the price computed on the date of receipt; and
an order received not in proper form or after 4:00 p.m. ET will be executed at
the price computed on the next day the Exchange is open after proper receipt.
For the DSI Money Market Portfolio, the net asset value is determined at 12:00
ET and 4:00 p.m. ET. The Exchange will be closed on the following days:
Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving Day; Christmas Day; New Year's Day, and Dr. Martin Luther King, Jr.
Day.

Each Portfolio reserves the right in its sole discretion (i) to
suspend the offering of its shares, (ii) to reject purchase orders when in the
judgment of management such rejection is in the best interest of the Fund, and
(iii) to reduce or waive the minimum for initial and subsequent investment for
certain fiduciary accounts such as employee benefit plans or under circumstances
where certain economies can be achieved in sales of a Portfolio's shares.

Each Portfolio may suspend redemption privileges or postpone the date
of payment (1) during any period that either the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an

-16-
<PAGE>

election with the Commission to pay in cash all redemptions requested by any
shareholder of record limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the net assets of the Fund at the beginning of such period.
Such commitment is irrevocable without the prior approval of the Commission.
Redemptions in excess of the above limits may be paid in whole or in part, in
investment securities or in cash, as the Directors may deem advisable; however,
payment will be made wholly in cash unless the Directors believe that economic
or market conditions exist which would make such a practice detrimental to the
best interests of the Portfolio. If redemptions are paid in investment
securities, such securities will be valued as set forth in the Prospectus under
"Valuation of Shares," and a redeeming shareholder would normally incur
brokerage expenses if these securities were converted to cash.

No charge is made by any Portfolio for redemptions. Any redemption
may be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase
Global Funds Services Company ("CGFSC") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required for (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) and/or
registered address, or (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.

The signature guarantee must appear either (1) on the written request
for redemption, (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed, or (3) on all
stock certificates tendered for redemption and, if shares held by the Fund are
also being redeemed, on the letter or stock power.

-17-
<PAGE>

VALUATION OF SHARES

Equity securities listed on a securities exchange for which market
quotations 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 securities
not traded on the valuation date for which market quotations are readily
available are valued neither exceeding the current asked prices nor less than
the current bid prices. Quotations of foreign securities in a foreign currency
are converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major bank
or by a broker.

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost when the
Board of Directors determines that amortized cost reflects fair value.

The Money Market Portfolio values its assets at amortized cost while
also monitoring the available market bid prices, or yield equivalents. While
this method provides certainty in valuation, it may result in periods during
which value, as determined by amortized cost, is higher or lower than the price
the Portfolio would receive if it sold the instrument. The net asset value per
share of the Portfolio will ordinarily remain at $1.00 and the Portfolio's daily
dividends will vary in amount. There can be no assurance, however, that the
Portfolio will maintain a constant net asset value per share of $1.00.

The use of amortized cost and the maintenance of the Portfolio's per
share net asset value at $1.00 is based on its election to operate under the
provisions of Rule 2a-7 under the Investment Company Act of 1940. As a
condition of operating under that rule, the Portfolio must maintain an average
weighted maturity of 90 days or less, purchase only instruments deemed to have
remaining maturities of one year or less, and invest only in securities which
are determined by the Adviser to present minimal credit risks and which are of
high quality as determined by any major rating service, or in the case of any
instrument not so rated, considered by the Adviser to be of comparable quality.

The value of other assets and securities for which no quotations are
readily available (including restricted

-18-
<PAGE>

securities) is determined in good faith at fair value using methods determined
by the Directors.

-19-
<PAGE>

SHAREHOLDER SERVICES

The following supplements the shareholder services information set
forth in the DSI Portfolios' Prospectuses.

EXCHANGE PRIVILEGE

Institutional Class Shares of each DSI Portfolio may be exchanged for
Institutional Class Shares of the other DSI Portfolios. In addition,
Institutional Class Shares of each DSI Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds -- Institutional Class Shares at the end of the DSI Portfolios --
Institutional Class Shares Prospectus.) Service Class Shares of the DSI
Disciplined Value Portfolio may be exchanged for any other Service Class Shares
of a Portfolio included in the UAM Funds which is comprised of the Fund and UAM
Funds Trust. (For those Portfolios currently offering Service Class Shares,
please call the UAM Funds Service Center.) Exchange requests should be made by
calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Service
Center, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA
02208-2798.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to 12:00
noon ET for the DSI Money Market Portfolio, and the close of regular trading on
the Exchange (generally 4:00 p.m. ET) for the other DSI Portfolios will be
processed as of the close of business on the same day. Requests received after
these times will be processed on the next business day. Neither the Fund nor
CGFSC will be responsible for the authenticity of the exchange instructions
received by telephone. Exchanges may also be subject to limitations as to
amounts or frequency and to other restrictions established by the Board of
Directors to assure that such exchanges do not disadvantage the Fund and its
shareholders.

-20-
<PAGE>

For federal income tax purposes an exchange between Portfolios is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information in
this regard. The exchange privilege may be modified or terminated at any time.

TRANSFER OF SHARES

INVESTMENT LIMITATIONS

Each DSI Portfolio of the Fund is subject to the following
restrictions which are fundamental policies of the DSI Disciplined Value
Portfolio, DSI Limited Maturity Bond Portfolio and DSI Money Market Portfolio
and may not be changed without the approval of the lesser of (1) at least 67% of
the voting securities of the Portfolio present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Portfolio are present
or represented by proxy, or (2) more than 50% of the outstanding voting
securities of the Portfolio. Whenever an investment limitation sets forth a
percentage limitation on investment or utilization of assets, such limitation
shall be determined immediately after and as a result of a Portfolio's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, net assets or other circumstances
will not be considered when determining whether the investment complies with a
Portfolio's investment limitations. Only investment limitations (1), (2), (3),
(4) and (11) are classified as fundamental policies of the DSI Balanced
Portfolio. Each Portfolio will not:

(1) invest in commodities except that each Portfolio may invest in futures
contracts and options to the extent that not more than 5% of a
Portfolio's assets are required as deposit to secure obligations under
futures contracts;

-21-
<PAGE>

(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in (10) below) which are publicly distributed,
and (ii) by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;

(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii)
entering into options and futures (for the DSI Disciplined Value, DSI
Limited Maturity Bond and DSI Balanced Portfolios) or repurchase
transactions;

(5) purchase on margin or sell short except as specified in (1) above;

(6) with respect to 75% of its assets, purchase more than 10% of the
outstanding voting securities of any issuer;

(7) with respect to 75% of its assets, purchase securities of any issuer
(except obligations of the United States Government and its
instrumentalities) if as the result more than 5% of the Portfolio's
total assets, at the time of purchase, would be invested in the
securities of such issuer;

(8) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than 1/2
of 1% of such securities together own more than 5% of such securities;

(9) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in excess
of 10% (33 1/3% for the DSI Balanced Portfolio) of the
Portfolio's gross assets valued at the lower of market or cost, and a
Portfolio may not purchase additional securities when borrowings
exceed 5% of total gross assets;

-22-
<PAGE>

(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% (33 1/3% for the DSI Balanced Portfolio) of its
total assets at fair market value;

(11) underwrite the securities of other issuers or invest more than an
aggregate of 10% (33 1/3% for the DSI Balanced Portfolio) of the
assets of the Portfolio, determined at the time of investment, in
securities subject to legal or contractual restrictions on resale or
securities for which there are no readily available markets, including
repurchase agreements having maturities of more than seven days;

(12) invest for the purpose of exercising control over management of any
company;

(13) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years;

(14) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position; and

(15) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

-23-
<PAGE>

<TABLE>
<S> <C>
John T. Bennett, Jr. Director of the Fund; President of Squam
College Road-RFD 3 Investment Management Company, Inc. and
Meredith, NH 03253 Great Island Investment Company, Inc.;
1/26/29 President of Bennett Management Company
from 1988 to 1993.

Nancy J. Dunn Director of the Fund; Vice President For
10 Garden Street Finance and Administration and Treasurer of
Cambridge, MA 02138 Radcliffe College since 1991.
8/14/51

Philip D. English Director of the Fund; President and Chief
16 West Madison Street Executive Officer of Broventure Company,
Baltimore, MD 21201 Inc.; Chairman of the Board of Chektec
8/5/48 Corporation and Cyber Scientific, Inc.

William A. Humenuk Director of the Fund; Partner in the
4000 Bell Atlantic Philadelphia office of the law firm Dechert
Tower Price & Rhoads; Director, Hofler Corp.
1717 Arch Street
Philadelphia, PA 19103
4/21/42

Norton H. Reamer* Director, President and Chairman of the
One International Fund; President, Chief Executive Officer
Place and a Director of United Asset Management
Boston, MA 02110 Corporation; Director, Partner or Trustee
3/21/35 of each of the Investment Companies of the
Eaton Vance Group of Mutual Funds.

Charles H. Salisbury, Director of the Fund; Executive Vice
Jr.* President of United Asset Management
One International Corporation; formerly an executive officer
Place and Director of T. Rowe Price and President
Boston, MA 02110 and Chief Investment Officer of T. Rowe
8/24/40 Price Trust Company.

Peter M. Whitman, Jr.* Director of the Fund; President and Chief
One Financial Center Investment Officer of Dewey Square
Boston, MA 02111 Investors Corporation since 1988; Director
7/1/43 and Chief Executive Officer of H.T.
Investors, Inc., formerly a subsidiary of
Dewey Square.
</TABLE>

-24-
<PAGE>

<TABLE>
<S> <C>
William H. Park Vice President of the Fund; Executive Vice
One International President and Chief Financial Officer of
Place United Asset Management Corporation.
Boston, MA 02110
9/19/47

Gary L. French Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President of
7/4/51 Operations, Development and Control of
Fidelity Investments in 1995; Treasurer of
the Fidelity Group of Mutual Funds from
1991 to 1995.

Robert R. Flaherty Assistant Treasurer of the Fund; Vice
211 Congress Street President of UAM Fund Services, Inc.;
Boston, MA 02110 former Manager of Fund Administration and
9/18/63 Compliance of Chase Global Fund Services
Company from 1995 to 1996; Senior Manager
of Deloitte & Touche LLP from 1985 to 1995.

Gordon M. Shone Assistant Treasurer of the Fund; Vice
73 Tremont Street President of Fund Administration and
Boston, MA 02108 Compliance of Chase Global Funds Services
7/30/56 Company; formerly Senior Audit Manager of
Coopers & Lybrand LLP from 1983 to 1993.

Michael DeFao Secretary of the Fund; Vice President and
211 Congress Street General Counsel of UAM Fund Services, Inc.
Boston, MA 02110 and UAM Fund Distributors, Inc.; Associate
2/28/68 Attorney of Ropes & Gray (a law firm) from
1993 to 1995.

Karl O. Hartmann Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of Chase
Boston, MA 02108 Global Funds Services Company.
3/7/55
</TABLE>

- ---------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested
persons" of the Fund as that term is defined in the 1940 Act.

-25-
<PAGE>

As of December 24, 1997, the Directors and officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

Nancy J. Dunn $ 6,774 0 0 $ 8,300
Director

Philip D. English $ 26,791 0 0 $32,750
Director

William A. Humenuk $ 26,791 0 0 $32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

-26-
<PAGE>

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of a Portfolio, as noted.

DSI Disciplined Value Portfolio Institutional Class Shares: Bob & Co.,
c/o Bank of Boston, P.O. Box 1809, Boston, MA, 41.6%* and Bob & Co., c/o Bank of
Boston, P.O. Box 1809, Boston, MA, 11.1%*.

DSI Limited Maturity Portfolio Institutional Class Shares: Bob & Co.,
c/o Bank of Boston, P.O. Box 1809, Boston, MA, 54.5%*; Bob & Co., c/o Bank of
Boston, P.O. Box 1809, Boston, MA, 7.5%*.

DSI Money Market Portfolio Institutional Class Shares: Bank of Boston,
150 Royall Street, Canton, MA 59.7%; CS First Boston Corp., 11 Madison Avenue,
5th Floor, New York, NY, 7.6%* and UMBSC & Co., P.O. Box 419260, Kansas City,
MO, 6.5%.

DSI Balanced Portfolio Institutional Class Shares: Crane & Excelsior
Company, 30 South Street, Dalton, MA, 100.0%.

DSI Discipline Value Portfolio Institutional Service Class Shares:
Wilmington Trust Co., c/o Mutual Funds Account, 1100 North Market Street,
Wilmington, DE, 44.7%; Fleet National Bank, Cherokee Nation, One Federal Street,
Boston, MA, 11.2%; Wilmington Trust Co., c/o Mutual Funds, 1100 North Market
Street, Wilmington, DE, 10.8%; Fleet National Bank, One Federal Street, Boston,
MA 10.0%; and Fleet National Bank, P.O. Box 92800, Boston, MA, 9.9% and
Wilmington Trust Co., c/o Mutual Funds, Wilmington, DE, 6.5%.

- ---------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

Dewey Square Investors Corporation (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in

-27-
<PAGE>

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 acquired or organized approximately 45 such wholly-owned
affiliated firms (the "UAM Affiliated Firms"). UAM believes that permitting UAM
Affiliated Firms to retain control over their investment advisory decisions is
necessary to allow them to continue to provide investment management services
that are intended to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to operate
under their own firm name, with their own leadership and individual investment
philosophy and approach. Each UAM Affiliated Firm manages its own business
independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.

Peter M. Whitman, Jr., a director of the Fund, is President and Chief
Investment Officer of the Adviser.

SERVICES PERFORMED BY ADVISER

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreements, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreements, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error or judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services under the Agreements.

-28-
<PAGE>

may be terminated at any time by a Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of a Portfolio on 60
days written notice to the Adviser. The Agreements may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days written
notice to the Fund. The Agreements will automatically and immediately terminate
in the event of their assignment.

PHILOSOPHY AND STYLE

The Adviser's equity portfolio management approach is "value-oriented"
and makes use of a proprietary screen to rank a universe of 1,000 stocks
according to relative attractiveness. The Adviser's philosophy is derived from a
belief that low P/E, high yield portfolios will generate superior results over
time. Portfolios are built from the "bottom-up," stock-by-stock, subject to a
disciplined diversification process which is intended to avoid becoming overly
concentrated in any one segment of the market. The objective is to provide more
consistent and less volatile performance than other typical value managers.

The Adviser's fixed income philosophy is based on the premise that
investing for yield will produce superior results over the long term.
Therefore, the fixed income portfolio is constructed primarily of corporate
bonds, mortgage pass-throughs and other high yielding sectors of the investment
grade bond market. Modest amounts of less than investment grade issues are used
for yield and diversification. The portfolio is built with an emphasis on
higher yield relative to the benchmark in order to provide superior investment
return, investment grade securities to provide safety of principal and
stability, limited interest rate anticipation to control market risk, and broad
diversification by sector and subsector to control portfolio risk.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included American Airlines,
Raytheon Corp., Bank of Boston, Guy Gannett Publishing and Reed & Barton.

ADVISORY FEES

-29-
<PAGE>

As compensation for services rendered by the Adviser under the
Investment Advisory Agreement, each DSI Portfolio pays the Adviser an annual
fee, in monthly installments, calculated by applying the following annual
percentage rates to each of the DSI Portfolio's average daily net assets for the
month:

-30-
<PAGE>

<TABLE>
<CAPTION>
Rate
<S> <C>
DSI Balanced Portfolio........... .45% for the first 12 months of operation
.55% for the next 12 months of operations
and
.65% thereafter

DSI Disciplined Value Portfolio.. .750% of the first $500 million
.650% in excess of $500 million
DSI Limited Maturity Bond
Portfolio...................... .450% of the first $500 million
.400% of the next $500 million
.350% in excess of $1 billion

DSI Money Market Portfolio....... .400% of the first $500 million
.350% in excess of $500 million
</TABLE>

For the years ended October 31, 1995, 1996, and 1997, the DSI
Disciplined Value Portfolio paid advisory fees of approximately $362,000,
$429,033 and $578,915, respectively, to the Adviser.

For the years ended October 31, 1995, 1996 and 1997, the DSI Limited
Maturity Bond Portfolio paid advisory fees of approximately $132,000, $134,334
and $141,248, respectively, to the Adviser.

For the years ended October 31, 1995, 1996 and 1997, the DSI Money
Market Portfolio paid advisory fees of approximately $393,000, $230,533 and
$333,241, respectively, to the Adviser. During the fiscal years ended October
31, 1995, 1996 and 1997, the Adviser voluntarily waived advisory fees of
approximately $82,000, $283,121 and $426,538, respectively.

As of October 31, 1997, the DSI Balanced Portfolio had not yet
commenced operations.

SERVICE AND DISTRIBUTION PLANS

As stated in the DSI Disciplined Value Portfolio's Service Class
Shares Prospectus, UAM Fund Distributors, Inc. (the "Distributor") may enter
into agreements with broker-dealers and other financial institutions ("Service
Agents"), pursuant to which they will provide administrative support services to
Service Class shareholders who are their customers ("Customers")

-31-
<PAGE>

in consideration of such Fund's payment of 0.25% (on an annualized basis) of the
average daily net asset value of the Service Class Shares held by the Service
Agent for the benefit of its Customers. Such services include:

(a) acting as the sole shareholder of record and nominee for
beneficial owners;

(b) maintaining account records for such beneficial owners of the
Fund's shares;

(d) answering questions and handling correspondence from shareholders
about their accounts;

(e) processing shareholder orders to purchase, redeem and exchange
shares;

(f) handling the transmission of funds representing the purchase price
or redemption proceeds;

(g) issuing confirmations for transactions in the Fund's shares by
shareholders;

(h) distributing current copies of prospectuses, statements of
additional information and shareholder reports;

(i) assisting customers in completing application forms, selecting
dividend and other account options and opening any necessary custody accounts;

(j) providing account maintenance and accounting support for all
transactions; and

(k) performing such additional shareholder services as may be agreed
upon by the Fund and the Service Agent, provided that any such additional
shareholder service must constitute a permissible non-banking activity in
accordance with the then current regulations of, and interpretations thereof by,
the Board of Governors of the Federal Reserve System, if applicable.

Each agreement with a Service Agent is governed by a Shareholder
Service Plan (the "Service Plan") that has been adopted by the Fund's Board of
Directors. Pursuant to the Service Plan, the Board of Directors reviews, at
least quarterly, a written report of the amounts expended under each agreement
with Service Agents and the purposes for which the expenditures were made. In
addition, arrangements with Service Agents must be approved annually by a
majority of the Fund's Directors, including a majority of the Directors who are
not "interested

-32-
<PAGE>

persons" of the Fund as defined in the 1940 Act and have no direct or indirect
financial interest in such arrangements.

The Board of Directors has approved the arrangements with Service
Agents based on information provided by the Fund's service contractors that
there is a reasonable likelihood that the arrangements will benefit the Fund and
its shareholders by affording the Fund greater flexibility in connection with
the servicing of the accounts of the beneficial owners of its shares in an
efficient manner. Any material amendment to the Fund's arrangements with
Service Agents must be approved by a majority of the Fund's Board of Directors
(including a majority of the disinterested Directors). The Shareholder Services
Plan may be terminated at any time by vote of a majority of the Directors of the
Fund who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan or, at the discretion of the Board of Directors of the Fund,
by vote of a majority of the outstanding voting securities of the Fund. So long
as the arrangements with Service Agents are in effect, the selection and
nomination of the members of the Fund's Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company will be
committed to the discretion of such non-interested Directors.

During the fiscal year ended October 31, 1997, the DSI Disciplined
Value Portfolio's Service Class paid $9,035 to Service Agents for services
provided pursuant to the Shareholder Services Plan.

Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Distribution Plan for the Service Class Shares of the Fund (the "Distribution
Plan"). The Distribution Plan permits the Fund to pay for certain distribution,
promotional and related expenses involved in the marketing of only the Service
Class Shares.

The Distribution Plan permits the Service Class Shares, pursuant to
the Distribution Agreement, to pay a monthly fee to the Distributor for its
services and expenses in distributing and promoting sales of the Service Class
Shares. These expenses include, among other things, advertising the
availability of services and products; designing materials to send to customers
and developing methods of making such materials accessible to customers;
providing information about the product needs of customers; providing facilities
to solicit Fund sales and to answer questions from prospective and existing
investors about the Fund; receiving and answering correspondence from
prospective investors, including requests for sales literature, prospectuses and
statements of additional information; displaying and making sales literature and
prospectuses available; acting as liaison

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<PAGE>

between shareholders and the Fund, including obtaining information from the Fund
and providing performance and other information about the Fund. In addition, the
Service Class Shares may make payments directly to other unaffiliated parties,
who either aid in the distribution of their shares or provide services to the
Class.

The maximum annual aggregate fee payable by the Fund under the Service
and Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares'
average daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares,
currently cannot exceed 0.50% of the average daily net assets represented by the
Service Class. While the current fee which will be payable under the Service
Plan has been set at 0.25%, the Plan permits a full 0.75% on all assets to be
paid at any time following appropriate Board approval.

All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid by the Service
Class Shares will be borne by such persons without any reimbursement from such
classes. Subject to seeking best price and execution, the Fund may, from time
to time, buy or sell portfolio securities from or to firms which receive
payments under the Plans. From time to time, the Distributor may pay additional
amounts from its own resources to dealers for aid in distribution or for aid in
providing administrative services to shareholders.

The Plans, the Distribution Agreement and the form of dealer's and
services agreements have all been approved by the Board of Directors of the
Fund, including a majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plan or any related agreements, by vote cast in person
at a meeting duly called for the purpose of voting on the Plan and such
Agreements. Continuation of the Plan, the Distribution Agreement and the
related agreements must be approved annually by the Board of Directors in the
same manner, as specified above.

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<PAGE>

may be terminated at any time without penalty by a majority of those Directors
who are not "interested persons" or by a majority vote of the outstanding voting
securities of the Class. Any amendment materially increasing the maximum
percentage payable under the Plans must likewise be approved by a majority vote
of the relevant Class' outstanding voting securities, as well as by a majority
vote of those Directors who are not "interested persons." Also, any other
material amendment to the Plans must be approved by a majority vote of the
Directors including a majority of the Directors of the Fund having no interest
in the Plans. In addition, in order for the Plans to remain effective, the
selection and nomination of Directors who are not "interested persons" of the
Fund must be effected by the Directors who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must provide written reports
at least quarterly to the Board of Directors for their review. The NASD has
adopted amendments to its Rules of Fair Practice relating to investment company
sales charges. The Fund and the Distributor intend to operate in compliance with
these rules.

During the fiscal year ended October 31, 1997, the DSI Disciplined
Value Portfolio's Service Class paid no compensation to the Distributor for
services provided pursuant to the Distribution Plan.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for each of the Portfolios and directs the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to
allocate brokerage or effect principal transactions with dealers on the basis of
sales of shares which may be made through broker-dealer firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend
the Fund's Portfolios or who act as agents in the purchase of shares of the
Portfolios for their clients. During the fiscal years ended October 31, 1995,
1996 and 1997, the DSI Disciplined Value Portfolio paid brokerage commissions of
approximately $191,222, $204,544 and $256,031, respectively.

Some securities considered for investment by the Portfolios may also
be appropriate for other clients served by the Adviser. If purchases or sales
of securities consistent with

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<PAGE>

the investment policies of a Portfolio and one or more of these other clients
served by the Adviser is considered at or about the same time, transactions in
such securities will be allocated among the Portfolio and clients in a manner
deemed fair and reasonable by the Adviser. Although there is no specified
formula for allocating such transactions, the various allocation methods used by
the Adviser, and the results of such allocations, are subject to periodic review
by the Fund's Directors.

ADMINISTRATIVE SERVICES

The Board of Directors of the Fund approved a Fund Administration
Agreement, effective April 15, 1996 ("Fund Administration Agreement") between
UAM Fund Services, Inc. ("UAMFSI"), a wholly owned subsidiary of UAM, and the
Fund. Pursuant to the terms of the Fund Administration Agreement, UAMFSI
manages, administers and conducts the general business activities of the Fund
other than those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Agreement.

Pursuant to the terms of the Agreements, each Portfolio pays UAMFSI a
two part monthly fee: a Portfolio-specific fee which is retained by UAMFSI and
a sub-administration fee which UAMFSI in turn pays to CGFSC. The following
portfolio-specific fees are calculated from the aggregate net assets of each
Portfolio:
<TABLE>
<CAPTION>
Annual Rate
<S> <C>
Disciplined Value Portfolio................. 0.06%
Limited Maturity Bond Portfolio............. 0.04%
Money Market Portfolio...................... 0.02%
Balanced Portfolio.......................... 0.06%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

0.19 of 1% of the first $200 million of combined Fund net assets;

0.11 of 1% of the next $800 million of combined Fund net assets;

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<PAGE>

0.07 of 1% of combined Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined Fund net assets in excess of $3 billion.

Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds
Service Company, provided certain administrative services to the Fund under an
Administration Agreement between the Fund and U.S. Trust Company of New York.
The basis of the fees paid to CGFSC for the fiscal periods prior 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 from $2,000 per month upon inception of a Portfolio to $70,000 annually
after two years.

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid to the Administrator by the DSI Disciplined
Value Portfolio totaled approximately $78,000, $99,321 and $133,991,
respectively; the DSI Limited Maturity Bond Portfolio paid administrative
services fees of $87,000, $92,990 and $94,725, respectively; and the DSI Money
Market Portfolio paid administrative fees of $134,000, $149,671 and $224,190,
respectively. Of the fees paid during the years ended October 31, 1996 and
October 31, 1997, DSI Disciplined Value Portfolio paid $79,439 and $87,680 to
CGFSC and $19,882 and $46,311 to UAMFSI, respectively; DSI Limited Maturity Bond
Portfolio paid $86,458 and $82,171 to CGFSC and $6,532 and $12,554 to UAMFSI,
respectively; and DSI Money Market Portfolio paid $135,324 and $186,237 to CGFSC
and $14,347 and $37,953 to UAMFSI, respectively. As of October 31, 1997, the
DSI Balanced Portfolio had not yet commenced operations.

UAMFSI bears all expenses in connection with the performance of its
services under the Fund Administration Agreement. Other expenses to be incurred
in the operation of the Fund are borne by the Fund or other parties, including
taxes, interest, brokerage fees and commissions, if any, salaries and fees of
officers and members of the Board who are not officers,

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<PAGE>

directors, shareholders or employees of UAMFSI, or the Fund's investment adviser
or distributor, SEC fees and state Blue Sky fees, EDGAR filing fees, processing
services and related fees, advisory and administration fees, charges and
expenses of pricing and data services, independent public accountants and
custodians, insurance premiums including fidelity bond premiums, outside legal
expenses, costs of maintenance of corporate existence, typesetting and printing
of prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund, printing and production costs of shareholders' reports
and corporate meetings, cost and expenses of Fund stationery and forms, costs of
special telephone and data lines and devices, trade association dues and
expenses, and any extraordinary expenses and other customary Fund expenses.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the DSI Disciplined
Value Portfolio, DSI Limited Maturity Bond Portfolio, and DSI Money Market
Portfolio paid the Service Provider $13,601, $399, and $13,901, respectively, in
fees pursuant to the Services Agreement.

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<PAGE>

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

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<PAGE>

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

The Distributor received no compensation for its services directly or
indirectly from any of the Portfolios during the Fund's fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolios may from time to time quote various performance figures
to illustrate the past performance of each class of the Portfolios.

Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized performance
quotations or, alternatively, that every non-standardized performance quotation
furnished by each class of the Fund be accompanied by certain standardized
performance information computed as required by the Commission. Current yield
and average annual compounded total return quotations used by each class of the
Fund are based on the standardized methods of computing performance mandated by
the Commission. An explanation of those and other methods used by each class of
the Fund to compute or express performance follows.

TOTAL RETURN

The average annual total return is determined by finding the average
annual compounded rates of return over 1, 5, and 10 year periods that would
equate an initial hypothetical $1,000 investment to its ending redeemable value.
The calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis. Since Service Class Shares of the DSI Disciplined Value
Portfolio bear additional service and distribution expenses, the

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<PAGE>

average annual total return of the Service Class Shares of a Portfolio will
generally be lower than that of the Institutional Class Shares of the same
Portfolio.

The average annual total rates of return for each of the DSI
Portfolios from inception to October 31, 1997 and for the one-year and five-year
periods ended October 31, 1997 are as follows:

<TABLE>
<CAPTION>
Since
Inception
One Year Five Years Through Year
Ended Ended Ended
October 31, October 31, October 31, Inception
1997 1997 1997 Date
------------ ----------- ------------- ---------
<S> <C> <C> <C> <C>
DSI Disciplined Value
Portfolio (Institutional
Class)................. 28.99% 19.17% 13.75% 12/12/89

DSI Disciplined Value
Portfolio (Service
Class)................... N/A N/A 9.31% 5/23/97

DSI Limited Maturity Bond
Portfolio
(Institutional Class).... 6.93% 5.07% 6.81% 12/18/89

DSI Money Market Portfolio
(Institutional Class).... 5.26% 4.38% 4.87% 12/28/89
</TABLE>

These figures are calculated according to the following formula:

P (1 + T)/n/ = ERV

where:

P = a hypothetical initial
payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or
10 year periods (or fractional portion thereof).

Shares of the DSI Balanced Portfolio were not offered as of October
31, 1997. Accordingly, no total return figures are available.

YIELD

Current yield reflects the income per share earned by a Portfolio's
investments. Since Service Class Shares of a

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<PAGE>

Portfolio bear additional service and distribution expenses, the yield of the
Service Class Shares of a Portfolio will generally be lower than that of the
Institutional Class Shares of the same Portfolio.

Current yield is determined by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per share
on the last day of the period and annualizing the result. Expenses accrued for
the period include any fees charged to all shareholders during the base period.
The yield for the Institutional Class Shares of the DSI Limited Maturity Bond
Portfolio for the 30-day period ended on October 31, 1997 was 6.16%.

This figure is obtained using the following formula:

Yield = 2[( a - b + 1 )/6/ - 1]
-----
cd

where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.

CALCULATION OF YIELD (DSI MONEY MARKET PORTFOLIO)

The current yield of the DSI Money Market Portfolio is calculated daily on
a base period return for a hypothetical account having a beginning balance of
one share for a particular period of time (generally 7 days). The return is
determined by dividing the net change (exclusive of any capital changes in such
account) by its average net asset value for the period, and then multiplying it
by 365/7 to determine the annualized current yield. The calculation of net
change reflects the value of additional shares purchased with the dividends by
the Portfolio, including dividends on both the original share and on such
additional shares. An effective yield, which reflects the effects of
compounding and represents an annualization of the current yield with all
dividends reinvested, may also be calculated for the Portfolio by dividing the
base period return by 7, adding 1 to the quotient, raising the sum to the 365th
power, and subtracting 1 from the result.

The current and effective yield calculations for the DSI Money Market
Portfolio Institutional Class Shares for the 7-day base period ended October 31,
1997 are 5.36% and 5.51%, respectively.

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<PAGE>

COMPARISONS

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation 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 located
at One International Place, Boston, MA 02110; however, all investor
correspondence should be directed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation authorize the Directors to issue 3,000,000,000
shares of common stock, $.001 par value. The Board of Directors has the power
to designate one or more series (Portfolios) or classes of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. The Board of Directors has classified
an additional class of shares in each Portfolio, known as Advisor Shares. As of
the date of this Statement of Additional Information, no Advisor shares of these
Portfolios have been offered by the Fund.

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<PAGE>

noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Directors
if they choose to do so. A shareholder is entitled to one vote for each full
share held (and a fractional vote for each fractional share held), then standing
in his or her name on the books of the Fund. Both Institutional Class and
Service Class Shares represent interests in the same assets of a Portfolio and
are identical in all respects, except that the Service Class Shares bear certain
expenses related to shareholder servicing and the distribution of such shares,
and have exclusive voting rights with respect to matters relating to such
distribution expenditures.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of the
Portfolios' net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the federal excise
tax on undistributed income and capital gains (see discussion under "Dividends,
Capital Gains Distributions and Taxes" in the Prospectuses). The amounts of any
income dividends or capital gains distributions cannot be predicted.

Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Prospectus.

As set forth in the Prospectuses, unless the shareholder elects
otherwise in writing, all dividend and capital gain distributions are
automatically received in additional shares of the Portfolios at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholders in writing at least three days
prior to the record date that either the Income Option (income dividends in cash
and capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash) has
been elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.

Each Portfolio will be treated as a separate entity (and hence as a
separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to

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<PAGE>

offset (for federal income tax purposes) such gains against any capital losses
of another Portfolio.

FEDERAL TAXES

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company under the Code, at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities, and gains from the
sale of securities or foreign currencies or other income derived with respect to
its business of investing in such securities or currencies.

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
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the DSI
Disciplined Value, Limited Maturity Bond, and Money Market Portfolios for the
fiscal year ended October 31, 1997, which appear in the DSI Portfolios' 1997
Annual Report to Shareholders, and the report thereon of Price Waterhouse LLP,
independent accountants, also appearing therein, are attached to this Statement
of Additional Information.

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<PAGE>

APPENDIX A -- 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.

A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during

A-1
<PAGE>

both good and bad times over the future. Uncertainty of position
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 shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Standard & Poor's Ratings Services 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
principal 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.

BBB -- Debt rated BBB is regarded as having an adequate capacity to
pay interest 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 conditions.

A-2
<PAGE>

C -- The rating C is reserved for income bonds on which no interest is
being paid.

D -- Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears.

II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES

Mortgage-backed securities represent ownership interests in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments 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 mortgagor 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 obligations under the policies. Mortgage-backed securities issued by
private issuers, 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
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate, fixed-
term mortgages, the DSI Portfolios may purchase mortgage securities consisting
of pools of variable rate mortgages (VRM), growing equity mortgages (GEM),
graduated payment mortgages (GPM) and other types where the principal and
interest payment procedures vary. VRM's are mortgages which reset the
mortgage's interest rate on pools of VRM's. GPM and GEM pools maintain constant
interest with varying levels of principal repayment over the life of the
mortgage. These different interest and principal payment procedures should not
impact a Portfolio's net asset value since the prices at which these securities
are valued each day will reflect the payment procedures.

All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.

A-3
<PAGE>

AVERAGE LIFE

The average life of pass-through pools varies with the maturities of
the underlying 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 including 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 maturities or different characteristics will have varying assumptions for
average life.

RETURNS ON MORTGAGE-BACKED SECURITIES

Yields on mortgage-backed pass-through securities are typically quoted
on the maturity of the underlying instruments and the associated average life
assumption. 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 payments
received by a Portfolio will increase its yield to shareholders, compared to
bonds that pay interest semiannually.

ABOUT MORTGAGE-BACKED SECURITIES

Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest 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 securities. Additional payments are caused by repayments resulting from
the sale of the underlying residential property, refinancing or foreclosure net
of fees or costs which may be 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.

A-4
<PAGE>

Residential mortgage loans are pooled by the Federal Home Loan
Mortgage Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S.
Government and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PCs") which represent interests in mortgages from FHLMC's national portfolio.
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 Government National Mortgage Association (GNMA). GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. Government, the timely payment of principal and interest on securities
issued by approved institutions and backed by pools of FHA-insured or VA-
guaranteed mortgages.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by governmental entities, private insurers and mortgage poolers. There
can be no assurance that the private insurers can meet their obligations under
the policies. Mortgage-backed securities purchased for the DSI Limited Maturity
Bond Portfolio will, however, be rated of investment grade quality by Moody's or
S&P.

The DSI Limited Maturity Bond Portfolio expects that Governmental or
private entities may create mortgage loan pools offering pass-through
investments in addition to those described

A-5
<PAGE>

above. The mortgages underlying these securities may be alternative mortgage
instruments, that is mortgage instruments whose principal or interest payment
may vary or whose terms to maturity may be shorter than previously customary. As
new types of mortgage-backed securities are developed and offered to investors,
the Portfolios will, consistent with their investment objective and policies,
consider making investments in such new types of securities.

III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

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
instrumentality 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
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.

Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United

A-6
<PAGE>

States, Farmers Home Administration, Federal Housing Administration, Maritime
Administration, Small Business Administration, and The Tennessee Valley
Authority.

IV. DESCRIPTION OF FOREIGN INVESTMENTS

As foreign companies are not generally subject to uniform accounting,
auditing and financing reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.

Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the companies comprising the Fund's Portfolios.
However, these foreign withholding taxes are not expected to have a significant
impact.

A-7
<PAGE>

APPENDIX B - COMPARISONS

(a) Donoghue's Money Fund Average -- is an average of all major money
market fund yields, published weekly for 7 and 30-day yields.

(b) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.

(c) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividend.

(d) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.

(e) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.

(f) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.

(g) Lipper 1-5 Year Short Investment Grade Debt Funds Average -- is an
average of 160 funds that invest at least 65% of assets in investment
grade debt issues (rated in top four grades with dollar-weighted
average maturities of 5 years or less.

(h) Merrill Lynch 1-4.99 Year Corporate/Government Bond Index -- is an
unmanaged index composed of U.S. Treasuries, agencies and corporates
with maturities from 1 to 4.99 years. Corporates are investment grade
only (rated in the top four grades).

B-1
<PAGE>

(i) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.

(j) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.

(k) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.

(l) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.

(m) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency
issues and mortgage pass-through securities.

(n) Lehman Brothers Long-Term Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.

(o) Lehman Brothers Intermediate Government/Corporate Index -- is a
combination of the Government and Corporate Bond Indices. All issues
are investment grade (BBB) or higher, with maturities of one to ten
years and an outstanding par value of at least $100 million for U.S.
Government issues and $25 million for others. The Government Index
includes public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The
Corporate Bond Index includes fixed-rate nonconvertible corporate
debt. Also included are Yankee Bonds and nonconvertible debt issued
by or guaranteed by foreign or international governments and agencies.
Any security downgraded during the month is held in the index until
month-end and then removed. All returns are market value weighted
inclusive of accrued income.

B-2
<PAGE>

(p) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.

(q) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.

(r) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S.
publicly-traded companies.

(t) Merrill Government/Corporate 1 to 5 Year Index -- is an unmanaged
index composed of U.S. Treasuries, agencies and corporates with
maturities from 1 to 4.99 years. Corporates are investment grade only
(rated in the top four grades).

(u) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
-- analyzes price, current yield, risk, total return and average rate
of return (average annual compounded growth rate) over specified time
periods for the mutual fund industry.

(v) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

(w) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service --
publications that rate fund performance over specified time periods.

(x) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over
time in the price of goods and services in major expenditure groups.

B-3
<PAGE>

(y) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates
-- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.

(z) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings and Loan League Fact Book.

(aa) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan Companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers and Bloomberg L.P.

B-4
<PAGE>

DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (89.2%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.6%)
Raytheon Co. ......................................... 27,700 $ 1,502,725
- -------------------------------------------------------------------------------
AUTOMOTIVE (2.6%)
LucasVarity plc ADR................................... 70,625 2,410,078
- -------------------------------------------------------------------------------
COMPUTERS (1.5%)
*Stratus Computer, Inc. ............................... 39,000 1,379,625
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (16.5%)
American Stores Co. .................................. 104,000 2,671,500
Black & Decker Corp. ................................. 60,900 2,318,006
J.C. Penney Co., Inc. ................................ 40,900 2,400,319
Liz Claiborne, Inc. .................................. 29,100 1,475,006
Philip Morris Cos., Inc. ............................. 56,900 2,254,662
RJR Nabisco Holdings Corp. ........................... 39,300 1,245,319
*Ryan's Family Steak House, Inc. ...................... 36,825 313,013
*Toys 'R' Us, Inc. .................................... 71,790 2,445,347
-----------
15,123,172
- -------------------------------------------------------------------------------
ELECTRONICS (1.0%)
Motorola, Inc. ....................................... 14,400 889,200
- -------------------------------------------------------------------------------
ENERGY (9.1%)
British Petroleum Co. plc ADR......................... 37,377 3,279,832
Exxon Corp. .......................................... 32,200 1,978,287
Texaco, Inc. ......................................... 54,200 3,086,013
-----------
8,344,132
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (3.0%)
Carnival Corp., Class A............................... 56,845 2,756,982
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (11.5%)
BankAmerica Corp. .................................... 51,000 3,646,500
BankBoston Corp. ..................................... 43,800 3,550,537
Chase Manhattan Corp. ................................ 29,500 3,403,563
-----------
10,600,600
- -------------------------------------------------------------------------------
HEALTH CARE (1.9%)
*Humana, Inc. ......................................... 51,400 1,079,400
*Tenet Healthcare Corp. ............................... 22,400 684,600
-----------
1,764,000
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (5.2%)
Cooper Industries, Inc. .............................. 11,700 $ 609,863
Imperial Chemical Industries plc ADR.................. 20,800 1,245,400
Millennium Chemicals, Inc. ........................... 30,200 709,700
United Technologies Corp. ............................ 31,400 2,198,000
-----------
4,762,963
- -------------------------------------------------------------------------------
INSURANCE (6.4%)
Aetna, Inc. .......................................... 31,500 2,238,469
Allstate Corp. ....................................... 28,000 2,322,250
Torchmark Corp. ...................................... 33,800 1,347,775
-----------
5,908,494
- -------------------------------------------------------------------------------
METALS (2.4%)
*Alumax, Inc. ......................................... 68,400 2,223,000
- -------------------------------------------------------------------------------
NATURAL RESOURCES (1.2%)
IMC Global, Inc. ..................................... 33,800 1,138,637
- -------------------------------------------------------------------------------
PAPER & PACKAGING (3.5%)
Fort James Corp. ..................................... 46,200 1,833,562
*Jefferson Smurfit Corp. .............................. 95,385 1,395,006
-----------
3,228,568
- -------------------------------------------------------------------------------
PHARMACEUTICALS (1.7%)
American Home Products Corp. ......................... 12,100 896,912
Pharmacia & Upjohn, Inc. ............................. 19,800 628,650
-----------
1,525,562
- -------------------------------------------------------------------------------
SERVICES (0.8%)
*Information Resources, Inc. .......................... 43,900 713,375
- -------------------------------------------------------------------------------
TECHNOLOGY (11.4%)
*Digital Equipment Corp. .............................. 32,900 1,647,056
International Business Machines Corp. ................ 32,250 3,162,516
*Lexmark International Group, Inc., Class A............ 11,280 344,745
*Micron Technology, Inc. .............................. 59,800 1,603,388
*Sybase, Inc. ......................................... 138,600 2,252,250
Xerox Corp. .......................................... 18,900 1,499,006
-----------
10,508,961
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

DSI DISCIPLINED VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES (7.9%)
Bell Atlantic Corp. .................................. 10,989 $ 877,746
GTE Corp. ............................................ 81,100 3,441,681
*Niagara Mohawk Power Corp. ........................... 85,800 831,188
Texas Utilities Co. .................................. 58,000 2,080,750
-----------
7,231,365
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $74,434,041)................. 82,011,439
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (4.3%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.1%)
Kmart Financing, 7.75%................................ 33,164 1,888,276
- -------------------------------------------------------------------------------
INDUSTRIAL (1.0%)
WHX Corp. Series A, 6.50%............................. 19,200 945,600
- -------------------------------------------------------------------------------
INSURANCE (1.2%)
Aetna, Inc., 6.25%.................................... 16,015 1,149,076
- -------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $3,957,197)... 3,982,952
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.6%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $4,275,995,
collateralized by $4,097,795 of various U.S Treasury
Notes, 5.50%-8.75% due from 5/15/00-6/30/02, valued
at $4,276,411 (COST $4,274,000)...................... $4,274,000 4,274,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.1%) (COST $82,665,238)(A)........ 90,268,391
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.9%).................... 1,720,174
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $91,988,565
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
ADR American Depositary Receipt
(a) The cost for Federal income tax purposes was $82,891,341. At October 31,
1997, net unrealized appreciation for all securities based on tax cost
was $7,377,050. This consisted of aggregate gross unrealized appreciation
for all securities of $10,882,564, and aggregate gross unrealized
depreciation for all securities of $3,505,514.

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (37.8%)
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.4%)
Philip Morris Cos., Inc.:
6.95%, 6/1/06......................................... $ 350,000 $ 359,639
8.625%, 3/1/99........................................ 250,000 257,708
9.25%, 12/1/97........................................ 500,000 500,426
-----------
1,117,773
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (0.0%)
Time Warner, Inc.
9.125%, 1/15/13....................................... 5,000 5,908
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (9.9%)
AT&T Capital Corp., Series 4
6.41%, 8/13/99........................................ 400,000 402,500
American General Corp.
9.625%, 2/1/18........................................ 125,000 131,519
Amresco, Inc.
10.00%, 1/15/03....................................... 250,000 258,125
Amresco, Inc., Series 97-A
10.00%, 3/15/04....................................... 250,000 258,750
Donaldson Lufkin & Jenrette, Inc., FRN
6.70%, 6/30/00........................................ 530,000 536,728
International Lease Finance Corp.
5.75%, 12/15/99....................................... 600,000 595,380
Phoenix Re Corp.
9.75%, 8/15/03........................................ 750,000 797,812
Salomon, Inc., FRN
6.20%, 2/15/99........................................ 260,000 261,734
-----------
3,242,548
- -------------------------------------------------------------------------------
INDUSTRIAL (12.3%)
Crown Paper Co.
11.00%, 9/1/05........................................ 250,000 266,875
Fortune Brands, Inc.
8.50%, 10/1/03........................................ 15,000 16,531
Ford Motor Credit Co.
7.50%, 1/15/03........................................ 10,000 10,453
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (CONTINUED)
Inco Ltd.
9.875%, 6/15/19....................................... $ 350,000 $ 376,306
News America Holdings, Inc.
8.45%, 8/1/34......................................... 250,000 281,278
Occidential Petroleum Corp.
8.50%, 9/15/04........................................ 475,000 489,326
Phillips Petroleum Corp.
9.18%, 9/15/21........................................ 600,000 679,800
U.S. Home Corp.
7.95%, 3/1/01......................................... 250,000 253,432
Valassis Communication, Inc.
9.55%, 12/1/03........................................ 1,000,000 1,123,840
WMX Technologies, Inc.
7.10%, 8/1/26......................................... 500,000 519,585
-----------
4,017,426
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.6%)
ITT Corp.
8.55%, 6/15/09........................................ 450,000 515,246
- -------------------------------------------------------------------------------
UTILITIES (10.6%)
Canal Electric Co.
8.85%, 9/1/06......................................... 784,000 806,956
Cleveland Electric Illuminating Co.
8.375%, 12/1/11....................................... 400,000 412,207
Commonwealth Edison Co.
8.625%, 2/1/22........................................ 650,000 705,348
Eastern Edison Co.
5.75%, 7/1/98......................................... 500,000 499,575
Midland Funding Corp. I, Series C-94
10.33%, 7/23/02....................................... 490,178 537,955
Pacific Gas & Electric Corp., Series PP
6.875%, 12/1/99....................................... 500,000 502,650
-----------
3,464,691
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $12,100,282)...... 12,363,592
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES (23.2%)
- -------------------------------------------------------------------------------
GOVERNMENT AGENCY-BACKED (22.6%)
Federal Home Loan Mortgage Corp.:
Series 1265 F, PAC(11), REMIC
7.00%, 10/15/17...................................... $ 376,046 $ 377,219
Series 1302 PF, PAC(11), REMIC
7.50%, 2/15/18....................................... 335,892 338,619
Series 1332 ZA, PAC(11), REMIC
6.50%, 1/15/16....................................... 106,317 106,117
Gold Pools:
7.50%, 4/1/27........................................ 847,330 866,124
7.50%, 6/1/27........................................ 997,170 1,030,824
8.50%, 11/1/24....................................... 1,414,422 1,482,922
Federal National Mortgage Association
Conventional Pools:
7.00%, 10/1/27....................................... 1,017,721 1,020,897
7.50%, 1/1/27........................................ 1,014,149 1,036,015
9.00%, 6/1/25........................................ 577,895 621,231
9.50%, 8/1/21........................................ 485,632 522,807
-----------
7,402,775
- -------------------------------------------------------------------------------
NON-GOVERNMENT AGENCY-BACKED (0.5%)
Ryland Acceptance Corp., Series 81-B, PAC, REMIC
9.00%, 1/1/15......................................... 166,173 172,249
- -------------------------------------------------------------------------------
NON-GOVERNMENT NON-AGENCY-BACKED (0.1%)
Merrill Lynch Mortgage Investors, Inc., Series 94-A,
CSI, REMIC
6.412%, 2/15/09....................................... 26,388 26,355
- -------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $7,962,208)...... 7,601,379
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (21.5%)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, Series FQ06
7.50%, 12/27/06....................................... 500,000 500,150
Federal Farm Credit Bank, FRN
5.90%, 11/18/97....................................... 500,000 499,878
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- ------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES--(CONTINUED)
- ------------------------------------------------------------------------------
Federal National Mortgage Association:
Series 04-M 8.55%, 12/10/04......................... $ 400,000 $ 401,188
MTN, 8.01%, 4/1/05.................................. 500,000 504,685
FRN, 4.665%, 2/25/98................................ 500,000 499,285
FRN, 4.23%, 1/6/98.................................. 1,100,000 1,097,701
++Principal Strip, 4/13/05........................... 1,000,000 975,000
U.S. Treasury Notes
5.75%, 9/30/99...................................... 1,175,000 1,177,573
6.25%, 2/15/03...................................... 430,000 438,935
6.50%, 5/15/05...................................... 670,000 694,133
6.875%, 7/31/99..................................... 250,000 255,000
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(COST $6,487,684).................................... 7,043,528
- ------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (6.5%)
- ------------------------------------------------------------------------------
Corp. Andina De Fomento
7.25%, 4/30/98...................................... 700,000 703,500
Korea Development Bank
7.125%, 9/17/01..................................... 500,000 494,140
United Kingdom Treasury Bill
8.00%, 12/7/00...................................... GBP 535,000 926,857
- ------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $2,095,392)...... 2,124,497
- ------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (4.2%)
- ------------------------------------------------------------------------------
Security Pacific National Bank, Series 91-2 B
8.15%, 6/15/20...................................... $ 239,043 244,240
TMS Home Equity Trust:
Series 95-C A3
6.55%, 9/15/21..................................... 585,000 589,861
Series 96-B A7
7.55%, 2/15/20..................................... 525,000 546,517
- ------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $1,348,590)....... 1,380,618
- ------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- --------------------------------------------------------------------------------
MUNICIPAL BOND (2.6%)
- --------------------------------------------------------------------------------
New York City, New York, General Obligation Bond,
Series B (Prerefunded) 9.50%, 6/1/09 (COST
$831,803)............................................ $ 750,000 $ 842,813
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (4.2%)
- --------------------------------------------------------------------------------
U.S. TREASURY BILL (0.2%)
+++4.93%, 2/12/98...................................... 50,000 49,289
REPURCHASE AGREEMENT (4.0%)
Lehman Brothers 5.60%, dated 10/31/97, due 11/3/97, to
be repurchased at $1,313,613, colateralized by
$1,005,000 U.S. Treasury Bonds, 8.75%, due 5/15/20,
valued at $1,350,653................................. 1,313,000 1,313,000
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,362,295)......... 1,362,289
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100%) (COST $32,188,254)(A)......... 32,718,716
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%).................... (6,367)
- --------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $32,712,349
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Callable on 4/13/98. If not called, will start accruing at 8.00%.
+++ All or a portion of this security was pledged to cover margin requirements
for open futures contracts.
CSI Collateral Strip Interest
FRN Floating Rate Note--rate disclosed is as of October 31, 1997.
GBP British Pound
MTN Medium Term Note
PAC Planned Amortization Class
REMIC Real Estate Mortgage Investment Conduit
(a) The cost for Federal income tax purposes was $32,188,254. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$530,462. This consisted of aggregate gross unrealized appreciation for
all securities of $547,694, and aggregate gross unrealized depreciation
for all securities of $17,232.

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

Forward Foreign Currency Exchange Contract Information: Under the terms of
forward foreign currency exchange contracts open at October 31, 1997, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:

<TABLE>
<CAPTION>
CURRENCY SETTLEMENT IN EXCHANGE NET UNREALIZED
TO DELIVER VALUE DATE FOR VALUE GAIN (LOSS)
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GBP 556,162 $ 932,907 11/3/97 $ 902,762 $ 902,762 $(30,145)
$ 927,956 927,956 11/3/97 GBP 556,162 932,907 4,951
GBP 556,161 932,655 12/3/97 $ 926,649 926,649 (6,006)
---------- ---------- --------
$2,793,518 $2,762,318 $(31,200)
========== ========== ========
</TABLE>

GBP-British Pound

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

DSI MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (79.2%)
- -------------------------------------------------------------------------------
BANKS (3.2%)
Nordbanken NA, Inc. 2/20/98.......................... $ 5,000,000 $ 4,914,283
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.9%)
Hershey Foods Corp. 11/7/97.......................... 6,000,000 5,994,520
- -------------------------------------------------------------------------------
CHEMICALS (7.2%)
Dow Chemical Co. 12/5/97............................. 5,000,000 4,973,933
Monsanto Co. 2/5/98.................................. 6,000,000 5,910,880
------------
10,884,813
- -------------------------------------------------------------------------------
FINANCAL SERVICES (22.7%)
Cargill Global Fund plc 2/23/98...................... 4,000,000 3,929,573
Corporate Asset Funding, Co. 11/12/97................ 6,000,000 5,989,917
Den Danske Corp. 12/16/97............................ 6,900,000 6,852,476
General Electric Capital Services 2/12/98............ 6,000,000 5,904,553
General Motors Acceptance Corp. 1/21/98.............. 7,000,000 6,911,643
Northern Rock plc 3/4/98............................. 5,000,000 4,904,846
------------
34,493,008
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT (4.2%)
Export Development Corp. 1/14/98..................... 6,500,000 6,425,688
- -------------------------------------------------------------------------------
INDUSTRIAL (4.0%)
Caterpillar, Inc. 11/19/97........................... 6,100,000 6,083,195
- -------------------------------------------------------------------------------
INSURANCE (21.6%)
American General Finance Corp. 1/29/98............... 7,000,000 6,904,127
Metlife Funding, Inc. 11/24/97....................... 6,500,000 6,476,869
Metlife Funding, Inc. 11/3/97........................ 7,448,000 7,445,724
Prudential Funding Corp. 11/18/97.................... 6,000,000 5,984,417
USAA Capital Corp. 11/7/97........................... 6,000,000 5,994,500
------------
32,805,637
- -------------------------------------------------------------------------------
PUBLISHING (3.9%)
Gannett Co. 1/16/98.................................. 6,000,000 5,930,460
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

DSI MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES (8.5%)
Duke Energy Corp. 11/14/97.......................... $ 6,500,000 $ 6,487,114
PacifiCorp 11/21/97................................. 6,500,000 6,480,103
------------
12,967,217
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST $120,498,821)........... 120,498,821
- -------------------------------------------------------------------------------
CORPORATE BONDS (9.9%)
- -------------------------------------------------------------------------------
BANKS (3.3%)
American Express Centurion Bank, FRN
5.716%, 6/25/98.................................... 5,000,000 5,003,325
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY (6.6%)
Student Loan Marketing Association, FRN
5.36%, 3/19/98..................................... 10,000,000 10,000,000
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $15,003,325)............. 15,003,325
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (20.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (20.6%)
Lehman Brothers 5.60%, dated 10/31/97, due 11/3/97,
to be repurchased at $31,437,664, collateralized by
$32,065,000 U.S. Treasury Note, 5.625% due
10/31/99, Valued at $32,075,020
(COST $31,423,000)................................. 31,423,000 31,423,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (109.7%) (COST $166,925,146)(A).... 166,925,146
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-9.7%)................. (14,709,209)
- -------------------------------------------------------------------------------
NET ASSETS (100%).................................... $152,215,937
================================================================================

</TABLE>
+ See Note A to Financial Statements.
FRN Floating Rate Note--rate disclosed is as of October 31, 1997.
(a) Aggregate cost for Federal tax and book purposes.

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

DSI PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<CAPTION>
DSI
DSI LIMITED DSI
DISCIPLINED MATURITY MONEY
VALUE BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost................... $82,665,238 $32,188,254 $166,925,146
=========== =========== ============
Investments, at Value (Including Repur-
chase Agreements of $4,274,000,
$1,313,000 and $31,423,000, respec-
tively)............................... $90,268,391 $32,718,716 $166,925,146
Cash................................... 561 507 557
Receivable for Investments Sold........ 4,235,187 -- --
Receivable for Portfolio Shares Sold... 99,693 -- 43,842
Dividends Receivable................... 108,888 -- --
Foreign Withholding Tax Reclaim........ -- 5,782 --
Interest Receivable.................... 665 480,068 74,599
Other Assets........................... 2,134 755 4,106
- -------------------------------------------------------------------------------
Total Assets.......................... 94,715,519 33,205,828 167,048,250
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased...... 2,528,254 405,978 --
Payable for Portfolio Shares Redeemed.. 92,973 -- 14,295,374
Payable for Investment Advisory Fees--
Note B................................ 60,234 12,407 27,428
Payable for Administrative Fees--Note
C..................................... 12,829 7,280 15,934
Payable for Custodian Fees--Note D..... 3,866 13,720 12,092
Distribution and Service Fees Payable--
Note E................................ 2,717 -- --
Payable for Account Service Fees--Note
F..................................... 1,513 49 --
Payable for Directors' Fees--Note G.... 791 678 1,062
Payable for Daily Variation Margin on
Futures............................... -- 2,063 --
Payable for Dividends.................. -- -- 460,473
Net Unrealized Loss on Foreign Currency
Exchange Contracts.................... -- 31,200 --
Other Liabilities...................... 23,777 20,104 19,950
- -------------------------------------------------------------------------------
Total Liabilities..................... 2,726,954 493,479 14,832,313
- -------------------------------------------------------------------------------
NET ASSETS.............................. $91,988,565 $32,712,349 $152,215,937
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSISTS OF:
Paid in Capital........................ $70,437,216 $34,052,200 $152,231,301
Undistributed Net Investment Income.... 84,248 224,952 94
Accumulated Net Realized Gain (Loss)... 13,863,948 (1,972,574) (15,458)
Unrealized Appreciation................ 7,603,153 407,771 --
- -------------------------------------------------------------------------------
NET ASSETS.............................. $91,988,565 $32,712,349 $152,215,937
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES:
Net Assets............................. $78,544,686 $32,712,349 $152,215,937
Shares Issued and Outstanding ($0.001
par value) (Authorized 25,000,000).... 5,505,550 3,456,626 152,230,553
Net Asset Value, Offering and Redemp-
tion Price Per Share.................. $ 14.27 $ 9.46 $ 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES:
Net Assets............................. $13,443,879 -- --
Shares Issued and Outstanding ($0.001
par value) (Authorized 10,000,000).... 943,364 -- --
Net Asset Value, Offering and Redemp-
tion Price Per Share.................. $ 14.25 -- --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

DSI PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
<TABLE>
<CAPTION>
DSI
DSI LIMITED DSI
DISCIPLINED MATURITY MONEY
VALUE BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................... $ 1,643,903 $ -- $ --
Interest...................... 242,974 2,231,720 10,449,375
- --------------------------------------------------------------------------------
Total Income................. 1,886,877 2,231,720 10,449,375
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note
B
Basic Fees................... 578,915 141,248 $ 759,779
Less: Fees Waived............ -- -- (426,538) 333,241
---------
Administrative Fees--Note C... 133,991 94,725 224,190
Custodian Fees--Note D........ 8,474 12,283 42,198
Distribution and Service Plan
Fees--Note E
Institutional Service Class.. 9,035 -- --
Account Services Fees--Note
F............................ 13,601 399 13,913
Directors' Fees--Note G....... 2,972 2,383 4,605
Printing Fees................. 20,192 14,242 14,252
Registration and Filing Fees.. 19,172 12,371 29,535
Other Expenses................ 32,533 19,950 45,628
- --------------------------------------------------------------------------------
Total Expenses............... 818,885 297,601 707,562
Expense Offset--Note A........ (962) (1,075) (214)
- --------------------------------------------------------------------------------
Net Expenses................. 817,923 296,526 707,348
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.......... 1,068,954 1,935,194 9,742,027
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments................... 14,000,484 (58,019) (15,458)
Foreign Exchange Transac-
tions........................ -- (327) --
Futures Contracts............. -- (248,703) --
- --------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN
(LOSS)........................ 14,000,484 (307,049) (15,458)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments................... 3,453,214 483,403 --
Foreign Exchange Transla-
tions........................ -- (30,191) --
Futures Contracts............. -- 26,344 --
- --------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION/ DEPRECIATION.... 3,453,214 479,556 --
- --------------------------------------------------------------------------------
NET GAIN (LOSS)................ 17,453,698 172,507 (15,458)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RE-
SULTING FROM OPERATIONS....... $18,522,652 $2,107,701 $ 9,726,569
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

19
<PAGE>

DSI DISCIPLINED VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,068,954 $ 1,082,485
Net Realized Gain..................................... 14,000,484 8,761,000
Net Change in Unrealized Appreciation/Depreciation.... 3,453,214 1,488,383
- -----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................... 18,522,652 11,331,868
- -----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class.................................. (1,082,593) (1,010,576)
Institutional Service Class*......................... (27,085) --
Net Realized Gain:
Institutional Class.................................. (8,741,247) (4,252,265)
Institutional Service Class*......................... -- --
- -----------------------------------------------------------------------------------
Total Distributions.................................. (9,850,925) (5,262,841)
- -----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE J:
Institutional Class:
Issued............................................... 13,740,810 14,182,497
--In Lieu of Cash Distributions.................... 9,778,238 5,246,377
Redeemed............................................. (17,157,284) (9,840,384)
- -----------------------------------------------------------------------------------
Net Increase from Institutional Class Shares......... 6,361,764 9,588,490
- -----------------------------------------------------------------------------------
Institutional Service Class:*
Issued............................................... 14,980,199 --
--In Lieu of Cash Distributions.................... 27,085 --
Redeemed............................................. (1,647,818) --
- -----------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares.............................................. 13,359,466 --
- -----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 19,721,230 9,588,490
- -----------------------------------------------------------------------------------
Total Increase....................................... 28,392,957 15,657,517
Net Assets:
Beginning of Period................................... 63,595,608 47,938,091
- -----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $84,248 and $136,622, respectively)........ $ 91,988,565 $63,595,608
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on May 23, 1997.

The accompanying notes are an integral part of the financial statements.

20
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

The accompanying notes are an integral part of the financial statements.

21
<PAGE>

DSI MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

The accompanying notes are an integral part of the financial statements.

22
<PAGE>

DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL
SERVICE CLASS
INSTITUTIONAL CLASS SHARES SHARES
------------------------------------------- ----------------
YEARS ENDED OCTOBER 31, MAY 23, 1997**
------------------------------------------- TO
1997 1996 1995 1994 1993 OCTOBER 31, 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 12.99 $ 11.76 $ 11.11 $ 12.72 $ 10.62 $ 13.10
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.19 0.23 0.25 0.22 0.22 0.07
Net Realized and
Unrealized Gain....... 3.10 2.26 1.70 0.17 2.09 1.15
- --------------------------------------------------------------------------------------
Total from Investment
Operations........... 3.29 2.49 1.95 0.39 2.31 1.22
- --------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.20) (0.22) (0.25) (0.22) (0.21) (0.07)
Net Realized Gain...... (1.81) (1.04) (1.05) (1.78) -- --
- --------------------------------------------------------------------------------------
Total Distributions... (2.01) (1.26) (1.30) (2.00) (0.21) (0.07)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 14.27 $ 12.99 $ 11.76 $ 11.11 $ 12.72 $ 14.25
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
TOTAL RETURN............ 28.99% 22.92% 20.12% 3.48% 21.92% 9.31%++
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands).... $78,545 $63,596 $47,938 $49,002 $42,170 $13,444
Ratio of Expenses to
Average Net Assets.... 1.05% 1.04% 1.00% 1.09% 1.04% 1.30%*
Ratio of Net Investment
Income to Average Net
Assets................ 1.42% 1.89% 2.26% 2.02% 1.88% 0.68%*
Portfolio Turnover
Rate.................. 126% 135% 121% 184% 149% 126%
Average Commission
Rate#................. $0.0594 $0.0588 N/A N/A N/A $0.0594
- --------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... 1.05% 1.04% 0.99% N/A N/A 1.30%*
- --------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Initial offering of Institutional Service Class Shares.
++ Not Annualized
# 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.

23
<PAGE>

DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PE-
RIOD............................ $ 9.40 $ 9.51 $ 9.31 $ 9.95 $ 10.56
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.58 0.62 0.69 0.56 0.68
Net Realized and Unrealized Gain
(Loss)......................... 0.05 (0.13) 0.17 (0.70) (0.16)
- --------------------------------------------------------------------------------
Total from Investment
Operations.................... 0.63 0.49 0.86 (0.14) 0.52
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.57) (0.60) (0.66) (0.50) (0.70)
Net Realized Gain............... -- -- -- -- (0.43)
- --------------------------------------------------------------------------------
Total Distributions............ (0.57) (0.60) (0.66) (0.50) (1.13)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 9.46 $ 9.40 $ 9.51 $ 9.31 $ 9.95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN..................... 6.93% 5.34% 9.58% (1.39)% 5.22%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................... $32,712 $30,433 $29,294 $30,220 $33,724
Ratio of Expenses to Average Net
Assets......................... 0.95% 1.00% 0.88% 0.88% 0.79%
Ratio of Net Investment Income
to Average Net Assets.......... 6.17% 6.55% 7.12% 5.68% 6.50%
Portfolio Turnover Rate......... 51% 121% 126% 274% 167%
- --------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets Including Expense
Offsets........................ 0.94% 0.99% 0.87% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

24
<PAGE>

DSI MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OP-
ERATIONS
Net Investment Income.... 0.051 0.051 0.053 0.033 0.026
- --------------------------------------------------------------------------------
Total from Investment
Operations............. 0.051 0.051 0.053 0.033 0.026
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.... (0.051) (0.051) (0.053) (0.033) (0.026)
- --------------------------------------------------------------------------------
Total Distributions..... (0.051) (0.051) (0.053) (0.033) (0.026)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.............. 5.26%+ 5.26%+ 5.48%+ 3.30% 2.63%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands)............. $152,216 $220,124 $124,147 $112,085 $188,419
Ratio of Expenses to
Average Net Assets...... 0.37% 0.38% 0.50% 0.56% 0.58%
Ratio of Net Investment
Income to Average Net
Assets.................. 5.14% 5.14% 5.35% 3.07% 2.60%
- --------------------------------------------------------------------------------
Voluntarily Waived Fees
and Expenses Assumed by
the Adviser Per Share... $ 0.002 $ 0.002 $ 0.001 N/A N/A
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................. 0.37% 0.38% 0.49% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
+Total return would have been lower had certain expenses not been waived for
the periods indicated.

The accompanying notes are an integral part of the financial statements.

25
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The DSI
Disciplined Value Portfolio, DSI Limited Maturity Bond Portfolio and DSI Money
Market Portfolio (the "Portfolios"), portfolios of UAM Funds, Inc., are
diversified, open-end management investment companies. At October 31, 1997,
the UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The
portfolios are authorized to offer two separate classes of shares--
Institutional Class Shares and Institutional Service Class Shares. As of
October 31, 1997, DSI Disciplined Value Portfolio has issued Institutional
Service Class Shares. Both classes have identical voting rights (except
Institutional Service Class shareholders have exclusive voting rights with
respect to matters relating to distribution and shareholder servicing of such
shares), dividend, liquidation and other rights. The objective of the
Portfolios are as follows:

DSI DISCIPLINED VALUE PORTFOLIO seeks to achieve maximum long-term total
return consistent with reasonable risk to principal through diversified
equity investments.

DSI LIMITED MATURITY BOND PORTFOLIO seeks to provide maximum total return
consistent with reasonable risk to principal by investing in investment
grade fixed income securities. The Portfolio will ordinarily maintain an
average weighted maturity of less than six years.

DSI MONEY MARKET PORTFOLIO seeks to provide maximum current income
consistent with the preservation of capital and liquidity by investing in
short-term investment grade money market obligations issued or guaranteed
by financial institutions, non financial corporations, and the United
States Government, as well as repurchase agreements collateralized by such
securities.

A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of
their financial statements. Generally accepted accounting principles may
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.

1. SECURITY VALUATION: The DSI Money Market Portfolio values all securities
utilizing the amortized cost method permitted in accordance with Rule 2a-7
under the Investment Company Act of 1940, as amended, and pursuant to which
the Portfolio must adhere to certain conditions. Securities in each of the
remaining Portfolios are valued in the following manner: Equity securities
listed on a securities exchange for which market quotations are readily
available are valued at the last quoted sales price as of the close of the
exchange on the day the valuation is made. Price information on listed
securities is taken from the exchange where the security is primarily
traded. Unlisted equity securities are valued at the current bid prices.
Fixed income securities are stated on the basis of valuations provided by
brokers and/or a pricing service which uses information with respect to
transactions in fixed income securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments that have remaining
maturities of sixty days or less at time of purchase are valued at
amortized cost, if it approximates market value. The value of other assets
and securities for which no quotations are readily available is determined
in good faith at fair value using methods determined by the board of
directors.

26
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements.

The DSI Disciplined Value and DSI Limited Maturity Bond Portfolios may be
subject to taxes imposed by countries in which they invest. Such taxes are
generally based on either income or gains earned or repatriated. The DSI
Disciplined Value and DSI Limited Maturity Bond Portfolios accrue such
taxes when the related income is earned.

At October 31, 1997, the following Portfolios had available capital loss
carryover for Federal income tax purposes, which will expire on the dates
indicated:

<TABLE>
<CAPTION>
OCTOBER 31,
------------------------------------------------------
DSI PORTFOLIO 2001 2002 2003 2004 2005 TOTAL
------------- ------ ---------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Limited Maturity Bond... $8,328 $1,606,712 $68,688 $137,755 $243,544 $2,065,027
Money Market............ -- -- -- -- 15,459 15,459
</TABLE>

3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, the Portfolios' custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, each
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.

Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Portfolio(s) may transfer their daily uninvested cash
balances into a joint trading account which invests in one or more
repurchase agreements. This joint repurchase agreement is covered by the
same collateral requirements as discussed above.

4. FUTURES AND OPTIONS CONTRACTS: The DSI Disciplined Value Portfolio and
the DSI Limited Maturity Bond Portfolio may use futures and options
contracts to hedge against changes in the values of securities the
Portfolio owns or expects to purchase. The DSI Disciplined Value Portfolio
and DSI Limited Maturity Bond Portfolio may also write covered options on
securities it owns or in which it may invest to increase its current
returns.

The potential risk to the Portfolios is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the value
of the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to perform.

Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price

27
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
for purchased options and the last ask price for written options. The DSI
Limited Maturity Bond Portfolio had the following futures contracts open at
October 31, 1997:

<TABLE>
<CAPTION>
NET
UNREALIZED
NUMBER OF AGGREGATE APPRECIATION
CONTRACTS CONTRACTS FACE VALUE EXPIRATION DATE (DEPRECIATION)
--------- --------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury 10 Year
Note................... 33 $3,595,250 December 1997 $(92,500)
</TABLE>

5. FOREIGN CURRENCY TRANSLATION: The books and records of DSI Disciplined
Value Portfolio and DSI Limited Maturity Bond Portfolio are maintained in
U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars on the
date of valuation. The DSI Disciplined Value Portfolio and DSI Limited
Maturity Bond Portfolio do not isolate that portion of realized or
unrealized gains and losses resulting from changes in the foreign exchange
rate from fluctuations arising from changes in the market prices of the
securities. These gains and losses are included in net realized and
unrealized gain and loss on investments on the statement of operations. Net
realized and unrealized gains and losses on foreign currency transactions
represent net foreign exchange gains or losses from forward foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between trade and settlement dates on securities
transactions and the difference between the amount of the investment income
and foreign withholding taxes recorded on the DSI Disciplined Value and DSI
Limited Maturity Bond Portfolios' books and the U.S. dollar equivalent
amounts actually received or paid.

6. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The DSI Disciplined Value
and the DSI Limited Maturity Bond Portfolios may enter into forward foreign
currency exchange contracts to protect the value of securities held and
related receivables and payables against changes in future foreign exchange
rates. A forward currency contract is an agreement between two parties to
buy and sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in 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 DSI Disciplined Value and the DSI
Limited Maturity Bond Portfolios as unrealized gain or loss. The DSI
Disciplined Value and the DSI Limited Maturity Bond Portfolios recognize
realized gain or loss when the contract is closed, equal to the difference
between the value of the contract at the time it was opened and the value
at the time it was closed. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and are generally 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.

7. DISTRIBUTIONS TO SHAREHOLDERS: The DSI Money Market Portfolio will
normally declare daily and distribute monthly substantially all of its net
investment income. The DSI Disciplined Value and DSI Limited Maturity Bond
Portfolios will normally distribute substantially all of their net
investment income quarterly. Any realized net capital gains will be
distributed annually. All distributions are recorded on ex-dividend date.

28
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments for foreign currency
transactions and the timing of the recognition of gains or losses on
investments. Permanent book and tax basis differences relating to
shareholder distributions resulted in reclassifications as follows:

<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID IN
DSI PORTFOLIOS INCOME GAIN CAPITAL
-------------- -------------- ------------ -------
<S> <C> <C> <C>
Disciplined Value....................... $(11,650) $18,279 $(6,629)
Limited Maturity Bond................... (37,163) 37,163 --
Money Market............................ 94 (94) --
</TABLE>

5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon
as the DSI Disciplined Value and the DSI Limited Maturity Bond Portfolios
are informed of the ex-dividend date. Interest income is recognized on the
accrual basis. Discounts and premiums on securities purchased are amortized
using the effective yield basis over their respective lives. Most expenses
of the UAM Funds can be directly attributed to a particular portfolio.
Expenses which cannot be directly attributed are apportioned among the
portfolios of the UAM Funds based on their relative net assets.
Additionally, certain expenses are apportioned among the portfolios of the
UAM Funds, based on their relative net assets. Custodian fees for the
Portfolios have been increased to include expense offsets, if any, for
custodian balance credits.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Dewey Square Investors Corporation (the "Adviser"), a wholly-owned subsidiary
of United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolios at a monthly fee calculated at an annual rate of
0.75% of the first $500 million of average daily net assets for the month and
0.65% of average daily net assets for the month in excess of $500 million for
DSI Disciplined Value Portfolio; 0.45% of the first $500 million of average
daily net assets for the month, 0.40% of the next $500 million of average
daily net assets for the month and 0.35% of average daily net assets for the
month in excess of $1 billion for DSI Limited Maturity Bond Portfolio; and
0.40% of the first $500 million of average daily net assets for the month and
0.35% of average daily net assets for the month in excess of $500 million for
DSI Money Market Portfolio. In addition, the Adviser has voluntarily agreed to
cap its advisory fees for the DSI Money Market Portfolio at 0.18% of average
daily net assets.

29
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the UAM Funds under a Fund Administration Agreement (the "Agreement").
Pursuant to the Agreement, the Administrator is entitled to receive annual
fees, 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 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 at an annual rate of 0.06%, 0.04%, 0.02% of average daily net assets for
DSI Disciplined Value Portfolio, DSI Limited Maturity Bond Portfolio, and DSI
Money Market Portfolio, respectively. The Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the year ended October 31, 1997, UAM Fund Services, Inc. earned the
following amounts from the Portfolios as Administrator and paid the following
portions to CGFSC for its services as sub-Administrator:

<TABLE>
<CAPTION>
ADMINISTRATION PORTION PAID
DSI PORTFOLIOS FEES TO CGFSC
- -------------- -------------- ------------
<S> <C> <C>
Disciplined Value................................... $133,991 $87,680
Limited Maturity Bond............................... 94,725 82,171
Money Market........................................ 224,190 186,237
</TABLE>

D. CUSTODIAN: The Chase Manhattan Bank, an affiliate of CGFSC, is custodian
for the Portfolio's assets held in accordance with the custodian agreement.

E. DISTRIBUTION AND SERVICE PLANS: UAM Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of UAM, distributes the shares of
the Portfolios. The DSI Disciplined Value Portfolio has adopted Distribution
and Service Plans (the "Plans") on behalf of the Institutional Service Class
Shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the Plans, the DSI Disciplined Value Portfolio may not incur distribution and
service fees which exceed an annual rate of 0.75% of the DSI Disciplined Value
Portfolio's net assets, however, the Board has currently limited aggregate
payments under the Plans to 0.50% per annum of the DSI Disciplined Value
Portfolio's net assets. The DSI Disciplined Value Portfolio's Institutional
Service Class Shares are not currently making payments for distribution fees.
In addition, the DSI Disciplined Value Portfolio's Institutional Service Class
Shares pay service fees at an annual rate of 0.25% of the average daily value
of Institutional Service Class Shares owned by clients of certain Service
Agents. The Distributor does not receive any fee or other compensation with
respect to the DSI Limited Maturity Bond and Money Market Portfolios.

F. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered in an
Account Services Agreement (the "Services Agreement") with UAM Retirement Plan
Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of UAM.
Under the Services Agreement, the Service Provider agrees to perform certain
services for participants in a self-directed, defined contribution plan, and
for whom the Service Provider provides

30
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
participant recordkeeping. Pursuant to the Services Agreement, the Service
Provider is entitled to receive, after the end of each month, a fee at the
annual rate of 0.15% of the average aggregate daily net asset value of shares
of the UAM Funds in the accounts for which they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:

<TABLE>
<CAPTION>
DSI PORTFOLIOS PURCHASES SALES
- -------------- ----------- -----------
<S> <C> <C>
Disciplined Value....................................... $97,992,019 $89,285,020
Limited Maturity Bond................................... 12,037,626 7,793,224
</TABLE>

Purchases and sales of long-term U.S. Government securities were $9,553,029
and $7,060,087, respectively, for the DSI Limited Maturity Bond Portfolio.
There were no purchases or sales of long-term U.S. Government securities for
the DSI Disciplined Value Portfolio.

I. LINE OF CREDIT: The DSI Disciplined Value and DSI Limited Maturity Bond
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. Interest is charged to
each participating Portfolio based on its borrowings at a rate per annum equal
to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.08%
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, 1997, the Portfolios had no
borrowings under the agreement.

31
<PAGE>

DSI PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

J. OTHER: Transactions in capital shares for the portfolios, by class, were as
follows:

<TABLE>
<CAPTION>
INSTITUTIONAL
SERVICE CLASS
INSTITUTIONAL CLASS SHARES SHARES
---------------------------- --------------
YEAR ENDED YEAR ENDED MAY 23, 1997*
OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
DSI PORTFOLIOS 1997 1996 1997
- -------------- -------------- ------------ --------------
<S> <C> <C> <C>
DISCIPLINED VALUE:
Shares Issued................ 1,054,305 1,139,721 1,056,772
In Lieu of Cash Distribu-
tions....................... 838,649 462,852 1,844
Shares Redeemed.............. (1,281,827) (785,773) (115,252)
-------------- ------------ ---------
Net Increase from Capital
Share Transactions.......... 611,127 816,800 943,364
============== ============ =========
LIMITED MATURITY BOND:
Shares Issued................ 257,032 273,542 --
In Lieu of Cash Distribu-
tions....................... 199,681 196,929 --
Shares Redeemed.............. (235,983) (316,456) --
-------------- ------------ ---------
Net Increase from Capital
Share Transactions.......... 220,730 154,015 --
============== ============ =========
MONEY MARKET:
Shares Issued................ 1,562,406,186 739,833,347 --
In Lieu of Cash Distribu-
tions....................... 2,676,039 604,974 --
Shares Redeemed.............. (1,632,974,857) (644,461,308) --
-------------- ------------ ---------
Net Increase (Decrease) from
Capital Share Transactions.. (67,892,632) 95,977,013 --
============== ============ =========
</TABLE>
- --------
* Initial Offering of Institutional Service Class Shares.

At October 31, 1997, the percentage of total shares outstanding held by record
shareholders owning 10% or greater of the aggregate total shares outstanding
for each Portfolio was as follows:

<TABLE>
<CAPTION>
NO. OF %
DSI PORTFOLIOS SHAREHOLDERS OWNERSHIP
- -------------- ------------ ---------
<S> <C> <C>
Disciplined Value--Institutional Class................... 2 53.2%
Disciplined Value--Institutional Service Class........... 4 76.9
Limited Maturity Bond.................................... 1 54.4
Money Market............................................. 1 63.1
</TABLE>

32
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio

In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of DSI Disciplined
Value Portfolio, DSI Limited Maturity Bond Portfolio, and DSI Money Market
Portfolio (the "Portfolios"), Portfolios of the UAM Funds, Inc., at October
31, 1997, and the results of each of their operations, the changes in each of
their net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
securities were not yet received by the custodian, provide a reasonable basis
for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):

At October 31, 1997, the DSI Disciplined Value Portfolio hereby designates
$2,704,474 as a long-term capital gain dividend for the purpose of the
dividend paid deduction on its Federal income tax return.

For the year ended October 31, 1997, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
15.4% for the DSI Disciplined Value Portfolio.

For the year ended October 31, 1997, the percentage of income earned from
direct Treasury Obligations for the DSI Limited Maturity Bond Portfolio was
15.5%.

33
<PAGE>

PART B

UAM FUNDS

FMA SMALL COMPANY PORTFOLIO

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the FMA Small Company Portfolio's Institutional Class Shares dated January 22,
1998 and the Prospectus for the FMA Small Company Portfolio Institutional
Service Class Shares (the "Service Class Shares") dated January 22, 1998. To
obtain a Prospectus, please call the UAM Funds Service Center: 1-800-638-7983

TABLE OF CONTENTS

<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES....................................... 2

PURCHASE AND REDEMPTION OF SHARES........................................ 4

SHAREHOLDER SERVICES..................................................... 6

INVESTMENT LIMITATIONS................................................... 7

MANAGEMENT OF THE FUND................................................... 9

INVESTMENT ADVISER....................................................... 13

SERVICE AND DISTRIBUTION PLANS........................................... 15

PORTFOLIO TRANSACTIONS................................................... 18

ADMINISTRATIVE SERVICES.................................................. 19

CUSTODIAN................................................................ 22

INDEPENDENT ACCOUNTANTS.................................................. 22

DISTRIBUTOR.............................................................. 22

PERFORMANCE CALCULATIONS................................................. 22

GENERAL INFORMATION...................................................... 25

FINANCIAL STATEMENTS..................................................... 27

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS....................... A-1

APPENDIX B - COMPARISONS................................................. B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objective and
policies of the FMA Small Company Portfolio (the "Portfolio) as set forth in the
FMA Portfolio's Prospectuses.

LENDING OF SECURITIES

The Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "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). The Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of collateral for the loan) at fair market value would be
committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed above.

SHORT-TERM INVESTMENTS

In order to earn a return on uninvested assets, meet anticipated
redemptions, or for temporary defensive purposes, the Portfolio may invest a
portion of its assets in the short-term investments described below:

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are non-
negotiable deposits maintained in a banking institution for a specified period
of time at a stated interest rate. Time deposits maturing in more than seven
days will not be purchased by the Portfolio, and time deposits maturing from two
business days through seven calendar days will not exceed 10% of the total
assets of the Portfolio.

-2-
<PAGE>

Certificates of deposit are negotiable short-term obligations issued
by commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

The Portfolio will not invest in any debt security issued by a
commercial bank unless (i) the bank had total assets of a least $1 billion, or
the equivalent in other currencies, (ii) in the case of U.S. banks, it is a
member of the Federal Deposit Insurance Corporation, and (iii) in the case of
foreign branches of U.S. banks, the security is, in the opinion of the Adviser,
of an investment quality comparable with other debt securities which may be
purchased by the 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, determined by the Adviser to be of comparable quality;

(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;

(6) Repurchase agreements collateralized by securities listed above.

PORTFOLIO TURNOVER

-3-
<PAGE>

Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may also be affected by cash requirements for redemptions
of shares. See "Financial Highlights" in the Prospectuses for the historical
portfolio turnover rates with respect to the Portfolio.

PURCHASE AND REDEMPTION OF SHARES

Both classes of shares of the Portfolio may be purchased without a
sales commission, at the net asset value per share next determined after an
order is received in proper form by the Fund and payment is received by the
Fund's custodian. The minimum initial investment required is $25,000 with
certain exceptions as may be determined from time to time by the officers of the
Fund. An order received in proper form prior to the close of regular trading on
the New York Stock Exchange (the "Exchange") (generally 4:00 p.m. Eastern Time),
will be executed at the price computed on the date of receipt; and an order
received not in proper form or after the close of the Exchange will be executed
at the price computed on the next day the Exchange is open after proper receipt.
The Exchange will be closed on the following days: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day; New
Year's Day; and Dr. Martin Luther King, Jr. Day.

The Portfolio reserves the right in its sole discretion (1) to suspend
the offering of its shares, (2) to reject purchase orders when in the judgement
of management such rejection is in the best interest of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of the Portfolio's shares.

The 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
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Portfolio to dispose of securities owned by it, or to fairly determine
the value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be

-4-
<PAGE>

paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares," and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.

No charge is made by the Portfolio for redemptions. Any redemption
may be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase
Global Funds Services Company ("CGFSC") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signatures guarantees are required for (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) or
registered address, and (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.

VALUATION OF SHARES

-5-
<PAGE>

securities not traded on the valuation date for which market quotations are
readily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is based
upon the bid price of the foreign currency against U.S. dollars quoted by any
major bank or by a broker.

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost when the
Board of Directors determines that amortized cost reflects fair value.

SHAREHOLDER SERVICES

The following supplements the information set forth under "Shareholder
Services" in the Prospectuses.

EXCHANGE PRIVILEGE

Institutional Class Shares of the Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in the UAM Funds which
is comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of
the UAM Funds -- Institutional Class Shares at the end of the Portfolio's
Institutional Class Shares Prospectus.) Service Class Shares of the Portfolio
may be exchanged for any other Service Class Shares of a Portfolio included in
the UAM Funds which is comprised of the Fund and UAM Funds Trust. (For those
Portfolios currently offering Service Class Shares, please see the list of
Service Class Shares at the end of the Portfolio's Service Class Shares
Prospectus.) Exchange requests should be made by calling the Fund (1-800-638-
7983) or by writing to UAM Funds, UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The exchange
privilege is only available with respect to Portfolios that are qualified for
sale in the shareholder's state of residence.

Any such exchange will be based on the respective net asset values of
the shares involved. There is no sales commission or charge of any kind.
Before making an exchange into a Portfolio, a shareholder should read its
Prospectus and consider the investment objectives and policies 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.

-6-
<PAGE>

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to the close of regular trading on the Exchange (generally 4:00
p.m. Eastern Time) will be processed as of the close of business on the same
day. Requests received after the close of regular trading on the Exchange will
be processed on the next business day. Neither the Fund nor CGFSC will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.

For federal income tax purposes, an exchange between Portfolios is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information in
this regard. The exchange privilege may be modified or terminated at any time.

TRANSFER OF SHARES

Shareholders may transfer shares of the Portfolio to another person by
making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Purchase
and Redemption of Shares." As in the case of redemptions, the written request
must be received in good order before any transfer can be made.

INVESTMENT LIMITATIONS

The Portfolio is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) at least 67% of the voting securities of the Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Portfolio. The Portfolio will not:

(1) invest in commodities;

-7-
<PAGE>

(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;

(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in (10) below) which are publicly
distributed; and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so long
as such loans are not inconsistent with the 1940 Act or the rules
and regulations or interpretations of the Commission thereunder;

(4) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit the Portfolio
from (i) making any permitted borrowings, mortgages or pledges,
or (ii) entering into repurchase transactions;

(5) purchase on margin or sell short;

(6) with respect to 75% of its assets, purchase more than 10% of the
outstanding voting securities of any issuer;

(7) with respect to 75% of its assets, purchase securities of any
issuer (except obligations of the United States Government and
its instrumentalities) if as the result more than 5% of the
Portfolio's total assets, at the time of purchase, would be
invested in the securities of such issuer;

(9) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in
excess of 10% of the Portfolio's gross assets valued at the lower
of market or cost, and the Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross assets;

-8-
<PAGE>

(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;

(11) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the assets of the Portfolio, determined at
the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;

(12) invest for the purpose of exercising control over management of
any company;

(13) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years;

(15) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

-9-
<PAGE>

Nancy J. Dunn Director of the Fund; Vice President for Finance and
10 Garden Street Administration of Radcliffe College since 1991.
Cambridge, MA 02138
8/14/51

Philip D. English Director of the Fund; President and Chief Executive
16 West Madison Officer of Broventure Company, Inc.; Chairman of the
Street Board of Chektec Corporation and Cyber Scientific, Inc.
Baltimore, MD 21201
8/15/48

William A. Humenuk Director of the Fund; Partner in the Philadelphia office
4000 Bell Atlantic of the law firm Dechert Price & Rhoads; Director, Hofler
Tower Corp.
1717 Arch Street
Philadelphia, PA
19103
4/21/42

Norton H. Reamer* Director, President and Chairman of the Fund; President,
One International Chief Executive Officer and a Director of United Asset
Place Management Corporation; Director, Partner or Trustee of
Boston, MA 02110 each of the Investment Companies of the Eaton Vance Group
3/21/35 of Mutual Funds.

Charles H. Director of the Fund; Executive Vice President of United
Salisbury, Jr.* Asset Management Corporation; formerly an executive
One International officer and Director of T. Rowe Price and President and
Place Chief Investment officer of T. Rowe Price Trust Company.
Boston, MA 02110
8/24/40

Peter M. Whitman, Director of the Fund; President and Chief Investment
Jr.* Officer of Dewey Square Investors Corporation since 1988;
One Financial Center Director and Chief Executive Officer of H.T. Investors,
Boston, MA 02111 Inc., formerly a subsidiary of Dewey Square.
7/1/43
</TABLE>

-10-
<PAGE>

<TABLE>
<S> <C>
William H. Park Vice President of the Fund; Executive Vice President and
One International Chief Financial Officer of United Asset Management
Place Corporation.
Boston, MA 02110
9/19/47

Gary L. French Treasurer of the Fund; President of UAM Fund Services,
211 Congress Street Inc. and UAM Fund Distributors, Inc.; Vice President of
Boston, MA 02110 Operations, Development and Control of Fidelity
7/4/51 Investments in 1995; Treasurer of the Fidelity Group of
Mutual Funds from 1991 to 1995.

Robert R. Flaherty Assistant Treasurer of the Fund; Vice President of UAM
211 Congress Street Fund Services, Inc.; former Manager of Fund
Boston, MA 02110 Administration and Compliance of Chase Global Fund
9/18/63 Services Company from 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 02110 Services Company; formerly Senior Audit Manager of
7/30/56 Coopers & Lybrand LLP from 1983 to 1993.

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)
2/28/68 from 1993 to 1995.

Karl O. Hartmann Assistant Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Chase Global Funds Services
Boston, MA 02108 Company; Senior Vice President, Secretary and General
3/7/55 Counsel of Leland, O'Brien, Rubenstein Associates, Inc.
from November 1990 to November 1991.
</TABLE>

- --------

* Messrs. Reamer, Whitman and Salisbury are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned
less than 1% of the Fund's outstanding shares.

-11-
<PAGE>

REMUNERATION OF DIRECTORS AND OFFICERS

John T. Bennett Jr......... $26,791 0 0 $32,750
Director

Nancy J. Dunn.............. $ 6,744 0 0 $ 8,300
Director

Philip D. English.......... $26,791 0 0 $32,750
Director

William A. Humenuk......... $26,791 0 0 $32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of the Portfolio:

FMA Small Company Portfolio Institutional Class Shares: Charles Schwab
& Co., Inc., Reinvest Account, Attn: Mutual Funds, 101 Montgomery Street, San
Francisco, CA, 20.8%; Dingle & Co., c/o Comerica Bank, Attn: Mutual Funds, P.O.
Box 75000, Detroit, MI, 12.4%; IBEW Local Union #226, Pension Fund, 4101
Southgate Drive, Suite A, Attn: Gary Muckenthaler, P.O. Box 5515, Topeka, KS,
9.5%; UFCW Local 23 & Giant Eagle Pension Funds, Central Data Services, Attn:
Kathryn Cross, 150 River Avenue, Suite 200, Pittsburgh, PA, 9.5%; Lafoba & Co.
1-3240,

-12-
<PAGE>

c/o Lake Forest Bank and Trust, 727 North Bank Lane, Lake Forest, IL, 6.7%; FMA
Small Company Portfolio Institutional Service Class Shares: Ironworkers Local
498 Supplemental Pension Plan, Attn: Mike Linder, c/o Joseph Anthony Associates,
4749 West Lincoln Mall Drive, Suite 202, Matteson, IL, 94.0%; Thomas C. Kisting,
Ironworkers Local 498 Health Welfare Fund, c/o Joseph Anthony Associates, 4749
Lincoln Mall Drive, Suite 202, Matteson, IL, 6.0%.

INVESTMENT ADVISER

CONTROL OF ADVISER

Fiduciary Management Associates, Inc. (the "Adviser") is a wholly-
owned subsidiary of United Asset Management Corporation ("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 acquired or organized
approximately 45 such wholly-owned affiliated firms (the "UAM Affiliated
Firms"). UAM believes that permitting UAM Affiliated Firms to retain control
over their investment advisory decisions is necessary to allow them to continue
to provide investment management services that are intended to meet the
particular needs of their respective clients. Accordingly, after acquisition by
UAM, UAM Affiliated Firms continue to operate under their own firm name, with
their own leadership and individual investment philosophy and approach. Each
UAM Affiliated Firm manages its own business independently on a day-to-day
basis. Investment strategies employed and securities selected by UAM Affiliated
Firms are separately chosen by each of them.

SERVICES PERFORMED BY ADVISER

Pursuant to Investment Advisory Agreement ("Agreement") between the Fund
and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolio's assets, to continuously review, supervise and
administer the Portfolio's investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolio's assets to be held uninvested.

-13-
<PAGE>

In the absence of (i) willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties under
the Agreement, (ii) reckless disregard by the Adviser of its obligations and
duties under the Agreement, or (iii) a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services, the Adviser shall
not be subject to any liability whatsoever to the Fund, or to any shareholder of
the Fund, for any error or judgment, mistake of law or any other act or omission
in the course of, or connected with, rendering services under the Agreement.

Unless sooner terminated, the Agreement shall continue for periods of one
year so long as such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Board of Directors of the Fund
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Board of Directors of the Fund or (c) by vote of a majority of
the outstanding voting securities of the Portfolios. The Agreement may be
terminated at any time by a Portfolio, without the payment of any penalty, by
vote of a majority of the entire Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of a Portfolio on 60 days written
notice to the Adviser. The Agreement may be terminated by the Adviser at any
time, without the payment of any penalty, upon 90 days written notice to the
Fund. The Agreement will automatically and immediately terminate in the event
of their assignment.

INVESTMENT PHILOSOPHY

As a "value style" investment manager, the Adviser buys stocks in a mix of
industries which it feels are undervalued. When the Adviser believes the
industry has become unattractive, it will move to another industry which it
feels has more investment potential. By consistently monitoring the portfolio,
the Adviser seeks to preserve assets in uncertain economic environments and
allow for capital appreciation in rising markets.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included Loras College, Peer Bearing
Company and Illinois Forge, Inc.

In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance-based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.

-14-
<PAGE>

ADVISORY FEES

As compensation for services rendered by the Adviser under the
Investment Advisory Agreement, the Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to the Portfolio's average daily net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
FMA Small Company Portfolio.............................. 0.75%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, the
Portfolio paid the Adviser fees of approximately $87,000, $59,775 and $142,036,
respectively, for advisory services. During these periods, the Adviser
voluntarily waived advisory fees of approximately $66,000, $107,546 and $89,172
respectively.

SERVICE AND DISTRIBUTION PLANS

As stated in the Portfolio's Service Class Shares Prospectus, UAM
Funds Distributors, Inc. (the "Distributor") may enter into agreements with
broker-dealers and other financial institutions ("Service Agents"), pursuant to
which they will provide administrative support services to Service Class
shareholders who are their customers ("Customers") in consideration of such
Fund's payment of 0.25% of 1% (on an annualized basis ) of the average daily net
asset value of the Service Class Shares held by the Service Agent for the
benefit of its Customers. Such services include:

(a) acting as the sole shareholder of record and nominee for
beneficial owners;

(b) maintaining account records for such beneficial owners of the
Fund's shares;

(d) answering questions and handling correspondence from shareholders
about their accounts;

(e) processing shareholder orders to purchase, redeem and exchange
shares;

(f) handling the transmission of funds representing the purchase
price or redemption proceeds;

-15-
<PAGE>

(g) issuing confirmations for transactions in the Fund's shares by
shareholders;

(h) distributing current copies of prospectuses, statements of
additional information and shareholder reports;

(i) assisting customers in completing application forms, selecting
dividend and other account options and opening any necessary
custody accounts;

(j) providing account maintenance and accounting support for all
transactions; and

(k) performing such additional shareholder services as may be agreed
upon by the Fund and the Service Agent, provided that any such
additional shareholder service must constitute a permissible non-
banking activity in accordance with the then current regulations
of, and interpretations thereof by, the Board of Governors of the
Federal Reserve System, if applicable.

The Board of Directors has approved the arrangements with Service
Agents based on information provided by the Fund's service contractors that
there is a reasonable likelihood that the arrangements will benefit the Fund and
its shareholders by affording the Fund greater flexibility in connection with
the servicing of the accounts of the beneficial owners of its shares in an
efficient manner. Any material amendment to the Fund's arrangements with
Service Agents must be approved by a majority of the Fund's Board of Directors
(including a majority of the disinterested directors). The Shareholder Services
Plan may be terminated at any time by vote of a majority of the Directors of the
Fund who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan or, at the discretion of the Board of Directors of the Fund,
by vote of a majority of the outstanding voting securities of the Fund.

-16-
<PAGE>

So long as the arrangements with Service Agents are in effect, the
selection and nomination of the members of the Fund's Board of Directors who are
not "interested persons" (as defined in the 1940 Act) of the Fund will be
committed to the discretion of such non-interested directors.

During the fiscal year ended October 31, 1997, the FMA Small Company
Portfolio paid $4,201 to Service Agents for services provided pursuant to the
Shareholder Services Plan.

The maximum annual aggregate fee payable by the Fund under the Service
and Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares'
average daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares,
currently cannot exceed 0.50% of the average daily net assets represented by the
Service Class. While the current fee which will be payable under the Service
Plan has been set at 0.15% the Plan permits a full 0.75% on all assets to be
paid at any time following appropriate Board approval.

-17-
<PAGE>

All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid by the Service
Class Shares will be borne by such persons without any reimbursement from such
classes. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
form its own resources to dealers for aid in distribution or for aid in
providing administrative services to shareholders.

The Plans, the Distribution Agreement and the form of dealer's and
services agreements have all been approved by the Board of Directors of the
Fund, including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plans or any related agreements, by vote cast in
person at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the
related agreements must be approved annually by the Board of Directors in the
same manner, as specified above.

Each year the Directors must determine whether continuation of the
Plans is in the best interest of the shareholders of Service Class Shares and
that there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
Class. Any amendment materially increasing the maximum percentage payable under
the Plans must likewise be approved by a majority vote of the relevant Class'
outstanding voting securities, as well as by a majority vote of those Directors
who are not "interested persons." Also, any other material amendment to the
Plans must be approved by a majority vote of the Directors including a majority
of the Directors of the Fund having no interest in the Plans. In addition, in
order for the Plans to remain effective, the selection and nomination of
Directors who are not "interested persons" of the fund must be effected by the
Directors who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plans. Persons authorized to make payments
under the Plans must provide written reports at least quarterly to the Board of
Directors for their review. The NASD has adopted amendments to its Rules of
Fair Practice relating to investment company sales charges. The Fund and the
Distributor intend to operate in compliance with these rules.

-18-
<PAGE>

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio. In
doing so, the Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or effect principal transactions with dealers on the basis of sales of shares
which may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended, October 31, 1995, 1996 and 1997,
the entire Fund paid brokerage commissions of approximately $104,988, $84,043
and $90,657, respectively.

Some securities considered for investment by the Portfolio 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 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

The Board of Directors of the Fund approved a Fund Administration
Agreement effective April 15, 1996 (the "Fund Administration Agreement") between
UAM Fund Services, Inc. ("UAMFSI"), a wholly owned subsidiary of UAM, and the
Fund. Pursuant to the terms of the Fund Administration Agreement, UAMFSI
manages, administers and conducts the general business activities of the Fund
other than those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Fund Administration Agreement.

-19-
<PAGE>

Administration Agreement between UAMFSI and the Fund, the "Agreements").

<TABLE>
<CAPTION>
Annual Rate
<S> <C>
Small Company Portfolio..................... 0.04%

</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

0.19 of 1% of the first $200 million of combined UAM Funds net assets;

0.11 of 1% of the next $800 million of combined UAM Funds net assets;

0.07 of 1% of combined UAM Funds net assets in excess of $1 billion
but less than $3 billion;

0.05 of 1% of combined UAM Funds net assets in excess of $3 billion.

Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds
Service Company, provided certain administrative services to the Fund under an
Administration Agreement between the Fund and U.S. Trust Company of New York.
The basis of the fees paid to CGFSC for the fiscal periods prior to April 15,
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.

-20-
<PAGE>

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid to the Administrator by the Portfolio totaled
approximately $76,000, $80,758 and $92,660, respectively. Of the fees paid
during the year ended October 31, 1997, the Portfolio paid $80,327 to CGFSC and
$12,333 to UAMFSI. The services provided by the Administrator and the basis of
the current fees payable to the Administrator for the 1995, 1996 and 1997 fiscal
years are described in the Portfolio's Prospectuses.

UAMFSI will bear all expenses in connection with the performance of
its services under the Fund Administration Agreement. Other expenses to be
incurred in the operation of the Fund will be borne by the Fund or other
parties, including taxes, interest, brokerage fees and commissions, if any,
salaries and fees of officers and members of the Board who are not officers,
directors, shareholders or employees of UAMFSI, or the Fund's investment adviser
or distributor, SEC fees and state Blue Sky fees, EDGAR filing fees, processing
services and related fees, advisory and administration fees, charges and
expenses of pricing and data services, independent public accountants and
custodians, insurance premiums including fidelity bond premiums, outside legal
expenses, costs of maintenance of corporate existence, typesetting and printing
of prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund, printing and production costs of shareholders' reports
and corporate meetings, cost and expenses of Fund stationery and forms, costs of
special telephone and data lines and devices, trade association dues and
Expenses, and any extraordinary expenses and other customary Fund expenses.

-21-
<PAGE>

the Service Provider agrees to perform certain services for participants in a
self-directed, defined contribution plan, and for whom the Service Provider
provides participant recordkeeping. Pursuant to the Services Agreement, the
Service Provider is entitled to receive, after the end of each month, a fee at
the annual rate of 0.15% of the average aggregate daily net asset value of
shares of the Portfolios in the accounts for which it provides services. During
the fiscal year ended October 31, 1997, the FMA Small Company Portfolio paid the
Service Provider $636 in fees pursuant to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves
as the Fund's distributor. Shares of the Fund are offered continuously. While
the Distributor will use its best efforts to sell shares of the Fund, it is not
obligated to sell any particular amount of shares. The Distributor received no
compensation for its services from the Portfolio during the fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolio may from time to time quote various performance figures
to illustrate the past performance of each class of the Portfolio. Performance
quotations by investment companies are subject to rules adopted by the
Commission, which require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
each class of the Portfolio be accompanied by certain standardized performance
information computed as required by the Commission. Current yield and average
annual compounded total return quotations used by each class of the Portfolio
are based on the standardized methods of computing performance mandated by the
Commission. An explanation of those and other methods used by each class of the
Portfolio to compute or express performance follows.

-22-
<PAGE>

YIELD

A yield figure is obtained using the following formula:

Yield = 2[(a - b + 1)/6/ - 1]
-----
cd

where:

a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period.

TOTAL RETURN

Since Service Class shares of the Portfolio bear additional service
and distribution expenses, the average annual total return of the Service Class
Shares of the Portfolio will generally be lower than that of the Institutional
Class Shares.

The average annual total rates of return for the Institutional Class
Shares and Service Class Shares of the FMA Small Company Portfolio from
inception and for the one- and five-year period (in the case of Institutional
Class shares) ended on the date of the Financial Statements included herein are
as follows:

-23-
<PAGE>

<TABLE>
<CAPTION>
Since
Inception
One Year Five Years Through Year
Ended Ended Ended
October 31, October October 31, Inception
1997 31, 1997 1997 Date
------------ ----------- ------------- ---------
<S> <C> <C> <C> <C>
FMA Small Company
Portfolio Institutional
Class Shares............. 42.33% 23.30% 18.98% 7/31/91

FMA Small Company
Portfolio Service
Class Shares............. - - 11.04% 8/1/97

</TABLE>

These figures are calculated according to the following formula:

P(1 + T)/n/ = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods at the
end of the 1, 5, or 10 year periods (or fractional portion
thereof).

COMPARISONS

-24-
<PAGE>

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation 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 located
at One International Place, Boston, MA 02110; however, all investor
correspondence 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.

Both classes of shares of each Portfolio of the Fund, when issued and
paid for as provided for in the Prospectus, will be fully paid and
nonassessable, have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemptive rights. The shares of the
Fund have noncumulative voting rights, which means that the holders of more than
50% of the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his or her name on the books of the Fund. Both Institutional
Class and Service Class Shares represent interests in the same assets of the
Portfolio and are identical in all respects, except that the Service Class
Shares bear certain expenses related to shareholder servicing and the
distribution of such shares, and have exclusive voting rights with respect to
matters relating to such distribution expenditures. The Board of Directors has
authorized an additional class of Shares in the Portfolio, Advisor Class Shares.
As of the date of this Statement of Additional Information, no Advisor Class
Shares have been offered by the Portfolio.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of the
Portfolio's net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the federal excise
tax on undistributed income and capital gains (see discussion under "Dividends,
Capital Gains Distributions and Taxes" in the Prospectuses). The

-25-
<PAGE>

amounts of any income dividends or capital gains distributions cannot be
predicted.

Any dividend or distribution paid shortly after the purchase of shares
of the Portfolio by an investor may have the effect of reducing the per share
net asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the
Prospectuses.

As set forth in the Prospectuses, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of the Portfolio at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholder in writing at least three days
prior to the record date that either the Income Option (income dividends in cash
and capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash) has
been elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.

FEDERAL TAXES

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes. Shareholders
will be advised on the nature of the payments.

-26-
<PAGE>

CODE OF ETHICS

The Fund has adopted a Code of Ethics which restricts to a certain
extent personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the FMA Small
Company Portfolio, which appear in the Portfolio's 1997 Annual Report to
Shareholders, and the report thereon of Price Waterhouse LLP, independent
accountants, also appearing therein, are attached to this Statement of
Additional Information.

-27-
<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF BOND RATINGS

Excerpts from Moody's Investors Service, Inc. ("Moody's") description
of its highest bond ratings: Aaa -- judged to be the best quality; carry the
smallest degree of investment risk: Aa -- judged to be of high quality by all
standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.

Excerpts from Standard & Poor's Ratings Services ("S&P") description
of its highest bond ratings: AAA -- highest grade obligations; possess the
ultimate degree of protection as to principal and interest; AA -- also qualify
as high grade obligations, and in the majority of instances differs from AAA
issues only in small degree; A -- regarded as upper medium grade; have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are
regarded as safe; BBB -- regarded as borderline between definitely sound
obligations and those where the speculative element begins to predominate; this
group is the lowest which qualifies for commercial bank investment.

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

A-1
<PAGE>

that they may make "indefinite and unlimited" drawings on the U.S. Treasury, if
needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, is not guaranteed by the United States, but those
institutions are protected by the discretionary authority of the U.S. Treasury
to purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation,
are federally chartered institutions under government supervision, but their
debt securities are backed only by the credit worthiness of those institutions,
not the U.S. Government.

III. DESCRIPTION OF COMMERCIAL PAPER

The Portfolios may invest in commercial paper (including variable
amount master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or
by S&P. Commercial paper refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually 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
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash flow
and other liquidity ratios of the issuer and the borrower's ability to pay
principal and interest on demand.

A-2
<PAGE>

issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation of
the management of the issuer; (2) economic evaluation of the issuer's industry
or industries and the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of issuer of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.

IV. DESCRIPTION OF BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution 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 reasonably orderly market conditions. The Portfolio is also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.

A-3
<PAGE>

V. DESCRIPTION OF FOREIGN INVESTMENTS

Investors should recognize that investing in foreign companies
involves certain special considerations which are not typically associated with
investing in U.S. companies. Since the securities of foreign companies are
frequently denominated in foreign currencies, a Portfolio may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.

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.

A-4
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages --- an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices ---
an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of
dividend.

(c) The New York Stock Exchange composite or component indices ---
unmanaged indices of all industrial, utilities, transportation
and finance stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity Index or its component indices ---
represents the return on the market value of all common equity
securities for which daily pricing is available. Comparisons of
performance assume reinvestment of dividends.

(e) Lipper Mutual Fund Performance Analysis and Lipper Fixed Income
Fund Performance Analysis --- measures total return and average
current yield for the mutual fund industry. Rank individual
mutual fund performance over specified time periods, assuming
reinvestment of all distributions, exclusive of any applicable
sales charges.

(f) Morgan Stanley Capital International EAFE Index and World Index
--- respectively, arithmetic, market value-weighted averages of
the performance of over 900 securities listed on the stock
exchanges of countries in Europe, Australia and the Far East, and
over 1,400 securities listed on the stock exchanges of these
continents, including North America.

(g) Goldman Sachs 100 Convertible Bond Index --- currently includes
67 bonds and 33 preferred. The original list of names was
generated by screening for convertible issues of 100 million or
greater in market capitalization. The index is priced monthly.

B-1
<PAGE>

(h) Salomon Brothers GNMA Index --- includes pools of mortgages
originated by private lenders and guaranteed by the mortgage
pools of the Government National Mortgage Association.

(i) Salomon Brothers High Grade Corporate Bond Index --- consist of
publicly issued, non-convertible corporate bonds rated AA or AAA.
It is a value-weighted, total return index, including
approximately 800 issues with maturities of 12 years or greater.

(j) Salomon Brothers Broad Investment Grade Bond --- a market-
weighted index that contains approximately 4,700 individually
priced investment grade corporate bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass-through securities.

(k) Lehman Brothers Long-Term Treasury Bond --- composed of all
bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater.

(l) NASDAQ Industrial Index --- composed of more than 3,000
industrial issues. It is a value-weighted index calculated on
price change only and does not include income.

(m) Value Line --- composed of over 1,600 stocks in the Value Line
Investment Survey.

(n) Russell 2000 --- composed of the 2,000 smallest stocks in the
Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.

(o) Composite Indices --- 70% Standard & Poor's 500 Stock Index and
30% NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock
Index and 65% Salomon Brothers High Grade Bond Index; all stocks
on the NASDAQ system exclusive of those traded on an exchange,
and 65% Standard & Poor's 500 Stock Index and 35% Salomon
Brothers High Grade Bond Index.

(p) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. --- analyzes price, current yield, risk, total return and
average rate of return (average annual compounded growth rate)
over specified time periods for the mutual fund industry.

B-2
<PAGE>

(q) Mutual Fund Source Book, published by Morningstar, Inc. ---
analyzes price, yield, risk and total return for equity funds.

(r) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Investor's Daily, Lipper
Analytical Services, Inc., Morningstar, Inc., New York Times,
Personal Investor, Wall Street Journal and Weisenberger
Investment Companies Service --- publications that rate fund
performance over specified time periods.

(s) Consumer Price Index (or Cost of Living Index), published by the
U.S. Bureau of Labor Statistics --- a statistical measure of
change, over time in the price of goods and services in major
expenditure groups.

(t) Stocks, Bonds, Bills and Inflation, published by Ibbotson
Associates --- historical measure of yield, price and total
return for common and small company stock, long-term government
bonds, U.S. Treasury bills and inflation.

(u) Savings and Loan Historical Interest Rates --- as published in
the U.S. Savings & Loan League Fact Book.

(v) Historical data supplied by the research departments of First
Boston Corporation, the J.P. Morgan Companies, Salomon Brothers,
Merrill Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and
Bloomberg L.P.

B-3
<PAGE>

FMA SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (90.2%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.2%)
*Aviation Sales Co. ....................................... 45,550 $ 1,565,781
- -------------------------------------------------------------------------------
BANKS (18.8%)
CCB Financial Corp. ....................................... 21,620 1,967,420
City National Corp. ....................................... 50,040 1,504,327
Commercial Federal Corp. .................................. 16,931 821,153
Community First Bankshares, Inc. .......................... 26,900 1,264,300
First Financial Holdings, Inc. ............................ 15,800 588,550
First Midwest Bancorp, Inc. ............................... 34,200 1,256,850
Life Bancorp, Inc. ........................................ 17,838 540,714
National Commerce Bancorp. ................................ 46,420 1,351,983
-----------
9,295,297
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (7.0%)
*Canandaigua Brands, Inc., Class A......................... 24,150 1,198,444
Flowers Industries, Inc. .................................. 10,800 205,200
Lance, Inc. ............................................... 42,110 886,942
Smucker (J.M.) Co., Class B................................ 45,886 1,158,621
-----------
3,449,207
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (0.5%)
Meredith Corp. ............................................ 6,674 227,333
- -------------------------------------------------------------------------------
CHEMICALS (2.4%)
Schulman (A.), Inc. ....................................... 52,200 1,174,500
- -------------------------------------------------------------------------------
CONSUMER STAPLES (1.7%)
Libbey, Inc. .............................................. 22,530 842,059
- -------------------------------------------------------------------------------
ENERGY (4.1%)
Global Industries Ltd. .................................... 5,427 108,540
Santa Fe Energy Resources, Inc. ........................... 70,573 921,860
Swift Energy Co. .......................................... 39,160 1,015,713
-----------
2,046,113
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
3
<PAGE>

FMA SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (5.9%)
Investors Financial Services Corp. ........................ 13,924 $ 584,808
UMB Financial Corp. ....................................... 28,300 1,457,450
Webster Financial Corp. ................................... 13,900 856,588
-----------
2,898,846
- -------------------------------------------------------------------------------
HEALTH CARE (8.2%)
*IDEXX Laboratories, Inc. ................................. 66,200 1,042,650
*Sierra Health Services, Inc. ............................. 45,900 1,695,431
*Universal Health Services, Inc., Class B.................. 29,390 1,294,997
-----------
4,033,078
- -------------------------------------------------------------------------------
INDUSTRIAL (4.1%)
Applied Power, Inc., Class A............................... 14,070 870,581
*Middleby Corp. ........................................... 49,900 502,119
*Nortek, Inc. ............................................. 29,756 675,089
-----------
2,047,789
- -------------------------------------------------------------------------------
INSURANCE (4.9%)
Protective Life Corp. ..................................... 25,174 1,331,075
*Triad Guaranty, Inc. ..................................... 37,600 1,071,600
-----------
2,402,675
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (6.4%)
Bob Evans Farm, Inc. ...................................... 83,610 1,572,913
*Brinker International, Inc. .............................. 65,111 911,554
*Prime Hospitality Corp. .................................. 32,986 672,090
-----------
3,156,557
- -------------------------------------------------------------------------------
MANUFACTURING (4.0%)
Dexter Corp. .............................................. 30,610 1,201,443
Regal-Beloit Corp. ........................................ 28,990 779,106
-----------
1,980,549
- -------------------------------------------------------------------------------
METALS (1.8%)
Titanium Metals Corp. ..................................... 28,400 873,300
- -------------------------------------------------------------------------------
PAPER & PACKAGING (3.1%)
Schweitzer-Mauduit International, Inc. .................... 36,452 1,535,540
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
4
<PAGE>

FMA SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (2.9%)
Nationwide Health Properties, Inc. .................... 63,670 $ 1,436,554
- -------------------------------------------------------------------------------
RETAIL (5.6%)
*Carson Pirie Scott & Co. ............................. 26,930 1,297,689
*Dominick's Supermarkets, Inc. ........................ 40,910 1,493,215
-----------
2,790,904
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.2%)
*Coherent Communications Systems Corp. ................ 35,850 1,066,538
- -------------------------------------------------------------------------------
TEXTILE & APPARELS (2.3%)
Guilford Mills, Inc. .................................. 48,330 1,153,879
- -------------------------------------------------------------------------------
UTILITIES (1.1%)
CILCORP, Inc. ......................................... 13,500 551,813
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $37,041,354).................. 44,528,312
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.8%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $2,360,101,
collateralized by $2,261,745 of various U.S. Treasury
Notes, 5.50%-8.75% due 5/15/00-6/30/02, valued at
$2,360,331 (COST $2,359,000).......................... $2,359,000 2,359,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (95.0%) (COST $39,400,354)(A)......... 46,887,312
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (5.0%)..................... 2,486,792
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $49,374,104
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $39,400,354. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$7,486,958. This consisted of aggregate gross unrealized appreciation for
all securities of $7,727,499 and aggregate gross unrealized depreciation
for all securities of $240,541.

The accompanying notes are an integral part of the financial statements.
5
<PAGE>

FMA SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost.............................................. $39,400,354
===========
Investments, at Value............................................. $46,887,312
Cash.............................................................. 137
Receivable for Investments Sold................................... 2,648,395
Receivable for Portfolio Shares Sold.............................. 376,146
Dividends Receivable.............................................. 28,930
Interest Receivable............................................... 367
Other Assets...................................................... 784
- -------------------------------------------------------------------------------
Total Assets..................................................... 49,942,071
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................. 502,159
Payable for Investment Advisory Fees--Note B...................... 27,396
Payable for Administrative Fees--Note C........................... 9,473
Payable for Custodian Fees--Note D................................ 3,767
Payable for Distribution Fees--Note E............................. 1,396
Payable for Directors' Fees--Note G............................... 674
Other Liabilities................................................. 23,102
- -------------------------------------------------------------------------------
Total Liabilities................................................ 567,967
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $49,374,104
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $36,212,437
Undistributed Net Investment Income............................... 23,746
Accumulated Net Realized Gain..................................... 5,650,963
Unrealized Appreciation........................................... 7,486,958
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $49,374,104
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES:
Net Assets........................................................ $45,060,517
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)...................................................... 2,714,036
Net Asset Value, Offering and Redemption Price Per Share.......... $ 16.60
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES:
Net Assets........................................................ $ 4,313,587
Shares Issued and Outstanding ($0.001 par value) (Authorized
10,000,000)...................................................... 259,958
Net Asset Value, Offering and Redemption Price Per Share.......... $ 16.59
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

FMA SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 336,340
Interest................................................ 138,193
- --------------------------------------------------------------------------------
Total Income........................................... 474,533
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee.............................................. $231,208
Less: Fees Waived...................................... (89,172) 142,036
--------
Administrative Fees--Note C............................. 92,660
Registration and Filing Fees............................ 27,238
Printing Fees........................................... 25,001
Custodian Fees--Note D.................................. 4,796
Distribution and Service Plan Fees--Note E:
Institutional Service Class............................ 4,201
Directors' Fees--Note G................................. 2,332
Account Services Fees--Note F........................... 636
Other Expenses.......................................... 23,653
- --------------------------------------------------------------------------------
Total Expenses......................................... 322,553
Expense Offset--Note A.................................. (739)
- --------------------------------------------------------------------------------
Net Expenses........................................... 321,814
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................... 152,719
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENT.......................... 5,652,960
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON
INVESTMENTS............................................. 4,904,778
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.................................. 10,557,738
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $10,710,457
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

FMA SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.................................. $ 152,719 $ 166,356
Net Realized Gain...................................... 5,652,960 3,778,061
Net Change in Unrealized Appreciation/Depreciation..... 4,904,778 448,990
- -----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.. 10,710,457 4,393,407
- -----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class................................... (239,184) (158,190)
Institutional Service Class*.......................... (2,725) --
Net Realized Gain:
Institutional Class................................... (3,781,382) (2,529,961)
- -----------------------------------------------------------------------------------
Total Distributions................................... (4,023,291) (2,688,151)
- -----------------------------------------------------------------------------------
CAPITAL CONTRIBUTION--NOTE B............................ -- 94,505
- -----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE J:
Institutional Class:
- --------------------
Issued................................................ 22,664,617 1,198,264
--In Lieu of Cash Distributions..................... 4,004,151 2,668,484
Redeemed.............................................. (8,799,304) (5,560,199)
- -----------------------------------------------------------------------------------
Net Increase (Decrease) from Institutional Class
Shares................................................ 17,869,464 (1,693,451)
- -----------------------------------------------------------------------------------
Institutional Service Class:*
-----------------------------
Issued................................................ 4,074,384 --
--In Lieu of Cash Distributions..................... 2,724 --
Redeemed.............................................. (212,783) --
- -----------------------------------------------------------------------------------
Net Increase from Institutional Service Class Shares.... 3,864,325 --
- -----------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions.................................................. 21,733,789 (1,693,451)
- -----------------------------------------------------------------------------------
Total Increase........................................ 28,420,955 106,310
Net Assets:
Beginning of Period................................... 20,953,149 20,846,839
- -----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $23,746 and $20,801, respectively)......... $49,374,104 $20,953,149
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on August 1,
1997.

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

FMA SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INSTITUTIONAL
SERVICE CLASS
INSTITUTIONAL CLASS SHARES SHARES
------------------------------------------- -----------------
YEARS ENDED OCTOBER 31, AUGUST 1, 1997***
------------------------------------------- TO OCTOBER 31,
1997 1996 1995 1994 1993 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 14.11 $ 13.19 $ 12.13 $ 14.24 $ 10.36 $ 14.95
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.06 0.09 0.08 0.01 0.02 0.01
Net Realized and
Unrealized Gain....... 4.97 2.46 1.47 0.50 3.88 1.64
- ----------------------------------------------------------------------------------------
Total From Investment
Operations........... 5.03 2.55 1.55 0.51 3.90 1.65
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.. (0.13) (0.09) (0.08) -- (0.02) (0.01)
Net Realized Gain...... (2.41) (1.60) (0.41) (2.62) -- --
- ----------------------------------------------------------------------------------------
Total Distributions... (2.54) (1.69) (0.49) (2.62) (0.02) (0.01)
- ----------------------------------------------------------------------------------------
CAPITAL CONTRIBUTION.... -- 0.06 -- -- -- --
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 16.60 $ 14.11 $ 13.19 $ 12.13 $ 14.24 $ 16.59
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
TOTAL RETURN+........... 42.33% 22.51% 13.57% 4.54% 37.65% 11.04%**
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $45,060 $20,953 $20,847 $19,561 $18,569 $ 4,314
Ratio of Expenses to
Average Net Assets..... 1.03% 1.03% 1.03% 1.03% 1.03% 1.43%*
Ratio of Net Investment
Income to Average Net
Assets................. 0.50% 0.75% 0.66% 0.06% 0.14% 0.24%*
Portfolio Turnover
Rate................... 86% 106% 170% 121% 163% 100%
Average Commission Rate
#...................... $0.0583 $0.0600 N/A N/A N/A $0.0583
- ----------------------------------------------------------------------------------------
Voluntarily Waived Fees
and Expenses Assumed by
the Adviser Per Share.. $ 0.04 $ 0.06 $ 0.04 $ 0.03 $ 0.03 $ 0.01
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ 1.03% 1.03% 1.03% N/A N/A 1.43%*
- ----------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
*** Initial offering of Institutional Service Class Shares
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

FMA SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The FMA Small
Company Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1997, the
UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The Portfolio
offers two separate classes of shares-Institutional Class Shares and
Institutional Service Class Shares. As of August 1, 1997, FMA Small Company
has issued Institutional Service Class Shares. Both classes have identical
voting rights (except Institutional Service Class shareholders have exclusive
voting rights with respect to matters relating to distributions and
shareholder servicing of such shares), dividend, liquidation and other rights.
The objective of the FMA Small Company Portfolio is to provide maximum, long-
term total return consistent with reasonable risk to principal by investing
primarily in common stocks of smaller companies in terms of revenues and/or
market capitalization.

1. SECURITY VALUATION: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid prices on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid prices. Short-term investments that have
remaining maturities of sixty days or less at time of purchase are valued
at amortized cost, if it approximates market value. The value of other
assets and securities for which no quotations are readily available is
determined in good faith at fair value using methods determined by the
Board of Directors.

10
<PAGE>

FMA SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income quarterly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications of $92,135 to increase
undistributed net investment income with an increase to accumulated net
realized gain of $2,370 and a decrease of paid in capital of $94,505.

5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Most expenses of the
UAM Funds can be directly attributed to a particular portfolio. Expenses
which cannot be directly attributed are apportioned among the portfolios of
the UAM Funds based on their relative net assets. Income, expenses (other
than class specific expenses) and realized and unrealized gains or losses
are allocated to each class of shares based upon their relative net assets.
Custodian fees for the Portfolio have been increased to include expense
offsets, if any, for custodian balance credits.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Fiduciary Management Associates, Inc. (the "Adviser"), a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio at a monthly fee calculated at an annual
rate of 0.75% of the Portfolio's average daily net assets for the month. The
Adviser has voluntarily agreed to waive a portion of its advisory fees and to
assume expenses, if necessary, in order to keep the Portfolio's total annual
operating expenses, after the effect of expense offset arrangements, from
exceeding 1.03% of average daily net assets for the Portfolio's Institutional
Class Shares and 1.43% of the average daily net assets for the Portfolio's
Institutional Service Class Shares. On September 11, 1996, the Portfolio
received a capital contribution primarily from the adviser in the amount of
$94,505 or $0.06 per share.

11
<PAGE>

FMA SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$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 at an annual rate of 0.04% of average daily net assets of
the Portfolio. The Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain
services, including but not limited to, administration, fund accounting,
dividend disbursing and transfer agent services. Pursuant to the Mutual Funds
Service Agreement, the Administrator pays CGFSC a monthly fee. For the year
ended October 31, 1997, UAM Fund Services, Inc. earned $92,660 from the
Portfolio as Administrator of which $80,327 was paid to CGFSC for its services
as sub-Administrator.

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

E. DISTRIBUTION AND SERVICE PLANS: UAM Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of UAM, distributes the shares of
the Portfolio. The Portfolio has adopted Distribution and Service Plans (the
"Plans") on behalf of the Institutional Service Class Shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. Under the Plans, the Portfolio
may not incur distribution and service fees which exceed an annual rate of
0.75% of the Portfolio's net assets, however, the Board has currently limited
aggregate payments under the Plans to 0.50% per annum of the Portfolio's net
assets. The Portfolio's Institutional Service Class Shares are currently
making payments for distribution fees at 0.15% of average daily net assets.

In addition, the Portfolio's Institutional Service Class Shares pays service
fees at an annual rate of 0.25% of the average daily value of Institutional
Service Class Shares owned by clients of the Service Agents.

F. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered into
an Account Services Agreement (the "Services Agreement") with UAM Retirement
Plan Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of
UAM. Under the Services Agreement, the Service Provider agrees to perform
certain services for participants in a self-directed, defined contribution
plan, and for whom the Service Provider provides participant recordkeeping.
Pursuant to the Services Agreement, the Service Provider is entitled to
receive, after the end of each month, a fee at the annual rate of 0.15% of the
average aggregate daily net asset value of shares of the UAM Funds in the
accounts for which it provides services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $39,768,250 and sales of $24,964,615 of investment
securities other than long-term U.S. Government and short-term securities.
There were no purchases or sales of long-term U.S. Government securities.

12
<PAGE>

FMA SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Borrowings will be made solely to temporarily finance the repurchase of
Capital shares. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% 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, 1997, the Portfolio had no borrowings under the agreement.

J. OTHER: Transactions in capital shares for the Portfolio, by class, are as
follows:

<TABLE>
<CAPTION>
INSTITUTIONAL
SERVICE CLASS
INSTITUTIONAL CLASS SHARES SHARES
---------------------------- ---------------
YEAR ENDED OCTOBER 31, AUGUST 1, 1997*
---------------------------- TO OCTOBER 31,
1997 1996 1997
------------- ------------- ---------------
<S> <C> <C> <C>
Shares Issued.................... 1,477,037 94,425 272,439
In Lieu of Cash Distributions.... 329,704 227,881 162
Shares Redeemed.................. (577,834) (417,165) (12,643)
------------- ------------ -------
Net Increase (Decrease) from
Capital Share Transactions...... 1,228,907 (94,859) 259,958
============= ============ =======
</TABLE>

At October 31, 1997, 54.8% and 94.0% of total shares outstanding were held by
4 and 1 record shareholders of the Institutional Class Shares and the
Institutional Service Class Shares, respectively, owning 10% or greater of the
aggregate total shares outstanding.
- --------
* Initial Offering of Institutional Service Class Shares.

13
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and the Shareholders of
FMA Small Company Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of FMA Small Company
Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October
31, 1997, and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management: our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where the securities were not yet received by the custodian,
provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION: (UNAUDITED)

The FMA Small Company Portfolio hereby designates $2,163,642 as a long-term
capital gain dividend for purposes of the dividend paid deduction on its
federal income tax return.

For the year ended October 31, 1997, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders was 14.3%.

14
<PAGE>

PART B

UAM FUNDS, INC.

- --------------------------------------------------------------------------------
ICM FIXED INCOME PORTFOLIO

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the ICM
Fixed Income Portfolio's Institutional Class Shares dated January 22, 1998. To
obtain the Prospectus, please call the UAM Funds Service Center: 1-800-638-
7983.

TABLE OF CONTENTS
<TABLE>

<S> <C>
INVESTMENT OBJECTIVES AND POLICIES........................................ 2

PURCHASE AND REDEMPTION OF SHARES......................................... 15

VALUATION OF SHARES....................................................... 16

SHAREHOLDER SERVICES...................................................... 17

INVESTMENT LIMITATIONS.................................................... 18

MANAGEMENT OF THE FUND.................................................... 20

INVESTMENT ADVISER........................................................ 24

PORTFOLIO TRANSACTIONS.................................................... 26

ADMINISTRATIVE SERVICES................................................... 27

CUSTODIAN................................................................. 29

INDEPENDENT ACCOUNTANTS................................................... 29

DISTRIBUTOR............................................................... 29

PERFORMANCE CALCULATIONS.................................................. 30

GENERAL INFORMATION....................................................... 32

FINANCIAL STATEMENTS...................................................... 34

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS........................ A-1

APPENDIX B - COMPARISONS.................................................. B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment policies of the ICM Fixed
Income Portfolio (the "Portfolio") as set forth in the Portfolio's Prospectus.

LENDING OF SECURITIES

The Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC" or the "Commission") thereunder, which currently
require that (a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). The Portfolio will not loan securities to the extent that greater
than one-third of its assets (including the value of the collateral for the
loan) at fair market value would be committed to loans. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. These risks are similar to the ones involved with repurchase
agreements as discussed in the Prospectus.

SHORT-TERM INVESTMENTS

-2-
<PAGE>

Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods);

Each Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other 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 purchased by each
Portfolio;

(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, determined by the Adviser to be of comparable quality;

(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;

(6) Repurchase agreements collateralized by securities listed above.

FUTURES CONTRACTS

The Portfolio may purchase and sell futures and related options on futures
contracts in connection with the securities in which it invests for the purposes
of remaining fully invested, reducing transactions costs and to hedge against
adverse movements of the market. In addition, interest rate futures and options
are used to increase or reduce interest rate exposure resulting from market
changes or cash flow variations. Futures

-3-
<PAGE>

and options also allow the efficient implementation of strategies to hedge U.S.
positions with currency-hedged foreign interest rate exposure. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges,
boards of trade, or similar entity or quoted on an automated quotation system.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government agency.

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, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

-4-
<PAGE>

use futures contracts with the expectation of realizing profits from a
fluctuation in interest rates. The Portfolio intends to use futures contracts
generally only for hedging purposes.

Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolio will incur commission expenses in both opening and closing
out futures positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.

RESTRICTIONS ON THE USE OF FUTURES TRANSACTIONS

The Portfolio will only enter into futures contracts or futures options
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system. The
Portfolio will use futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable regulations of the
CFTC, or, with respect to positions in financial futures and related options
that do not qualify as "bona fide hedging" positions, will enter such non-
hedging positions only to the extent that aggregate initial margin deposits plus
premiums paid by it for open futures option positions, less the amount by which
any such positions are "in-the-money," would not exceed 5% of the Portfolio's
total net assets.

RISK FACTORS IN FUTURES TRANSACTIONS

The Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Portfolio has
insufficient cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures
positions also could have an adverse impact on the Portfolio's ability to
effectively hedge.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage

-5-
<PAGE>

involved in futures pricing. As a result, a relatively small price movement in
a futures contract may result in immediate and substantial loss (as well as
gain) to the investor. For example, if at the time of purchase, 10% of the
value of the futures contract is deposited as margin, a subsequent 10% decrease
in the value of the futures contracts would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit if the contract were closed out. Thus, a purchase or
sale of a futures contract may result in losses in excess of the amount invested
in the contract. However, because the futures strategies of the Portfolio are
generally 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 Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is
also possible that the Portfolio could lose money on futures contracts and also
experience a decline in value of portfolio securities. There is also the risk
of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
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.

Futures contracts, and options on futures contracts, may be traded on
foreign exchanges. Such transactions are subject to the risk of governmental
actions affecting trading in or the prices of foreign currencies or securities.
The value of such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser availability

-6-
<PAGE>

than in the United States of data on which to make trading decisions, (iii)
delays in the Portfolio's ability to act upon economic events occurring in
foreign markets during nonbusiness hours in the United States, (iv) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading volume.

OPTIONS

The Portfolio may purchase and sell put and call options on futures
contracts securities and currencies for hedging purposes. Investments in
options involve some of the same considerations that are involved in connection
with investments in futures contracts (e.g., the existence of a liquid secondary
market). In addition, the purchase of an option also entails the risk that
changes in the value of the underlying security or contract will not be fully
reflected in the value of the option purchased. Depending on the pricing of the
option compared to either the futures contract on which it is based or the price
of the securities being hedged, an option may or may not be less risky than
ownership of the futures contract or such securities. In general, the market
prices of options can be expected to be more volatile than the market prices on
the underlying futures contract or securities.

WRITING COVERED OPTIONS

The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on the
securities alone. By writing covered call options, the Portfolio gives up the
opportunity, while the option is in effect, to profit from any price increase in
the underlying security above the option exercise price. In addition, the
Portfolio's ability to sell the underlying security will be limited while the
option is in effect unless the Portfolio effects a closing purchase transaction.
A closing purchase transaction cancels out the Portfolio's position as the
writer of an option by means of an offsetting purchase of an identical option
prior to the expiration of the option it has written. Covered call options
serve as a partial hedge against the price of the underlying security declining.

The Portfolio writes only covered put options, which means that so long as
a Portfolio is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash or other liquid securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities. By writing a put, a Portfolio will be obligated to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of

-7-
<PAGE>

exercise for as long as the option is outstanding. The Portfolio may engage in
closing transactions in order to terminate put options that it has written.

PURCHASING OPTIONS

The amount of any appreciation in the value of the underlying security will
be partially offset by the amount of the premium paid for the put option and any
related transaction costs. Prior to its expiration, a put option may be sold in
a closing sale transaction and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out the Portfolio's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. In certain circumstances, the Portfolio may purchase call
options on securities held in its investment portfolio on which it has written
call options or on securities which it intends to purchase.

OPTIONS ON FOREIGN CURRENCIES

The Portfolio may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminution in the value of portfolio securities, the Portfolio may purchase
put options on the foreign currency. If the value of the currency does decline,
the Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in
the direction or to the extent anticipated, the Portfolio could sustain losses
on transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.

-8-
<PAGE>

The Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where the Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the premium
received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Portfolio also may be
required to forego all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.

The Portfolio intends to write covered call options on foreign currencies.
A call option written on a foreign currency by the Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the custodian) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if the Portfolio has a
call on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written, or (b) is greater than the exercise
price of the call written if the difference is maintained by the Portfolio in
cash or liquid securities in a segregated account with the custodian.

The Portfolio also intends to write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign currency
is for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which the
Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate.
In such circumstances, the

-9-
<PAGE>

Portfolio collateralizes the option by maintaining in a segregated account with
the custodian, cash or liquid securities in an amount not less than the value of
the underlying foreign currency in U.S. dollars marked to market daily.

RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES

Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to the regulation of the Commission. Similarly, options on currencies
may be traded over-the-counter. In an over-the-counter trading environment,
many of the protections afforded to exchange participants will not be available.
For example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting the Portfolio to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event of
adverse market movements.

-10-
<PAGE>

counter market. For example, exercise and settlement of such options must be
made exclusively through the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery
of currency, the fixing of dollar settlement prices or prohibitions on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The U.S. dollar value of the assets of the Portfolio may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Portfolio may incur costs in connection
with conversions between various currencies. The Portfolio will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward foreign currency exchange contracts ("forward contracts")
to purchase or sell foreign currencies. A forward contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward contract generally has
no deposit requirement, and no commissions are charged at any stage for such
trades.

The Portfolio may enter into forward contracts in several circumstances.
When the Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when the Portfolio anticipates the receipt
in a foreign currency of dividends or interest payments on a security which it

-11-
<PAGE>

holds, the Portfolio may desire to "lock-in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for a fixed amount of
dollars, for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, the Portfolio will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.

Additionally, when the Portfolio anticipates that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
the Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The Portfolio does not intend to enter
into such forward contracts to protect the value of portfolio securities on a
regular or continuous basis. The Portfolio will not enter into such forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio securities or other assets
denominated in that currency.

Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of the
Portfolio will thereby be served. The Fund's custodian will place cash or
liquid securities into a segregated account in an amount equal to the value of
the Portfolio's total assets committed to the consummation of forward contracts.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will be equal to the amount of the Portfolio's
commitments with respect to such contracts.

-12-
<PAGE>

The Portfolio generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, the Portfolio
may either sell the security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency.

It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for the Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that the Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.

If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or loss (as described
below) to the extent that there has been movement in forward contract prices.
Should forward prices decline during the period between the Portfolio entering
into a forward contract for the sale of a foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency, the
Portfolio will realize a gain to the extent that the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Portfolio would suffer a loss to the extent
that the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.

The Portfolio's dealings in forward contracts will be limited to the
transactions described above. Of course, the Portfolio is not required to enter
into such transactions with regard to its foreign currency-denominated
securities. It also should be realized that this method of protecting the value
of portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.

FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS

Except for transactions the Portfolio has identified as hedging
transactions, the Portfolio is required for federal

-13-
<PAGE>

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 recognized with respect to a futures contract is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the contract. Realized gain or loss
attributable to a foreign currency forward contract is treated as 100% ordinary
income. Furthermore, sales of futures contracts which are intended to hedge
against a change in the value of securities held by the Portfolio may affect the
holding period of such securities and, consequently, the nature of the gain or
loss on such securities upon disposition.

In order for the Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income: i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or foreign currencies, or other related income including gains from
options, futures and forward contracts, derived with respect to its business of
investing in such securities or currencies. 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.

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments, and shareholders will be
advised on the nature of the payments.

PORTFOLIO TURNOVER

-14-
<PAGE>

PURCHASE AND REDEMPTION OF SHARES

Shares of the Portfolio may be purchased without a sales commission, at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's custodian. The minimum
initial investment required is $100,000 with certain exceptions as may be
determined from time to time by officers of the Fund. The minimum additional
investment is $1,000. An order received in proper form prior to the close of
regular trading on the New York Stock Exchange ("Exchange") (generally 4:00 p.m.
Eastern time) will be executed at the price computed on the date of receipt; and
an order received not in proper form or after the close of the Exchange will be
executed at the price computed on the next day the Exchange is open after proper
receipt. The Exchange will be closed on the following days: Presidents' Day;
Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day;
Christmas Day; New Year's Day and Dr. Martin Luther King, Jr. Day.

The Portfolio reserves the right in its sole discretion (i) to suspend the
offering of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of the Portfolio's shares.

The Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that either the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Portfolio to dispose of securities owned by it, or to fairly determine
the value of its assets, and (iii) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Portfolio. If redemptions
are paid in investment securities, such securities will be valued as set forth
in the Portfolio's Prospectus under "Valuation of Shares," and a redeeming
shareholder would normally

-15-
<PAGE>

incur brokerage expenses if these securities were converted to cash.

No charge is made by a Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.

Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.

The signature guarantee must appear either (1) on the written request for
redemption, (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed, or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.

VALUATION OF SHARES

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents. The
converted value is based upon the bid price of the foreign currency against U.S.
dollars quoted by any major bank or by a broker.

-16-
<PAGE>

Securities purchased with remaining maturities of 60 days or less are
valued at amortized cost if the Board of Directors determines that amortized
cost reflects fair value.

SHAREHOLDER SERVICES

The following supplements the shareholder services information set forth in
the Portfolio's Prospectus.

EXCHANGE PRIVILEGE

Institutional Class Shares of the ICM Portfolios may be exchanged for
Institutional Class Shares of the other ICM Portfolios. In addition,
Institutional Class Shares of the ICM Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds -- Institutional Class Shares at the end of each respective
Prospectus.) Exchange requests should be made by calling the Fund (1-800-638-
7983) or by writing to UAM Funds, UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The exchange
privilege is only available with respect to Portfolios that are qualified for
sale in the shareholder's state of residence.

Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder, and if the registration of
the two accounts will be identical. Requests for exchanges received prior to
the close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time)
will be processed as of the close of business on the same day. Requests
received after the close of regular trading on the Exchange will be processed on
the next business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency and to other
restrictions established by the Board of Directors to

-17-
<PAGE>

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, therefore
that a capital gain or loss would be realized on an exchange between Portfolios.
You may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.

TRANSFER OF SHARES

Shareholders may transfer shares of the Fund's Portfolios to another person
or entity by making a written request to the Fund. The request should clearly
identify the account and number of shares to be transferred, and include the
signature of all registered owners and all stock certificates, if any, which are
subject to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as
described under "Purchase and Redemption of Shares." As in the case of
redemptions, the written request must be received in good order before any
transfer can be made.

INVESTMENT LIMITATIONS

The Portfolio is subject to the following restrictions, which are non-
fundamental except as described below, and which may be changed by the Fund's
Board of Directors upon reasonable notice to investors. Investment limitations
(4), (6) and (7) are classified as fundamental. The Portfolio's fundamental
investment limitations cannot be changed without approval by a "majority of the
outstanding shares" (as defined in the 1940 Act) of the Portfolio. These
restrictions supplement the investment objective and policies set forth in the
Prospectus. Whenever an investment limitation sets forth a percentage
limitation on investment or utilization of assets, such limitation shall be
determined immediately after and as a result of the Portfolio's acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with the Portfolio's
investment limitations. The Portfolio will not:

(1) invest in commodities except that the Portfolio may invest in futures
contracts and options to the extent that not more than 5% of the
Portfolio's assets are required as deposit to secure obligations under
futures contracts;

-18-
<PAGE>

(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in (10) below) which are publicly distributed,
and (ii) by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;

(4) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii)
entering into options, futures or repurchase transactions;

(5) purchase on margin or sell short except as specified in (1) above;

(6) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;

(7) with respect as to 75% of its assets, purchase securities of any
issuer (except obligations of the United States Government and its
instrumentalities) if as the result more than 5% of the Portfolio's
total assets, at the time of purchase, would be invested in the
securities of such issuer;

(8) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than 1/2
of 1% of such securities together own more than 5% of such securities;

(9) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in excess
of 10% of the Portfolio's gross assets valued at the lower of market
or cost, and the Portfolio may not purchase additional securities when
borrowings exceed 5% of total gross assets;

(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;

-19-
<PAGE>

(11) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the assets of the Portfolio, determined at the
time of investment, in securities subject to legal or contractual
restrictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;

(12) invest for the purpose of exercising control over management of any
company;

(13) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years;

(14) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position; and

(15) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

<TABLE>
<S> <C>
John T. Bennett, Jr. Director of the Fund; President of
College Road-RFD 3 Squam Investment Management Company,
Meredith, NH 03253 Inc. and Great Island Investment
1/26/29 Company, Inc.; President of Bennett
Management Company from 1988 to 1993.
</TABLE>

-20-
<PAGE>

<TABLE>
<S> <C>
Nancy J. Dunn Director of the Fund; Vice President
10 Garden Street for Finance and Administration and
Cambridge, MA 02138 Treasurer of Radcliffe College since
8/14/51 1991.

Philip D. English Director of the Fund; President and
16 West Madison Street Chief Executive Officer of Broventure
Baltimore, MD 21201 Company, Inc.; Chairman of the Board of
8/5/48 Chektec Corporation and Cyber
Scientific, Inc.

Norton H. Reamer* Director, President and Chairman of the
One International Place Fund; President, Chief Executive
Boston, MA 02110 Officer and a Director of United Asset
3/21/35 Management Corporation; Director,
Partner or Trustee of each of the
Investment Companies of the Eaton Vance
Group of Mutual Funds.

Charles H. Salisbury, Jr.* Director of the Fund; Executive Vice
One International Place President of United Asset Management
Boston, MA 02110 Corporation; formerly an executive
8/24/40 officer and Director of T. Rowe Price
and President and Chief Investment
Officer of T. Rowe Price Trust Company.

Peter M. Whitman, Jr.* Director of the Fund; President and
One Financial Center Chief Investment Officer of Dewey
Boston, MA 02111 Square Investors Corporation since
7/1/43 1988; Director and Chief Executive
Officer of H.T. Investors, Inc.,
formerly a subsidiary of Dewey Square.

William H. Park Vice President of the Fund; Executive
One International Place Vice President and Chief Financial
Boston, MA 02110 Officer of United Asset Management
9/19/47 Corporation.
</TABLE>

-21-
<PAGE>

<S> <C>
Gary L. French Treasurer of the Fund; President of UAM
211 Congress Street Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President of
7/4/51 Operations, Development and Control of
Fidelity Investments in 1995; Treasurer
of the Fidelity Group of Mutual Funds
from 1991 to 1995.

Robert R. Flaherty Assistant Treasurer of the Fund; Vice
211 Congress Street President of UAM Fund Services, Inc.;
Boston, MA 02110 former Manager of Fund Administration
9/18/63 and Compliance of Chase Global Fund
Services Company from 1995 to 1996;
Senior Manager of Deloitte & Touche LLP
from 1985 to 1995.

Gordon M. Shone Assistant Treasurer of the Fund; Vice
73 Tremont Street President of Fund Administration and
Boston, MA 02108 Compliance of Chase Global Funds
7/30/56 Services Company; formerly Senior Audit
Manager of Coopers & Lybrand from 1983
to 1993.

Michael DeFao Secretary of the Fund; Vice President
211 Congress Street and General Counsel of UAM Fund
Boston, MA 02110 Services, Inc. and UAM Fund
2/28/68 Distributors, Inc.; Associate Attorney
of Ropes & Gray (a law firm) from 1993
to 1995.

Karl O. Hartmann Assistant Secretary of the Fund; Senior
73 Tremont Street Vice President and General Counsel of
Boston, MA 02108 Chase Global Funds Services Company.
3/7/55
</TABLE>

- -----------------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and officers of the Fund owned less
than 1% of the Fund's outstanding shares.

-22-
<PAGE>

REMUNERATION OF DIRECTORS AND OFFICERS

<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Annual from
Compensation Part of Benefits Registrant
Name of Person, From Fund Upon and
Position Registrant Expenses Retirement Fund Complex
- ---------------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr... $26,791 0 0 $32,750
Director
Nancy J. Dunn......... $ 6,774 0 0 $ 8,300
Director
Philip D. English..... $26,791 0 0 $32,750
Director
William A. Humenuk.... $26,791 0 0 $32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held of
record or beneficially 5% or more of the shares of the Portfolio:

ICM Fixed Income Portfolio: Finney Trimble & Associates, Profit Sharing
Plan, First National Bank of Maryland, P.O. Box 1596, Baltimore, MD, 16.0%;
Friends School of Baltimore, Inc., Trustee, FBO Mercantile-Safe Deposit & Trust
Co., Attn: Ms Isabel Corbett, Two Hopkins Plaza, Baltimore, MD, 11.4%*; MSTA
Pension, c/o Investment Counselors of Maryland, 803 Cathedral

-23-
<PAGE>

Street, Baltimore, MD, 9.7%; ICM-UAM Profit Sharing & 401(k) Plan, First
National Bank of Maryland, P.O. Box 1596, Baltimore, MD, 8.9%; Bryn Mawr School,
c/o Investment Counselors of Maryland, 803 Cathedral Street, Baltimore, MD,
7.5%; Garrison Forest School, c/o Investment Copunselors of Maryland, 803
Cathedral Street, Baltimore, MD, 6.0%; and AAMC Employee Thrift Plan 401A,
Franklin and Cathedral Streets, Attn: David Harthman, Annapolis, MD, 5.7%.

- ------------------------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

Investment Counselors of Maryland, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their own
firm name, with their own leadership and individual investment philosophy and
approach. Each UAM Affiliated Firm manages its own business independently on a
day-to-day basis. Investment strategies employed and securities selected by UAM
Affiliated Firms are separately chosen by each of them.

SERVICES PERFORMED BY ADVISER

Pursuant to an Investment Advisory Agreement ("Agreement") between the Fund
and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolio's assets, to continuously review, supervise and
administer the Portfolio's investment program, and to determine in its
discretion the

-24-
<PAGE>

securities to be purchased or sold and the portion of the Portfolio's assets to
be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties under
the Agreement, (ii) reckless disregard by the Adviser of its obligations and
duties under the Agreement, or (iii) a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services, the Adviser shall
not be subject to any liability whatsoever to the Fund, or to any shareholder of
the Fund, for any error of judgment, mistake of law or any other act or omission
in the course of, or connected with, rendering services under the Agreement.

Unless sooner terminated, the Agreement shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolio. The Agreement
may be terminated at any time by the Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of the Portfolio on
60 days written notice to the Adviser. The Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days written
notice to the Fund. The Agreement will automatically and immediately terminate
in the event of its assignment.

PHILOSOPHY AND STYLE

The Adviser employs a conservative fixed income investment strategy. It is
designed to provide superior, risk-adjusted returns with an emphasis on
consistently outperforming the broad intermediate-term market as interest rates
climb and participating in market rallies as rates fall. The investment process
is largely driven by independent research on relative value along the yield
curve and a view on interest rate trends. The Adviser considers events
affecting both the U.S. and international capital markets in its analysis.
Market models developed in-house and other internal systems quantify and monitor
a broad set of risk measures used to identify relative value between sectors and
within security groups. Relative value generally exists when a security or
sector offers the prospect of superior rewards for a given amount of risk.

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<PAGE>

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included Georgia Gulf Corp., State of
Maryland, Johns Hopkins Hospital, State of Kentucky, NYNEX, TRW Corp., and
Wisconsin Power & Light.

In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.

ADVISORY FEES

As compensation for services rendered by the Adviser under the Agreement,
the Portfolio pays the Adviser an annual fee, in monthly installments,
calculated by applying the following annual percentage rates to the Portfolio's
average daily net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
ICM Fixed Income Portfolio............. 0.50%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, the Portfolio
paid advisory fees of approximately $0, $0 and $0, respectively. During these
periods, the Adviser voluntarily waived advisory fees of approximately $76,000,
$101,707 and $144,659, respectively.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio orders with
qualified broker-dealers who recommend the Fund's Portfolios or who act as
agents in the purchase of shares of the Portfolio for their clients. During the
fiscal years

-26-
<PAGE>

ended October 31, 1995, 1996 and 1997, the Portfolio paid no brokerage
commissions.

Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.

ADMINISTRATIVE SERVICES

The Board of Directors of the Fund approved a Fund Administration
Agreement, effective April 15, 1996 ("Fund Agreement") between UAM Fund
Services, Inc., a wholly owned subsidiary of UAM, and the Fund. Pursuant to the
terms of the Fund Administration Agreement, UAMFSI manages, administers and
conducts the general business activities of the Fund other than those which have
been contracted to other third parties by the Fund. Additionally, UAMFSI has
agreed to provide transfer agency services to the Portfolio pursuant to the
terms of the Agreement.

Pursuant to the terms of the Agreements, the Portfolio pays UAMFSI a two
part monthly fee: a Portfolio-specific fee which is retained by UAMFSI and a
sub-administration fee which UAMFSI in turn pays to CGFSC. The portfolio-
specific fee is 0.04% of aggregate net assets.

CGFSC's monthly fee for its services is calculated on an annualized basis
as follows:

0.19 of 1% of the first $200 million of combined UAM Funds net assets;

0.11 of 1% of the next $800 million of combined UAM Funds net assets;

0.07 of 1% of combined UAM Funds net assets in excess of $1 billion but
less than $3 billion;

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<PAGE>

0.05 of 1% of combined UAM Funds net assets in excess of $3 billion.

Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds Service
Company, provided certain administrative services to the Fund under an
Administration Agreement between the Fund and U.S. Trust Company of New York.
The basis of the fees paid to CGFSC for the fiscal periods prior to April 15,
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.

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid to the Administrator by the ICM Fixed Income
Portfolio totaled approximately $82,000, $89,268 and $96,007, respectively. Of
the fees paid during the year ended October 31, 1996 and 1997, the ICM Fixed
Income Portfolio paid $84,340 and $84,435 to CGFSC and $4,928 and $11,572 to
UAMFSI, respectively.

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<PAGE>

trade association dues and expenses, and any extraordinary expenses and other
customary Fund expenses.

Unless sooner terminated, the Fund Administration Agreement shall continue
in effect from year to year provided such continuance is specifically approved
at least annually by the Board. The Fund Administration Agreement is
terminable, without penalty, by the Board or by UAMFSI, on not less than ninety
(90) days' written notice. The Fund Administration Agreement shall
automatically terminate upon its assignment by UAMFSI without the prior written
consent of the Fund.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolio in the accounts for which it provides
services. The Service Provider received no compensation from the Fixed Income
Portfolio during the fiscal year ended October 31, 1997.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves as
the Fund's distributor. Shares of the Fund are

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<PAGE>

offered continuously. While the Distributor will use its best efforts to
sell shares of the Fund, it is not obligated to sell any particular amount of
shares.

The Distributor received no compensation for its services directly or
indirectly from the Fixed Income Portfolio during the Fund's fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolio may from time to time quote various performance figures to
illustrate the Fund's past performance.

Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by the Fund be accompanied by certain standardized performance information
computed as required by the Commission. Current yield and average annual
compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by the Fund to compute or express
performance follows.

TOTAL RETURN

The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5, and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis. The average annual total rates of return for the Portfolio
from inception and for the one year period ended on the date of the Financial
Statements included herein are as follows:

<TABLE>
<CAPTION>
Since Inception
Through Year
One Year Ended
Ended October 31, October 31, Inception
1997 1997 Date
------------------ ---------------- ---------
<S> <C> <C> <C>
ICM Fixed Income
Portfolio........ 8.31% 6.71% 11/3/92
</TABLE>

-30-
<PAGE>

These figures are calculated according to the following formula:

P (1 + T)/n/ = ERV

where:

P = a hypothetical initial payment of $1,000
- ------------
T = average annual total return
- ------------
n = number of years
- ------------
ERV = ending redeemable value of a hypothetical $1,000 payment made
- ----------
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5, or 10 year periods (or fractional portion thereof).

YIELD

Current yield reflects the income per share earned by a Portfolio's
- -----
investments.

Current yield is determined by dividing the net investment income per share
- -----
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period. The
yield for the Portfolio for the 30-day period ended on October 31, 1997 was
5.64%.

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
calculated above) to performance as reported by other investments, indices and

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<PAGE>

averages. Please see Appendix B for publications, indices and averages which
may be used.

In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a Portfolio, 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 a
Portfolio to calculate its performance. In addition, there can be no assurance
that a Portfolio 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
corporation 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 located at
One International Place, Boston, MA 02110; however, all investor correspondence
should be addressed to the Fund at UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's
Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of common
stock and to classify or reclassify any unissued shares with respect to such
Portfolios. The Board of Directors has classified additional classes of shares
in the Portfolio, known as Institutional Service Shares and Advisor Shares. As
of the date of this Statement of Additional Information, no Institutional
Service Shares or Advisor Shares of these Portfolios have been offered by the
Fund.

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<PAGE>

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of each Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the federal excise tax on undistributed
income and capital gains (see discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Portfolio's Prospectus). The amounts of any
income dividends or capital gains distributions cannot be predicted.

As set forth in the Portfolio's Prospectus, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of the Portfolio of the Fund at net
asset value (as of the business day following the record date). This will
remain in effect until the Fund is notified by the shareholder in writing at
least three days prior to the record date that either the Income Option (income
dividends in cash and capital gains distributions in additional shares at net
asset value) or the Cash Option (both income dividends and capital gains
distributions in cash) has been elected. An account statement is sent to
shareholders whenever an income dividend or capital gains distribution is paid.

Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for federal income tax purposes) such gains against any
net capital losses of another Portfolio.

FEDERAL TAXES

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<PAGE>

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes. Shareholders
will be advised on the nature of the payments.

CODE OF ETHICS

The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the ICM Fixed Income
Portfolio for the fiscal year ended October 31, 1997, which appear in the
Portfolio's 1997 Annual Report to Shareholders, and the report thereon of Price
Waterhouse LLP, independent accountants, also appearing therein, are attached to
this Statement of Additional Information.

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<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF BOND RATINGS

Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its highest bond ratings: Aaa -- judged to be the best quality; carry the
smallest degree of investment risk: Aa -- judged to be of high quality by all
standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.

Excerpts from Standard & Poor's Ratings Services' ("S&P") description of
its highest bond ratings: AAA -- highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
- -- regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.

II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES

Mortgage-backed securities represent ownership interests in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to investors such
as the Portfolio. Most issuers or poolers provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or poolers are supported by various forms of 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 obligations under the policies. Mortgage-backed
securities issued by private issuers, 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 by the Portfolio will be rated
investment grade by Moody's or S&P.

UNDERLYING MORTGAGES

Pools consist of whole mortgage loans or participants in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary

A-1
<PAGE>

among pools. For example, in addition to fixed-rate, fixed-term mortgages, the
Portfolio may purchase mortgage securities, consisting of pools of variable rate
mortgages (VRM), growing equity mortgages (GEM), graduated payment mortgages
(GPM) and other types where the principal and interest payment procedures vary.
VRMs are mortgages which reset the mortgage's interest rate with changes in open
market interest rates. The Portfolio's interest income will vary with changes in
the applicable interest rate on pools of VRMs. GPM and GEM pools maintain
constant interest rates, with varying levels of principal repayment over the
life of the mortgage. These different interest and principal payment procedures
should not impact the Portfolio's net asset value since the prices at which
these securities are valued each day will reflect the payment procedure.

All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit standards
and underwriting criteria for individual mortgages included in the pools. In
addition, many mortgages included in pools are insured through private mortgage
insurance companies.

AVERAGE LIFE

As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturities
of different characteristics will have varying assumptions for average life.

RETURNS ON MORTGAGE-BACKED SECURITIES

Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life
assumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yields of
the Portfolio. The compounding effect from reinvestment of monthly payments
received by the Portfolio will

A-2
<PAGE>

increase its yield to shareholders, compared to bonds that pay interest
semiannually.

ABOUT MORTGAGE-BACKED SECURITIES

Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest 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
securities. Additional payments are caused by repayments resulting from the sale
of the underlying residential property, refinancing or foreclosure net of fees
or costs which may be 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
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PCs") which represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal.

The Federal National Mortgage Association (FNMA) is a government sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller/services which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.

The principal government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.

A-3
<PAGE>

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 various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance purchased by the issuer. The insurance and guarantees are issued by
governmental entities, private insurers and the mortgage poolers. There can be
no assurance that the private insurers can meet their obligations under the
policies. Mortgage-backed securities purchased for the Portfolio will, however,
be rated investment grade by Moody's or S&P.

The Portfolio expects that governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and offered
to investors, the Portfolio will, consistent with their investment objective and
policies, consider making investments in such new types of securities.

III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.

U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.

A-4
<PAGE>

full faith and credit of the United States through provisions in their charters
that they may make "indefinite and unlimited" drawings on the U.S. Treasury, if
needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the FHLMC, are federally chartered institutions under government
supervision, but their debt securities are backed only by the creditworthiness
of those institutions, not the U.S. Government.

Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.

IV. DESCRIPTION OF COMMERCIAL PAPER

The Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's or
by S&P. Commercial paper refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash flow
and other liquidity ratios of the issuer and the borrower's ability to pay
principal and interest on demand.

A-5
<PAGE>

V. BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution 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 reasonably orderly market conditions. The Portfolio is also able to
sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.

A-6
<PAGE>

VI. DESCRIPTION OF FOREIGN INVESTMENTS

Investors should recognize that investing in foreign companies involves
certain 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
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.

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.

A-7
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividend.

(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.

(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the performance of
over 900 securities listed on the stock exchanges of countries in Europe,
Australia and the Far East, and over 1,400 securities listed on the stock
exchanges of these continents, including North America.

(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.

(i) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index,

B-1
<PAGE>

including approximately 800 issues with maturities of 12 years or greater.

(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment grade
corporate bonds rated BBB or better, U.S. Treasury/agency issues and mortgage
pass-through securities.

(k) Lehman Brothers Aggregate Index -- is a fixed income market value-
weighted index that combines the Lehman Brothers Government/ Corporate Index and
the Lehman Brothers Mortgage-Backed Securities Index. It includes fixed rate
issues of investment grade (BBB) or higher, with maturities of at least one year
and outstanding par values of at least $100 million for U.S. Government issues
and $25 million for others.

(l) Lehman Brothers Long-Term Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of 10 years
or greater.

(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only and does
not include income.

(n) Value Line -- composed of over 1,600 stocks in the Value Line
Investment 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. publicly-traded
companies.

(p) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65% Salomon
Brothers High Grade Bond Index; all stocks on the NASDAQ system exclusive of
those traded on an exchange, and 65% Standard & Poor's 500 Stock Index and 35%
Salomon Brothers High Grade Bond Index.

(q) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc.-- analyzes price, current yield, risk, total return and average rate of
return (average annual compounded growth rate) over specified time periods for
the mutual fund industry.

(r) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

B-2
<PAGE>

Times, Personal Investor, Wall Street Journal and Weisenberger Investment
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
Associates -- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills and
inflation.

(v) Savings and Loan Historical Interest Rates -- as published in the
U.S. Savings & Loan League Fact Book.

(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill Lynch,
Pierce, Fenner & Smith, Lehman Brothers, Inc.; and Bloomberg L.P.

B-3
<PAGE>

ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (19.2%)
- -------------------------------------------------------------------------------
BANKS (2.0%)
<S> <C> <C>
First National Bank of Commerce 6.50%, 1/14/00......... $ 350,000 $ 353,570
#State Street Institution Capital Securities, Series A
7.94%, 12/30/26....................................... 250,000 259,275
-----------
612,845
- -------------------------------------------------------------------------------
<CAPTION>
FINANCIAL SERVICES (8.0%)
<S> <C> <C>
American General Finance 8.125%, 8/15/09............... 250,000 281,875
Associates Corp. of North America 8.375%, 1/15/98...... 25,000 25,142
Commercial Credit Corp. 8.70%, 6/15/09................. 100,000 117,500
*Dean Witter Discover 5.57%, 3/2/99.................... 15,000 15,028
Ford Motor Credit Corp. 7.00%, 9/25/01................. 500,000 516,250
Ford Motor Credit Corp. Medium Term Note 6.70%, 8/2/00. 250,000 254,063
General Electric Capital Corp. 8.85%, 4/1/05........... 450,000 520,875
General Motors Acceptance Corp. 8.875%, 6/1/10......... 50,000 59,500
Lehman Brothers Holdings Medium Term Note 6.90%,
1/29/01............................................... 250,000 254,075
Norwest Financial, Inc. 6.23%, 9/1/98.................. 350,000 351,204
U.S. West Capital, Inc. 8.40%, 9/15/99................. 100,000 104,125
-----------
2,499,637
- -------------------------------------------------------------------------------
<CAPTION>
INDUSTRIAL (6.8%)
<S> <C> <C>
American Home Products 7.70%, 2/15/00.................. 250,000 258,750
Dow Chemical Co. 8.55%, 10/15/09....................... 25,000 29,500
EG & G, Inc. 6.80%, 10/15/05........................... 200,000 203,660
IBM Corp., Medium Term Note 6.15%, 12/11/98............ 500,000 502,100
Martin Marietta 6.50%, 4/15/03......................... 300,000 302,625
Martin Marietta Materials, Inc. 6.90%, 8/15/07......... 500,000 516,250
Rite Aid Corp. 6.70%, 12/15/01......................... 250,000 254,687
Weyerhaeuser Co. 9.05%, 2/1/03......................... 50,000 55,813
-----------
2,123,385
- -------------------------------------------------------------------------------
<CAPTION>
TRANSPORTATION (1.5%)
<S> <C> <C>
Federal Express ETC 7.50%, 1/15/18..................... 300,000 324,090
Ryder System, Inc. 7.30%, 10/30/00..................... 150,000 154,050
-----------
478,140
- -------------------------------------------------------------------------------
<CAPTION>
UTILITIES (0.9%)
<S> <C> <C>
Baltimore Gas & Electric 6.73%, 6/12/12................ 250,000 260,925
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $5,775,683)....... 5,974,932
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
YANKEE BONDS (2.1%)
- -------------------------------------------------------------------------------
BANKS (1.5%)
<S> <C> <C>
Korea Development Bank 6.50%, 11/15/02................. $ 500,000 $ 465,625
- -------------------------------------------------------------------------------
<CAPTION>
FINANCIAL SERVICES (0.6%)
<S> <C> <C>
InterAmerica Development Bank 8.40%, 9/1/09............ 150,000 178,312
- -------------------------------------------------------------------------------
TOTAL YANKEE BONDS (COST $638,574)...................... 643,937
- -------------------------------------------------------------------------------
<CAPTION>
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES (24.6%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (6.4%)
<S> <C> <C>
Pool #E48794
15 yr. Guarantee 6.50%, 7/1/08........................ 212,270 213,199
Pool #E00292
Gold 6.50%, 4/1/09.................................... 358,140 360,042
Pool #346544
7.00%, 5/1/11......................................... 345,702 350,779
Pool #E64395
15 yr. Guarantee 7.00%, 6/1/11........................ 409,753 416,539
Pool #277196
8.00%, 8/1/16......................................... 1,877 1,956
*Pool #845640
7.854%, 8/1/23........................................ 192,502 198,879
Pool #C00449
7.00%, 3/1/26......................................... 455,807 459,226
-----------
2,000,620
- -------------------------------------------------------------------------------
<CAPTION>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (8.9%)
<S> <C> <C>
Pool #81817
9.50%, 8/1/02......................................... 7,219 7,627
Pool #232847
7.00%, 8/1/08......................................... 143,110 145,614
Pool #50904
6.00%, 10/1/08........................................ 200,288 197,785
Pool #232361
6.00%, 10/1/08........................................ 61,001 60,238
Pool #264441
6.00%, 1/1/09......................................... 65,278 64,462
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--(CONTINUED)
<S> <C> <C>
Pool #250498
6.50%, 3/1/11......................................... $ 256,507 $ 257,309
Pool #50013
9.50%, 10/1/17........................................ 2,930 3,159
Pool #55343
9.50%, 10/1/17........................................ 2,042 2,206
Pool #50993
7.00%, 2/1/24......................................... 567,631 571,534
Pool #298034
8.00%, 11/1/24........................................ 211,597 219,069
Pool #311025
8.00%, 5/1/25......................................... 345,856 359,474
Pool #322345
7.50%, 9/1/25......................................... 470,051 481,215
Pool #330297
7.00%, 11/1/25........................................ 403,325 405,594
-----------
2,775,286
- -------------------------------------------------------------------------------
<CAPTION>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (9.3%)
<S> <C> <C>
Pool #7414
7.25%, 7/15/05........................................ 9,215 9,466
Pool #17084
8.00%, 9/15/07........................................ 19,992 21,010
Pool #20335
8.00%, 10/15/07....................................... 26,998 28,044
Pool #327371
7.00%, 2/15/08........................................ 214,225 218,041
Pool #780159
8.00%, 4/15/08........................................ 331,481 347,359
Pool #362234
7.00%, 3/15/09........................................ 220,244 225,062
Pool #400216
7.00%, 4/15/09........................................ 219,617 224,421
Pool #40824
12.50%, 7/15/10....................................... 11,642 13,570
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Pool #109599
12.00%, 1/15/14....................................... $ 52,977 $ 60,443
Pool #311575
7.50%, 2/15/23........................................ 586,719 603,404
Pool #387161
7.50%, 10/15/25....................................... 271,630 278,930
Pool #405183
7.50%, 11/15/25....................................... 355,897 365,350
Pool #423836
8.00%, 8/15/26........................................ 472,652 491,410
-----------
2,886,510
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH
SECURITIES (COST $7,510,752)........................... 7,662,416
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (9.4%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (9.4%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (2.3%)
Series 1544-E PAC(11) REMIC
6.25%, 6/15/08........................................ 200,000 200,863
Series 1577 CL PH PAC-1(11) REMIC
6.30%, 3/15/23........................................ 500,000 499,383
-----------
700,246
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (7.1%)
Series 1993-52 CL D PAC-1(11) REMIC
5.50%, 12/25/02....................................... 126,782 126,277
Series 1993-194 CL PG PAC(11) REMIC
5.65%, 4/25/05........................................ 350,000 347,537
Series 1993-71 CL PG PAC(11) REMIC
6.25%, 7/25/07........................................ 400,000 401,314
Series 1996-M5 CL A1 REMIC
7.141%, 6/25/08....................................... 238,511 244,974
Series 1990-103 CL J PAC REMIC
7.50%, 10/25/19....................................... 13,444 13,449
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>
- -----------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED)
- -----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--(CONTINUED)
Series 1991-21 H PAC REMIC
7.00%, 12/25/19..................................... $ 64,808 $ 64,752
Series G92-15 CL G PAC(11) REMIC
7.00%, 4/25/20...................................... 545,000 549,769
Series G19-H PAC REMIC
8.40%, 6/25/20...................................... 200,000 206,000
Series G92-19K PAC(11) REMIC
7.50%, 12/25/20..................................... 250,000 252,188
-----------
2,206,260
- -----------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $2,885,578)........................ 2,906,506
- -----------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (36.4%)
- -----------------------------------------------------------------------------
U.S. TREASURY BONDS (14.4%)
++3.625%, 7/15/02.................................... 501,927 502,555
12.75%, 11/15/10..................................... 25,000 35,651
7.50%, 11/15/16...................................... 2,975,000 3,399,919
7.125%, 2/15/23...................................... 500,000 555,530
-----------
4,493,655
- -----------------------------------------------------------------------------
U.S. TREASURY NOTES (22.0%)
6.375%, 1/15/99...................................... 725,000 731,605
6.875%, 8/31/99...................................... 1,600,000 1,633,680
5.50%, 4/15/00....................................... 100,000 99,612
6.25%, 5/31/00....................................... 1,320,000 1,337,094
@7.50%, 11/15/01..................................... 150,000 159,214
@6.375%, 8/15/02..................................... 1,660,000 1,700,222
7.25%, 8/15/04....................................... 150,000 161,688
6.50%, 10/15/06...................................... 500,000 519,550
++3.375%, 1/15/07.................................... 507,430 500,610
-----------
6,843,275
- -----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $10,904,110)... 11,336,930
- -----------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

ICM FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
CLOSED-END INVESTMENT COMPANIES (4.4%)
- -------------------------------------------------------------------------------
Blackrock 1998 Term Trust.............................. 2,800 $ 27,125
Blackrock 1999 Term Trust.............................. 30,000 279,375
Blackrock 2001 Term Trust.............................. 60,000 510,000
Blackrock Target Term Trust............................ 60,000 551,250
- -------------------------------------------------------------------------------
TOTAL CLOSED-END INVESTMENT COMPANIES
(COST $1,343,745)...................................... 1,367,750
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.8%)
Chase Securities, Inc., 5.60% dated 10/31/97, due
11/3/97, to be repurchased
at $876,409, collateralized by $839,885 of various
U.S. Treasury Notes, 5.50%-8.75%, due from 5/15/00-
6/30/02, valued at $876,494
(COST $876,000)....................................... $876,000 876,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.9%) (COST $29,934,442)(A)......... 30,768,471
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.1%)..................... 350,223
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $31,118,694
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Par amount is indexed to inflation rate.
* Variable/Floating rate security--rate disclosed is as of October 31,1997.
# 144A Security--Certain conditions for public sale may exist.
@ All, or a portion of these shares, were pledged to cover initial margin
requirements on open futures contracts.
ETC-- Equipment Trust Certificates
PAC-- Planned Amortization Class
REMIC--Real Estate Mortgage Investment Conduit
(a) The cost for federal income tax and book purposes was $29,938,521. At
October 31, 1997, net unrealized appreciation for all securities based on
tax cost was $829,950. This consisted of aggregate gross unrealized
appreciation for all securities of $861,858 and aggregate gross
unrealized depreciation for all securities of $31,908.

The accompanying notes are an integral part of the financial statements.
10
<PAGE>

ICM FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................. $29,934,442
===========
Investments, at Value............................................ $30,768,471
Cash............................................................. 612
Interest Receivable.............................................. 393,078
Receivable for Daily Variation on Futures Contracts.............. 2,743
Other Assets..................................................... 872
- -------------------------------------------------------------------------------
Total Assets.................................................... 31,165,776
- -------------------------------------------------------------------------------
LIABILITIES
Payable to Investment Advisor--Note B............................ 6,636
Payable for Administrative Fees--Note C.......................... 8,037
Payable for Custodian Fees--Note D............................... 6,431
Payable for Directors' Fees--Note F.............................. 670
Payable for Printing Fees........................................ 8,920
Other Liabilities................................................ 16,388
- -------------------------------------------------------------------------------
Total Liabilities............................................... 47,082
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $31,118,694
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $30,139,214
Undistributed Net Investment Income.............................. 255,821
Accumulated Net Realized Loss.................................... (114,574)
Unrealized Appreciation.......................................... 838,233
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $31,118,694
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
50,000,000)..................................................... 2,946,788
Net Asset Value, Offering and Redemption Price Per Share......... $ 10.56
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

ICM FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
Year Ended October 31, 1997

<TABLE>
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................. $1,860,624
Dividends................................................ 28,762
- ---------------------------------------------------------------------------------
Total Income............................................ 1,889,386
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.............................................. $ 144,659
Less: Fees Waived....................................... (144,659) --
---------
Administrative Fees--Note C.............................. 96,007
Printing Fees............................................ 16,354
Custodian Fees--Note D................................... 15,075
Registration and Filing Fees............................. 13,584
Audit Fees............................................... 13,196
Directors' Fees--Note F.................................. 2,339
Other Expenses........................................... 5,888
Expenses Assumed by the Adviser--Note B.................. (17,285)
- ---------------------------------------------------------------------------------
Total Expenses.......................................... 145,158
Expense Offset--Note A................................... (596)
- ---------------------------------------------------------------------------------
Net Expenses............................................ 144,562
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... 1,744,824
- ---------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS):
Investments.............................................. 49,578
Written Options.......................................... 938
Futures Contracts........................................ 50,984
Foreign Exchange Translations............................ (640)
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS, WRITTEN OPTIONS,
FUTURES CONTRACTS AND FOREIGN EXCHANGE TRANSLATIONS...... 100,860
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION:
Investments.............................................. 529,114
Futures.................................................. 25,046
- ---------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION.. 554,160
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS, WRITTEN OPTIONS, FUTURES
CONTRACTS AND FOREIGN EXCHANGE TRANSLATIONS.............. 655,020
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $2,399,844
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

12
<PAGE>

ICM FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 1,744,824 $ 1,211,660
Net Realized Gain (Loss)............................. 100,860 (33,891)
Net Change in Unrealized Appreciation/Depreciation... 554,160 (87,594)
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 2,399,844 1,090,175
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (1,729,486) (1,168,003)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................... 6,306,694 8,726,617
--In Lieu of Cash Distributions..................... 1,451,047 1,021,678
Redeemed............................................. (1,667,639) (2,077,394)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 6,090,102 7,670,901
- --------------------------------------------------------------------------------
Total Increase....................................... 6,760,460 7,593,073
Net Assets:
Beginning of Year.................................... 24,358,234 16,765,161
- --------------------------------------------------------------------------------
End of Year (including undistributed net investment
income of $255,821
and $212,125, respectively)......................... $31,118,694 $24,358,234
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 611,727 846,409
In Lieu of Cash Distributions....................... 140,942 99,711
Shares Redeemed..................................... (157,979) (200,725)
- --------------------------------------------------------------------------------
594,690 745,395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

ICM FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
NOVEMBER 3,
YEARS ENDED OCTOBER 31, 1992** TO
---------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 10.36 $ 10.43 $ 9.55 $ 10.58 $ 10.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............. 0.62 0.59 0.59 0.52 0.51
Net Realized and Unrealized Gain
(Loss)........................... 0.21 (0.07) 0.82 (0.98) 0.51
- ------------------------------------------------------------------------------------
Total from Investment Operations. 0.83 0.52 1.41 (0.46) 1.02
- ------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............. (0.63) (0.59) (0.53) (0.48) (0.44)
Net Realized Gain................. -- -- -- (0.09) --
- ------------------------------------------------------------------------------------
Total Distributions.............. (0.63) (0.59) (0.53) (0.57) (0.44)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $ 10.56 $ 10.36 $ 10.43 $ 9.55 $ 10.58
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
TOTAL RETURN+...................... 8.31% 5.17% 15.11% (4.43)% 10.38%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)....................... $31,119 $24,358 $16,765 $12,601 $12,465
Ratio of Expenses to Average Net
Assets............................ 0.50% 0.50% 0.63% 0.84% 0.84%*
Ratio of Net Investment Income to
Average Net Assets................ 6.03% 5.98% 6.04% 5.26% 5.41%*
Portfolio Turnover Rate............ 34% 46% 49% 82% 65%
- ------------------------------------------------------------------------------------
Voluntarily Waived Fees and
Expenses Assumed by the Adviser
Per Share......................... $ 0.06 $ 0.08 $ 0.08 $ 0.04 $ 0.03
Ratio of Expenses to Average Net
Assets Including Expense Offsets.. 0.50% 0.50% 0.61% N/A N/A
- ------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Advisor during the period.

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

ICM FIXED INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The ICM Small
Company Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1997, the
UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the Portfolio is to provide maximum, long-term total return consistent with
reasonable risk to principal, by investing primarily in investment grade,
fixed income securities of varying maturities.

1. SECURITY VALUATION: Fixed income securities are stated on the basis of
valuation provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at time of
purchase are valued at amortized cost, if it approximates market value. The
value of other assets and securities for which no quotations are readily
available is determined in good faith at fair value using methods
determined by the Board of Directors.

At October 31, 1997, the Portfolio had available a capital loss carryover
for Federal income tax purposes of $22,494, $381 and $93,355 which will
expire on October 31, 2002, October 31, 2003, and October 31, 2004,
respectively. For the year ended October 31, 1997, the Portfolio utilized
capital loss carryover for Federal income tax purposes of $87,027.

15
<PAGE>

ICM FIXED INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. FUTURES AND OPTIONS CONTRACTS: The Portfolio may use futures and options
contracts to hedge against changes in the values of securities the
Portfolio owns or expects to purchase. The Portfolio may also write covered
options on securities it owns or in which it may invest to increase its
current returns.

The potential risk to the Portfolio is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the value
of the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to perform.

The Portfolio had the following futures contracts open at October 31, 1997:

<TABLE>
<CAPTION>
NET
NUMBER UNREALIZED
OF AGGREGATE EXPIRATION APPRECIATION
CONTRACTS CONTRACTS FACE VALUE DATE (DEPRECIATION)
--------- --------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Purchases:
U.S. Treasury 20 Year
Bond................... 10 $1,184,688 December, 1997 $ 12,582
U.S. Treasury 5 Year
Note................... 5 542,031 December, 1997 1,447
French 10 Year Bond..... 10 859,798 December, 1997 9,938
Sales:
U.S. Treasury 10 Year
Note................... 10 1,117,500 December, 1997 (19,763)
--------
$ 4,204
========
</TABLE>

16
<PAGE>

ICM FIXED INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

During the year ended October 31, 1997, the Portfolio participated in
writing covered call and put options. The Portfolio had option activity as
follows:

<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
--------- --------
<S> <C> <C>
Options outstanding at October 31, 1996................... -- $ --
Options written during the year........................... 5 938
Options expired during the year........................... (5) (938)
--- -----
Options outstanding at October 31, 1997................... -- --
=== =====
</TABLE>

6. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income quarterly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications of $28,358 to increase
undistributed net investment income with an increase of $28,358 to
accumulated net realized loss.

Permanent book-tax differences, if any, are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.

7. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Discounts and premiums
on securities purchased are amortized using the effective yield basis over
their perspective 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. Custodian fees for the Portfolio have been
increased to include expense offsets for custodian balance credits, if any.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, Inc. (the "Adviser"), a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio at a monthly fee calculated at an annual
rate of 0.50% of average daily net assets for the month. The Adviser has
voluntarily agreed to waive a portion of its advisory fees and to assume
expenses, if necessary, in order to keep the Portfolio's total annual
operating expenses, after the effect of expense offset arrangements, from
exceeding 0.50% of average daily net assets.

17
<PAGE>

ICM FIXED INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 at an annual rate of 0.04% of average daily net assets of
the Portfolio. The Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), an affiliate of
The Chase Manhattan Bank, under which CGFSC agrees to provide certain
services, including but not limited to, administration, fund accounting,
dividend disbursing and transfer agent services. Pursuant to the Mutual Funds
Service Agreement, the Administrator pays CGFSC a monthly fee. For the year
ended October 31, 1997, UAM Fund Services, Inc. earned $96,007 from the
Portfolio as Administrator of which $84,435 was paid to CGFSC for their
services as sub-Administrator.

D. CUSTODIAN: The Chase Manhattan Bank (the "Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

G. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $5,747,241 and sales of $996,248 of investment securities
other than long-term U.S. Government and short-term securities. The
Portfolio's purchases figure includes $2,557,989 of in-kind transactions.
Purchases and sales of long-term U.S. Government securities were $9,441,676
and $8,211,248, respectively.

I. OTHER: At October 31, 1997, 27.4% of total shares outstanding were held by
2 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

18
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
ICM Fixed Income Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of ICM Fixed Income
Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc., at October 31,
1997, and the results of operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.

Price Waterhouse llp

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)

For the year ended October 31, 1997,the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders is 49.6%.

19
<PAGE>

PART B

UAM FUNDS, INC.

- --------------------------------------------------------------------------------

ICM SMALL COMPANY PORTFOLIO

ICM EQUITY PORTFOLIO

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION - January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the ICM Small Company and ICM Equity Portfolios' Institutional Class Shares
dated January 22, 1998. 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....................................... 1

PURCHASE AND REDEMPTION OF SHARES........................................ 9

VALUATION OF SHARES...................................................... 11

SHAREHOLDER SERVICES..................................................... 12

INVESTMENT LIMITATIONS................................................... 13

MANAGEMENT OF THE FUND................................................... 15

INVESTMENT ADVISER....................................................... 19

PORTFOLIO TRANSACTIONS................................................... 21

ADMINISTRATIVE SERVICES.................................................. 22

CUSTODIAN................................................................ 24

INDEPENDENT ACCOUNTANTS.................................................. 25

DISTRIBUTOR.............................................................. 25

PERFORMANCE CALCULATIONS................................................. 25

GENERAL INFORMATION...................................................... 27

FINANCIAL STATEMENTS..................................................... 29

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS...................... A-1

APPENDIX B - COMPARISONS................................................. B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment policies of the ICM
Small Company and ICM Equity Portfolios (the "Portfolios") as set forth in the
Portfolios' Prospectus.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC" or the "Commission") thereunder, which currently
require that (a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). A Portfolio will not loan securities to the extent that greater
than one-third of its assets (including the value of collateral for the loan) at
fair market value would be committed to loans. As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially. These
risks are similar to the ones involved with repurchase agreements as discussed
in the Prospectus.

SHORT-TERM INVESTMENTS

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are non-
negotiable deposits maintained in a banking institution for a specified period
of time at a stated interest rate. Time deposits maturing in more than seven
days will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calendar days will not exceed 10% of the total
assets of a Portfolio;
<PAGE>

Certificates of deposit are negotiable short-term obligations issued
by commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods);

Each Portfolio will not invest in any security issued by a commercial
bank unless (i) the bank had total assets of a least $1 billion, or the
equivalent in other currencies, (ii) in the case of U.S. banks, it is a member
of the Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be purchased
by each Portfolio;

(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, determined by the Adviser to be of comparable quality;

(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;

(6) Repurchase agreements collateralized by securities listed above.

FUTURES CONTRACTS

The Portfolios may enter into stock futures contracts, options, and
options on 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

-2-
<PAGE>

price. Futures contracts which are standardized as to maturity date and
underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government agency.

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, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable 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 interest rates. The Portfolios intend to use futures contracts only for
hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging

-3-
<PAGE>

transactions or that the Fund's commodity futures and option positions be for
other purposes, to the extent that the aggregate initial margins and premiums
required to establish such non-hedging positions do not exceed five percent of
the liquidation value of a Portfolio. A Portfolio will only sell futures
contracts to protect securities it owns against price declines or purchase
contracts to protect against an increase in the price of securities it intends
to purchase. As evidence of this hedging interest, the Portfolio expects that
approximately 75% of its futures contracts purchases will be "completed"; that
is, equivalent amounts of related securities will have been purchased or are
being purchased by the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control the Portfolios' exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Portfolios will incur commission expenses in
both opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

The Portfolios will not enter into futures contract transactions to
the extent that, immediately thereafter, the sum of their initial margin
deposits on open contracts exceeds 5% of the market value of its total assets.
In addition, the Portfolios will not enter into futures contracts to the extent
that their outstanding obligations to purchase securities under these contracts
would exceed 20% of their total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

The Portfolio will minimize the risk that it will be unable to close
out a futures contract by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may
not be possible to close a futures position. In the event of adverse price
movements, the Portfolios would continue to be required to make daily cash
payments to maintain their required margin. In such situations, if the
Portfolios have insufficient cash, they may have to sell portfolio securities to
meet daily margin requirements at a time when it may be disadvantageous to do
so. In addition, the Portfolios may be required to make delivery of the
instruments underlying futures contracts they hold. The inability to close
options and futures positions also could have an adverse impact on the
Portfolios' ability to effectively hedge.

-4-
<PAGE>

The risk of loss in trading futures contracts in some strategies can
be substantial, 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the 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 a loss in
excess of the amount invested in the contract. However, because the futures
strategies of the Portfolio is engaged in only for hedging purposes, the Adviser
does not believe that the Portfolios are subject to the risks of loss frequently
associated with futures transactions. The Portfolios would presumably have
sustained comparable losses if, instead of the futures contract, they had
invested in the underlying financial instrument and sold it after the decline.

Utilization of futures transactions by the Portfolios does involve the
risk of imperfect or no correlation where the securities underlying a futures
contract have different maturities than the portfolio securities being hedged.
It is also possible that the Portfolios could lose money on futures contracts
and also experience a decline in value of portfolio securities. There is also
the risk of loss by the Portfolios of margin deposits in the event of bankruptcy
of a broker with whom the Portfolios have an open position in a futures contract
or related option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable 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.

-5-
<PAGE>

OPTIONS

The Portfolios may purchase and sell put and call options and write
covered call and put options on futures contracts generally for hedging
purposes. Investments in options involve some of the same considerations that
are involved in connection with investments in futures contracts (e.g., the
existence of a liquid secondary market). In addition, the purchase of an option
also entails the risk that changes in the value of the underlying security or
contract will not be fully reflected in the value of the option purchased.
Depending on the pricing of the option compared to either the futures contract
on which it is based or the price of the securities being hedged, an option may
or may not be less risky than ownership of the futures contract or such
securities. For example, there are significant differences between the
securities, futures and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objective. A decision as to whether, when, and how to use options involves
the exercise of skill and judgment by the Adviser, and even a well-conceived
transaction may be unsuccessful because of market behavior or unexpected events.

WRITING COVERED CALL AND PUT OPTIONS AND PURCHASING CALL AND PUT OPTIONS

The Portfolios may write exchange-traded covered call and put options
on or relating to specific securities in order to earn additional income or, in
the case of a call written, to minimize or hedge against anticipated declines in
the value of its portfolio securities. The Portfolios may write covered call
options on their portfolio securities in order to earn additional income or to
minimize or hedge against anticipated declines in the value of those securities.
All call options written by a Portfolio are covered, which means that the
Portfolio will own the securities subject to the option as long as the option is
outstanding. All put options written by a Portfolio are covered, which means
that the Portfolio has deposited with its custodian cash or liquid securities
with a value at least equal to the exercise price of the option. Call and put
options written by the Portfolio may also be covered to the extent that the
Portfolio's liabilities under such options are offset by its rights under call
or put options purchased by a Portfolio and call options written by a Portfolio
may also be covered by depositing cash or securities with its custodian in the
same manner as written puts are covered.

-6-
<PAGE>

value of the security during this period. Through the writing of a covered put
option, a Portfolio receives premium income but obligates itself to purchase a
particular security underlying the option at a specified price at any time prior
to the expiration of the option period, regardless of market value during the
option period.

The Portfolios may, in accordance with their investment objectives,
also write exchange-traded covered call and put options on stock indices. The
Portfolios may write such options to generate additional income or as a hedging
technique to minimize anticipated declines in the value of the Portfolio's
securities. In economic effect, a stock index call or put option is similar to
an option on a particular security, except that the value of the option depends
on the weighted value of the group of securities comprising the index, rather
than a particular security, and settlements are made in cash rather than by
delivery of a particular security.

The Portfolios may also purchase exchange-traded call and put options
with respect to securities and with respect also to stock indices that correlate
with their particular portfolio securities. The Portfolios may purchase put
options for defensive purposes in order to protect against an anticipated
decline in the value of portfolio securities. As the holder of a put option
with respect to individual securities, the Portfolios have the right to sell the
securities underlying the options and to receive a cash payment at the exercise
price at any time during the option period. As the holder of a put option on an
index, a Portfolio has the right to receive, upon exercise of the option, a cash
payment equal to a multiple of any excess of the strike price specified by the
option over the value of the index.

The Portfolios may purchase call options on individual securities in
order to take advantage of anticipated increases in the price of those
securities by purchasing the right to acquire the securities underlying the
option (or, with respect to options on indices, to receive income equal to the
value of such index over the strike price). As the holder of a call option with
respect to individual securities, a Portfolio obtains the right to purchase the
underlying securities at the exercise price at any time during the option
period. As the holder of a call option on a stock index, a Portfolio obtains
the right to receive upon exercise of the option, a cash payment equal to the
multiple of any excess of the value of the index on the exercise date over the
strike price specified in the option.

-7-
<PAGE>

connection with listed options -- that the party on the other side of the option
transaction will default. This may make it impossible to close out an unlisted
option position in some cases, and profits may be lost thereby. Except as
described below, such unlisted over-the-counter options will generally be
considered illiquid securities. The Portfolios will engage in such transactions
only with firms of sufficient credit to minimize these risks. Where a Portfolio
has entered into agreements with primary dealers with respect to the unlisted
options it has written, and such agreements would enable the Portfolio to have
an absolute right to repurchase, at a pre-established formula price, the over-
the-counter options written by it, the Portfolio will treat as illiquid only the
amount equal to the formula price described above less the amount by which the
option is "in the money."

Option-related investment practices involve certain risks that are
different in some respects from investment risks associated with similar funds
which do not engage in such activities. These risks include the following:
writing covered call options -- the inability to effect closing transactions at
favorable prices and the inability to participate in the appreciation of the
underlying securities above an amount equal to the exercise price plus the
premium; writing covered put options -- the inability to effect closing
transactions at favorable prices and the obligation to purchase the specified
securities or to make a cash settlement on a stock index at prices that may not
reflect current market values; and purchasing put and call options -- possible
loss of the entire premium paid.

In addition, the effectiveness of hedging the Portfolios through the
purchase or sale (writing)of stock index options will depend upon the extent to
which price movements in the Portfolios' holdings being hedged correlate with
price movements in the selected stock index. Perfect correlation may not be
possible because the securities held or to be acquired by the Portfolios may not
exactly match the composition of the stock index on which options are purchased
or written.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions the Portfolios have identified as hedging
transactions, the Portfolios are 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 recognized with
respect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are
intended to hedge against a change in the value of securities

-8-
<PAGE>

held by the Portfolios may affect the holding period of such securities and,
consequently, the nature of the gain or loss on such securities upon
disposition.

In order for the Portfolios to continue to qualify for federal income
tax treatment as a regulated investment company, at least 90% of their gross
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. 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.

The Portfolios will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolios' fiscal year) on
futures transactions. Such distributions will be combined with distributions of
capital gains realized on the Portfolios' other investments and shareholders
will be advised on the nature of the payments.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectus are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares. See "Financial
Highlights" in the Prospectus for the historical portfolio turnover rates with
respect to the Small Company and Equity Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Shares of each Portfolio may be purchased without a sales commission,
at the net asset value per share next determined after an order is received in
proper form by the Fund, and payment is received by the Fund's custodian. The
minimum initial investments required for the ICM Small Company and ICM Equity
Portfolios are $5,000,000 and $2,500, respectively, with certain exceptions as
may be determined from time to time by the officers of the Fund. Other
investment minimums are: initial IRA investment, $500; initial spousal IRA
investment, $250; minimum additional investment for Small Company and Equity
Portfolios are $1,000 and $100, respectively. An order received in proper form
prior to the close of regular trading on the New

-9-
<PAGE>

York Stock Exchange ("Exchange") (generally 4:00 p.m. Eastern Time) will be
executed at the price computed on the date of receipt; and an order received not
in proper form or after the close of the Exchange will be executed at the price
computed on the next day the Exchange is open after proper receipt. The
Exchange will be closed on the following days: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day; New
Year's Day and Dr. Martin Luther King, Jr. Day.

Each Portfolio reserves the right in its sole discretion (1) to
suspend the offering of its shares, (2) to reject purchase orders when in the
judgment of management such rejection is in the best interest of the Fund, and
(3) to reduce or waive the minimum for initial and subsequent investment for
certain fiduciary accounts such as employee benefit plans or under circumstances
where certain economies can be achieved in sales of the Portfolio's shares.

Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that either the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (iii) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any 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 Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Portfolio. If redemptions
are paid in investment securities, such securities will be valued as set forth
in the Prospectus under "Valuation of Shares" and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to
cash.

No charge is made by a Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by a Portfolio.

-10-
<PAGE>

Signature Guarantees -- To protect your account, the Fund and Chase Global Funds
Services Company ("CGFSC") from fraud, signature guarantees are required for
certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account.
Signature guarantees are required for (1) all redemptions when the proceeds are
to be paid to someone other than the registered owner(s) and/or registered
address, or (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.

VALUATION OF SHARES

Equity securities listed on a securities exchange for which market
quotations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Unlisted equity securities
and listed securities not traded on the valuation date for which market
quotations are readily available are valued not exceeding the asked prices nor
less than the bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is based
upon the bid price of the foreign currency against U.S. dollars quoted by any
major bank or by a broker.

Securities purchased with remaining maturities of 60 days or less are
valued at amortized cost using methods approved by the Fund's Directors.

The value of other assets and securities for which no quotations are
readily available (including restricted

-11-
<PAGE>

securities) is determined in good faith at fair value using methods approved by
the Fund's Directors.

SHAREHOLDER SERVICES

The following supplements the shareholder services information set
forth in the Prospectus.

EXCHANGE PRIVILEGE

Institutional Class Shares of each ICM Portfolio may be exchanged for
Institutional Class Shares of the other ICM Portfolios. In addition,
Institutional Class Shares of each ICM Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds -- Institutional Class Shares in the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to UAM Funds,
UAM Funds Service Center, c/o Chase Global Funds Services Company, P.O. Box
2798, Boston, MA 02208-2798. The exchange privilege is only available with
respect to Portfolios that are qualified for sale in a shareholder's state of
residence.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time) will
be processed as of the close of business on the same day. Requests received
after the close of regular trading on the Exchange will be processed on the next
business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency, and to other
restrictions established by the Board of Directors to assure that such exchanges
do not disadvantage the Fund and its shareholders.

For federal income tax purposes, an exchange between funds is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to

-12-
<PAGE>

circumstances similar to the Fund's, an exchange between series of a Fund was
also deemed to be a taxable event. It is likely, therefore that a capital gain
or loss would be realized on an exchange between Portfolios; you may want to
consult your tax adviser for further information in this regard. The exchange
privilege may be modified or terminated at any time.

TRANSFER OF SHARES

Shareholders may transfer shares of the Fund's Portfolios to another
person or entity by making a written request to the Fund. The request should
clearly identify the account and number of shares to be transferred, and include
the signature of all registered owners and all stock certificates, if any, which
are subject to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as
described under "Purchase and Redemption of Shares." As in the case of
redemptions, the written request must be received in good order before any
transfer can be made.

INVESTMENT LIMITATIONS

Each Portfolio is subject to the following restrictions which are
fundamental policies (except as noted below) and may not be changed without the
approval of the lesser of: (1) at least 67% of the voting securities of the
Portfolio present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Portfolio are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the
Portfolio. Whenever an investment limitation sets forth a percentage limitation
on investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such security
or other assets. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered when
determining whether the investment complies with a Portfolio's investment
limitations. Each Portfolio will not:

(1) invest in commodities except that the Portfolio may invest in
futures contracts and options to the extent that not more than 5%
of a Portfolio's assets are required as deposit to secure
obligations under futures contracts;

(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;

-13-
<PAGE>

(5) purchase on margin or sell short except as specified in (1)
above;*

(6) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer;

(7) with respect as to 75% of its assets, purchase securities of any
issuer (except obligations of the United States Government and
its instrumentalities) if as the result more than 5% of the
Portfolio's total assets, at the time of purchase, would be
invested in the securities of such issuer;

(9) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in
excess of 10% of the ICM Small Company Portfolio's gross assets
(33 1/3% for the ICM Equity Portfolio) valued at the lower
of market or cost, and the Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross assets;

(10) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;*

-14-
<PAGE>

(11) underwrite the securities of other issuers;

(12) invest more than an aggregate of 10% of net assets determined at
the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;

(13) invest for the purpose of exercising control over management of
any company;*

(14) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years;*

(15) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, or instruments issued by U.S. banks when the
Portfolio adopts a temporary defensive position; and

(16) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.*

__________

* This restriction is a non-fundamental policy of the ICM Equity Portfolio.
Therefore, it may be changed by the Fund's Board of Directors upon a
reasonable notice to investors.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

-15-
<PAGE>

Nancy J. Dunn Director of the Fund; Vice President
10 Garden Street for Finance and Administration and
Cambridge, MA 02138 Treasurer of Radcliffe College since
8/14/51 1991.

Philip D. English Director of the Fund; President and
16 West Madison Street Chief Executive Officer of Broventure
Baltimore, MD 21201 Company, Inc.; Chairman of the Board
8/5/48 of Chektec Corporation and Cyber
Scientific, Inc.

Norton H. Reamer* Director, President and Chairman of
One International Place the Fund; President, Chief Executive
Boston, MA 02110 Officer and a Director of United Asset
3/21/35 Management Corporation; Director,
Partner or Trustee of each of the
Investment Companies of the Eaton
Vance Group of Mutual Funds.

Charles H. Salisbury, Jr.* Director of the Fund; Executive Vice
One International Place President of United Asset Management
Boston, MA 02110 Corporation; formerly an executive
3/24/40 officer and Director of T. Rowe Price
and President and Chief Investment
Officer of T. Rowe Price Trust
Company.

Peter M. Whitman, Jr.* Director of the Fund; President and
One Financial Center Chief Investment Officer of Dewey
Boston, MA 02111 Square Investors Corporation since
7/1/43 1988; Director and Chief Executive
Officers of H.T. Investors, Inc.,
formerly a subsidiary of Dewey Square.

William H. Park Vice President of the Fund; Executive
One International Place Vice President and Chief Financial
Boston, MA 02110 Officer of United Asset Management
9/19/47 Corporation.
</TABLE>
-16-
<PAGE>

<TABLE>

<S> <C>
Gary L. French Treasurer of the Fund; President of
211 Congress Street UAM Fund Services, Inc, and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President of
7/4/51 Operations, Development and Control of
Fidelity Investments in 1995;
Treasurer of the Fidelity Group of
Mutual Funds from 1991 to 1995.

Gordon M. Shone Assistant Treasurer of the Fund; Vice
73 Tremont Street President of Fund Administration and
Boston, MA 02108 Compliance of Chase Global Funds
7/30/56 Services Company; formerly Senior
Audit Manager of Coopers & Lybrand
from 1983 to 1993.

Karl O. Hartmann Assistant Secretary of the Fund;
73 Tremont Street Senior Vice President and General
Boston, MA 02108 Counsel of Chase Global Funds Services
3/7/55 Company.

</TABLE>

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

-17-
<PAGE>

Trust and reimbursement for travel and other expenses incurred while attending
Board meetings. Directors who are also officers or affiliated persons receive no
remuneration for their services as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"), the
Administrator or CGFSC and receive no compensation from the Fund. The following
table shows aggregate compensation paid to each of the Fund's unaffiliated
Directors by the Fund and total compensation paid by the Fund, and UAM Funds
Trust (collectively the "Fund Complex") in the fiscal year ended October 31,
1997.

<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued Annual from
Compensation as Part of Benefits Registrant
Name of Person, From Fund Upon and
Position Registrant Expenses Retirement Fund Complex
- ------------ -------------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr........ $26,791 0 0 $32,750
Director
Nancy J. Dunn.............. $ 6,774 0 0 $ 8,300
Director
Philip D. English.......... $26,791 0 0 $32,750
Director
William A. Humenuk......... $26,791 0 0 $32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of the ICM Portfolios, as
noted.

ICM Equity Portfolio: Wilmington Trust Co. TRSTE, FBO AC 425173
Integrated Device Technology 401K, c/o Mutual Funds, 1100 N. Market Street,
Wilmington, DE, 23.1%; Charles Schwab & Co., Inc., Reinvest Account, Attn:
Mutual Funds, 101 Montgomery Street, San Francisco, CA, 15.4%; First National
Bank of Maryland Customer Account, Finney Trimble, Assoc. Profit Sharing Plan
28050, P.O. Box 1596, Baltimore, MD, 12.4%; First National Bank of Maryland,
Cust ICM/USM PS & 401K Plan, 71275, Security Processing 101 610, P.O. Box 1596,
Baltimore, MD, 9.0% and Bryn Mawr School, c/o Investment Counselors of Maryland,
803 Cathedral Street, Baltimore, MD, 8.8%.

ICM Small Company Portfolio: Major League Baseball Players Benefit
Plan, c/o Investment Counselors of Maryland, 803 Cathedral Street, Baltimore,
MD, 9.8%; North Carolina Trust Company, P.O. Box 1108, Greensboro, NC, 7.9%*;
and Strafe &

-18-
<PAGE>

Co., FAO Riverside Methodist Hospital Foundation, P.O. Box 160,
Westerville, OH, 6.9%.

- -------------

* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

Investment Counselors of Maryland, Inc. (the "Adviser") is a wholly-
owned subsidiary of UAM, a holding company incorporated in Delaware in December
1980 for the purpose of acquiring and owning firms engaged primarily in
institutional investment management. Since its first acquisition in August
1983, UAM has acquired or organized approximately 45 such wholly-owned
affiliated firms (the "UAM Affiliated Firms"). UAM believes that permitting UAM
Affiliated Firms to retain control over their investment advisory decisions is
necessary to allow them to continue to provide investment management services
that are intended to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to operate
under their own firm name, with their own leadership and individual investment
philosophy and approach. Each UAM Affiliated Firm manages its own business
independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.

SERVICES PERFORMED BY ADVISER

Pursuant to Investment Advisory Agreements ("Agreements") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of

-19-
<PAGE>

its obligations and duties under the Agreements, (ii) reckless disregard by the
Adviser of its obligations and duties under the Agreements, or (iii) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services, the Adviser shall not be subject to any liability
whatsoever to the Fund, for any error or judgment, mistake of law or any other
act or omission in the course of, or connected with, rendering services under
the Agreements.

Unless sooner terminated, the Agreements shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreements or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolios. The Agreements
may be terminated at any time by a Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of a Portfolio on 60
days' written notice to the Adviser. The Agreements may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days' written
notice to the Fund. The Agreements will automatically and immediately terminate
in the event of their assignment.

PHILOSOPHY AND STYLE

The Adviser employs an investment strategy and approach which can best
be characterized as bottom up and value oriented. In selecting stocks for
purchase, the Adviser looks for companies which have strong financial and
operating characteristics and whose shares are selling at valuations below that
of the market in general, and below the average of the companies' own historic
valuation ranges. The primary indicator of value to the Adviser is a low price
to earnings ratio both on trailing twelve month earnings and one year forward
earnings estimates. Other indicators of value include low price to book value,
low price to cash flow, and low price to revenue per share. In addition to
analyzing company financial statements and talking to management, the Adviser's
research includes analysis of suppliers and competitors as well as consulting
with outside research sources.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included Georgia Gulf Corp.,
State of Maryland, Johns Hopkins Hospital, State of Kentucky, Bell Atlantic, TRW
Corp., The Rouse Company and Wisconsin Power & Light.

-20-
<PAGE>

In compiling this client list, the Adviser used objective criteria
such as account size, geographic location and client classification. The Adviser
did not use any performance based criteria. It is not known whether these
clients approve or disapprove of the Adviser or the advisory services provided.

ADVISORY FEES

As compensation for services rendered by the Adviser under the
Investment Advisory Agreements, the Portfolios pay the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to the Portfolios' average daily net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
ICM Small Company Portfolio.. 0.700%
ICM Equity Portfolio......... 0.625%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, the ICM
Small Company Portfolio paid advisory fees of approximately $1,242,000,
$2,068,648 and $2,852,097, respectively, to the Adviser. Advisory fees of
approximately $35,000, $44,350 and $60,807 were paid by the ICM Equity Portfolio
for the fiscal years ended October 31, 1995, 1996 and 1997, respectively. Of
the amounts paid to the Adviser on behalf of the ICM Equity Portfolio, $35,000,
$44,350 and $88,365 were waived by the Adviser for the fiscal years ended
October 31, 1995, 1996 and 1997, respectively.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for each Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio 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, 1995, 1996 and 1997, the Small Company
Portfolio paid brokerage commissions of

-21-
<PAGE>

$293,462, $318,247 and $264,115, respectively, and the Equity Portfolio paid
brokerage commissions of $7,000, $12,102 and $61,390, respectively.

Some securities considered for investment by a Portfolio 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 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

Pursuant to the terms of the Agreements, each Portfolio pays UAMFSI a
two-part monthly fee: a Portfolio-specific fee which is retained by UAMFSI and
a sub-administration fee which UAMFSI in turn pays to CGFSC. The following
Portfolio-specific fees are calculated from the aggregate net assets of each
Portfolio:

Annual Rate
<S> <C>
Small Company Portfolio ......... 0.04%
Equity Portfolio ................ 0.06%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

-22-
<PAGE>

0.19 of 1% of the first $200 million of combined UAM Funds net
assets;

0.11 of 1% of the next $800 million of combined UAM Funds net
assets;

0.07 of 1% of combined UAM Funds net assets in excess of $1 billion
but less than $3 billion;

0.05 of 1% of combined UAM Funds net assets in excess of $3
billion.

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 the fiscal
periods prior 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.

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid by the ICM Small Company Portfolio totaled
approximately $207,000, $384,267 and $555,980, respectively, and administrative
fees paid by the ICM Equity Portfolio totaled approximately $60,000, $76,615 and
$89,499, respectively. Of the fees paid during the year ended October 31, 1996
and October 31, 1997, ICM Small Company Portfolio paid $316,060 and $393,014 to
CGFSC and $68,707 and $162,966 to UAMFSI, and ICM Equity Portfolio paid $74,696
and $74,736 to CGFSC and $1,919 and $14,763 to UAMFSI.

-23-
<PAGE>

fees of officers and members of the Board who are not officers, directors,
shareholders or employees of UAMFSI, or the Fund's investment adviser or
distributor, SEC fees and state Blue Sky fees, EDGAR filing fees, processing
services and related fees, advisory and administration fees, charges and
expenses of pricing and data services, independent public accountants and
custodians, insurance premiums including fidelity bond premiums, outside legal
expenses, costs of maintenance of corporate existence, typesetting and printing
of prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund, printing and production costs of shareholders' reports
and corporate meetings, cost and expenses of Fund stationery and forms, costs of
special telephone and data lines and devices, trade association dues and
expenses, and any extraordinary expenses and other customary Fund expenses.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the Small Company
Portfolio and Equity Portfolio paid the Service Provider $4,567 and $0,
respectively, in fees pursuant to the Services Agreement.

-24-
<PAGE>

CUSTODIAN

The Chase Manhattan Bank, 3 Chase Metro Tech Center, Brooklyn, NY
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, serves as
independent accountants for the Fund.

DISTRIBUTOR

The Distributor received no compensation for its services directly or
indirectly from any of the Portfolios during the Fund's fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolios may from time to time quote various performance figures
to illustrate the Fund's past performance.

Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized performance
quotations or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance
information computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by the Fund to compute or express
performance follows.

TOTAL RETURN

-25-
<PAGE>

and the deduction of all applicable Fund expenses on an annual basis.

The average annual total return for the ICM Small Company Portfolio
from inception and for the one and five year periods ended on the date of the
Financial Statements included herein and the average annual total return for the
ICM Equity Portfolio from inception and for the one year period ended on the
date of the Financial Statements included herein are as follows:

Since
Inception
One Year Five Years Through Year
Ended Ended Ended
October 31, October 31, October 31, Inception
1997 1997 1997 Date
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ICM Equity Portfolio....... 36.98% -- 21.17% 10/1/93

ICM Small Company
Portfolio................ 43.28% 22.49% 19.13% 4/19/89
</TABLE>

These figures are calculated according to the following formula:

P (1 + T)/n/ = ERV
where:
P= a hypothetical initial payment of $1,000
T= average annual total return
n= number of years
ERV= ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or
10 year periods (or fractional portion thereof).

YIELD

Current yield reflects the income per share earned by a Portfolio's
investment.

-26-
<PAGE>

A yield figure is obtained using the following formula:
Yield = 2 [(a -- b + 1)/6/ - 1]
------
cd
where:
a= dividends and interest earned during the period
b= expenses accrued for the period (net of reimbursements)
c= the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d= the maximum offering price per share on the last day of the period.

COMPARISONS

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

-27-
<PAGE>

reclassify any unissued shares with respect to such Portfolios. The Board of
Directors has classified additional classes of shares in each Portfolio, known
as Institutional Service Shares and Advisor Shares. As of the date of this
Statement of Additional Information, no Institutional Services Shares or Advisor
Shares of these Portfolios have been offered by the Fund.

The shares of each Portfolio of the Fund, when issued and paid for as
provided for in its Prospectuses, will be fully paid and nonassessable, and have
no preference as to conversion, exchange, dividends, retirement or other
features. The shares of each Portfolio of the Fund have no preemptive rights.
The shares of the Fund have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so. A shareholder is entitled
to one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his or her name on the books of the Fund. Both
Institutional Class and Service Class Shares represent an interest in the same
assets of a Portfolio and are identical in all respects except that the Service
Class Shares bear certain expenses related to shareholder servicing and the
distribution of such shares, and have exclusive voting rights with respect to
matters relating to such distribution expenditures.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of the
Portfolios' net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the federal excise
tax on undistributed income and capital gains (see discussion under "Dividends,
Capital Gains Distributions and Taxes" in the Portfolios' Prospectus). The
amounts of any income dividends or capital gains distributions cannot be
predicted.

Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Portfolios'
Prospectus.

As set forth in the Portfolios' Prospectus, unless the shareholder
elects otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of the Portfolio at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholder in writing at least three days
prior to the record date that either the Income Option

-28-
<PAGE>

(income dividends in cash and capital gains distributions in additional shares
at net asset value) or the Cash Option (both income dividends and capital gains
distributions in cash) has been elected. An account statement is sent to
shareholders whenever an income dividend or capital gains distribution is
paid.

FEDERAL TAXES

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
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the ICM Small
Company Portfolio and the ICM Equity Portfolio for the fiscal period ended
October 31, 1997, which appear in the Portfolios' 1997 Annual Report to
Shareholders, and the reports thereon of Price Waterhouse LLP, the Fund's
independent accountants, also appearing therein, are attached to this Statement
of Additional Information.

-29-
<PAGE>

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF BOND RATINGS

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

A-1
<PAGE>

III. DESCRIPTION OF COMMERCIAL PAPER

The Portfolios may invest in commercial paper (including variable
amount master demand notes) rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's. Commercial paper refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding 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.

A-2
<PAGE>

IV. BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution 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 reasonably orderly market conditions. The Portfolio is also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.

A-3
<PAGE>

V. DESCRIPTION OF FOREIGN INVESTMENTS

Investors should recognize that investing in foreign companies
involves certain special considerations which are not typically associated with
investing in U.S. companies. Since the securities of foreign companies are
frequently denominated in foreign currencies, a Portfolio may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.

A-4
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividend.

(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation
and finance stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity index or its component indices -- represents
the return on the market value of all common equity securities
for which daily pricing is available. Comparisons of performance
assume reinvestment of dividends.

(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed
Income Fund Performance Analysis -- measures total return and
average current yield for the mutual fund industry. Rank
individual mutual fund performance 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 performance of over 900 securities listed on the stock
exchanges of countries in Europe, Australia and the Far East, and
over 1,400 securities listed on the stock exchanges of these
continents, including North America.

(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated
by screening for convertible issues of 100 million or greater in
market capitalization. The index is priced monthly.

B-1
<PAGE>

(h) Salomon Brothers GNMA Index -- includes pools of mortgages
originated by private lenders and guaranteed by the mortgage
pools of the Government National Mortgage Association.

(i) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA.
It is a value-weighted, total return index, including
approximately 800 issues with maturities of 12 years or greater.

(j) Salomon Brothers Broad Investment Grade Bond -- is a market-
weighted index that contains approximately 4,700 individually
priced investment grade corporate bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass-through securities.

(k) Lehman Brothers Long-Term Treasury Bond -- is composed of all
bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater.

(l) The Lehman Brothers Intermediate Government/Corporate Index -- is
an unmanaged index composed of a combination of the Government
and Corporate Bond Indices. All issues are investment grade
(BBB) or higher, with maturities of one to ten years and an
outstanding par value of at least $100 million for U.S.
Government issues and $25 million for others. The Government
Index includes public obligations of the U.S. Treasury, issues of
Government agencies, and corporate debt backed by the U.S.
Government. The Corporate Bond Index includes fixed-rate
nonconvertible corporate debt. Also included are Yankee Bonds
and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. Any security downgraded
during the month is held in the index until month-end and then
removed. All returns are market value weighted inclusive of
accrued income.

(m) The Lehman Brothers Aggregate Index -- is a fixed income market
value-weighted index that combines the Lehman Brothers
Government/Corporate Index and the Lehman Brothers Mortgage-
Backed Securities Index. It includes fixed rate issues of
investment grade (BBB) or higher, with maturities of at least one
year and outstanding par values of

B-2
<PAGE>

at least $100 million for U.S. Government issues and $25 million
for others.

(n) NASDAQ Industrial Index -- is composed of more than 3,000
industrial issues. It is a value-weighted index calculated on
price change only and does not include income.

(o) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.

(p) Russell 2000 -- composed of the 2,000 smallest stocks in the
Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.

(q) Composite Indices -- 70% Standard & Poor's 500 Stock Index and
30% NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock
Index and 65% Salomon Brothers High Grade Bond Index; all stocks
on the NASDAQ system exclusive of those traded on an exchange,
and 65% Standard & Poor's 500 Stock Index and 35% Salomon
Brothers High Grade Bond Index.

(r) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and
average rate of return (average annual compounded growth rate)
over specified time periods for the mutual fund industry.

(s) Mutual Fund Source Book, published by Morningstar, Inc. --
analyzes price, yield, risk and total return for equity funds.

(t) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Investor's Daily, Lipper
Analytical Services, Inc., Morningstar, Inc., New York Times,
Personal Investor, Wall Street Journal and Weisenberger
Investment Companies Service -- publications that rate fund
performance over specified time periods.

(u) Consumer Price Index (or cost of Living Index), published by the
U.S. Bureau of Labor Statistics -- a statistical measure of
change, over time in the price of goods and services in major
expenditure groups.

B-3
<PAGE>

(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson
Associates -- historical measure of yield, price and total
return for common and small company stock, long-term government
bonds, U.S. Treasury bills and inflation.

(w) Savings and Loan Historical Interest Rates -- as published in the
U.S. Savings & Loan League Fact Book.

(x) Historical data supplied by the research departments of First
Boston Corporation, the J.P. Morgan Companies, Salomon Brothers,
Merrill Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and
Bloomberg L.P.

B-4
<PAGE>

ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (88.5%)
- -------------------------------------------------------------------------------
AUTOMOTIVE (1.9%)
Donnelly Corp............................................. 161,750 $ 2,911,500
*Dorsey Trailers, Inc. ................................... 200,000 475,000
Excel Industries, Inc. ................................... 125,000 2,226,562
*Starcraft Corp........................................... 90,000 227,813
*Strattec Security Corp................................... 150,000 4,031,250
-----------
9,872,125
- -------------------------------------------------------------------------------
BANKS (1.7%)
TCF Financial Corp. ...................................... 80,000 4,550,000
Vermont Financial Services Corp. ......................... 170,000 4,292,500
-----------
8,842,500
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (7.2%)
Applied Power, Inc., Class A ............................. 60,000 3,712,500
*Astec Industries, Inc. .................................. 130,000 2,145,000
*Avondale Industries, Inc................................. 240,000 6,420,000
*BE Aerospace, Inc........................................ 75,000 2,100,000
CMI Corp., Class A........................................ 300,000 1,406,250
*Gradall Industries, Inc.................................. 230,000 3,450,000
Kennametal, Inc........................................... 100,000 4,850,000
Owosso Corp............................................... 33,500 252,297
Scotsman Industries, Inc.................................. 150,000 3,965,625
Varlen Corp............................................... 170,000 6,375,000
Woodhead Industries, Inc.................................. 150,000 2,850,000
-----------
37,526,672
- -------------------------------------------------------------------------------
CHEMICALS (3.7%)
*Applied Extrusion Technologies, Inc. .................... 200,000 1,450,000
Dexter Corp............................................... 150,000 5,887,500
Furon Co. ................................................ 150,000 5,718,750
Wynn's International, Inc................................. 189,675 6,437,095
-----------
19,493,345
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSTRUCTION (14.1%)
Centex Construction Products, Inc. ....................... 300,000 $ 9,300,000
Centex Corp............................................... 50,000 2,925,000
*Central Sprinkler Corp. ................................. 125,000 2,328,125
Continental Homes Holding Corp............................ 175,000 5,271,875
Granite Construction, Inc................................. 250,000 5,281,250
*Griffon Corp............................................. 500,000 7,906,250
Juno Lighting, Inc........................................ 295,000 5,162,500
Martin Marietta Materials, Inc............................ 150,000 5,231,250
MDC Holdings, Inc......................................... 500,000 5,562,500
Southdown, Inc. .......................................... 250,000 13,843,750
Texas Industries, Inc..................................... 140,000 6,641,250
*U.S. Home Corp. ......................................... 100,000 3,550,000
-----------
73,003,750
- -------------------------------------------------------------------------------
CONSUMER DURABLES (3.9%)
Aaron Rents, Inc. ........................................ 350,000 5,687,500
*Cannondale Corp.......................................... 131,400 2,841,525
*Global Motorsport Group Inc. ............................ 125,000 1,875,000
*Stanley Furniture Co., Inc. ............................. 60,000 1,432,500
Toro Co. ................................................. 175,000 7,481,250
*Winsloew Furniture, Inc.................................. 60,000 847,500
-----------
20,165,275
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.8%)
*CSS Industries, Inc. .................................... 125,000 4,421,875
*Fieldcrest Cannon, Inc. ................................. 35,000 1,170,312
*Galey & Lord, Inc........................................ 300,000 5,512,500
Guilford Mills, Inc....................................... 195,000 4,655,625
Springs Industries, Inc., Class A......................... 20,000 927,500
*Sylvan, Inc.............................................. 200,000 3,000,000
-----------
19,687,812
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.

7
<PAGE>

ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (5.3%)
*Belco Oil & Gas Corp..................................... 210,000 $ 4,541,250
*Clayton Williams Energy, Inc............................. 150,000 2,062,500
*Meridian Resource Corp................................... 150,000 1,959,375
*Oceaneering International, Inc........................... 183,400 4,550,612
*Offshore Logistics, Inc.................................. 100,000 2,075,000
Penn Virginia Corp........................................ 150,000 4,275,000
Trigen Energy Corp........................................ 100,000 2,381,250
Zeigler Coal Holding Co................................... 311,000 5,559,125
-----------
27,404,112
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (1.5%)
*Ascent Entertainment Group, Inc.......................... 104,456 1,031,503
*Carmike Cinemas, Inc. Class A............................ 200,000 6,500,000
-----------
7,531,503
- -------------------------------------------------------------------------------
HEALTH CARE (2.4%)
*Bio Rad Labs, Class A.................................... 150,000 3,712,500
*Marquette Medical Systems................................ 75,000 1,912,500
*Sierra Health Services, Inc.............................. 130,000 4,801,875
*Spacelabs Medical, Inc................................... 100,000 2,187,500
-----------
12,614,375
- -------------------------------------------------------------------------------
INSURANCE (6.8%)
*ACMAT Corp............................................... 100,000 1,812,500
Allied Group, Inc......................................... 125,000 5,906,250
CMAC Investment Corp...................................... 53,400 2,920,312
Capital Re Corp........................................... 68,200 4,019,538
Lawyers Title Corp........................................ 113,500 3,603,625
Life RE Corp.............................................. 85,000 4,685,625
*Medical Assurance, Inc................................... 70,786 1,977,584
PXRE Corp................................................. 160,000 4,880,000
Trenwick Group, Inc....................................... 163,400 5,698,575
-----------
35,504,009
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (0.4%)
*Lone Star Steakhouse & Saloon, Inc....................... 100,000 2,312,500
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements

8
<PAGE>

ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MANUFACTURING (3.6%)
Clarcor, Inc.............................................. 55,000 $ 1,577,812
*Essef Corp............................................... 154,000 2,618,000
*Holophane Corp........................................... 27,500 618,750
Hunt Corp................................................. 225,000 4,781,250
*Northwest Pipe Co........................................ 66,000 1,567,500
Smith (A.O.) Corp......................................... 125,000 5,179,688
York Group, Inc........................................... 100,000 2,250,000
-----------
18,593,000
- -------------------------------------------------------------------------------
METALS (2.3%)
Carpenter Technology Corp................................. 100,000 4,837,500
Intermet Corp............................................. 150,000 2,812,500
J & L Specialty Steel, Inc................................ 225,000 2,840,625
*Steel of West Virginia, Inc.............................. 125,000 1,312,500
-----------
11,803,125
- -------------------------------------------------------------------------------
PAPER & PACKAGING (2.3%)
American Business Products, Inc........................... 220,900 4,431,806
*Fibermark, Inc........................................... 202,500 3,961,406
Rayonier, Inc............................................. 80,000 3,495,000
-----------
11,888,212
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (4.5%)
Cali Realty Corp.......................................... 80,000 3,240,000
Evans Withycombe Residential, Inc......................... 125,000 3,156,250
Healthcare Realty Trust, Inc.............................. 75,000 2,085,937
Liberty Property Trust.................................... 110,000 3,080,000
Mid-Atlantic Realty Trust................................. 50,000 675,000
Omega Healthcare Investors, Inc........................... 24,500 882,000
Prime Retail, Inc......................................... 250,000 3,734,375
Shurgard Storage Centers, Inc............................. 125,000 3,531,250
Town & Country Trust...................................... 70,000 1,273,125
United Dominion Realty Trust, Inc......................... 100,000 1,387,500
-----------
23,045,437
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL (5.4%)
*Carson Pirie Scott & Co. ................................ 210,000 $10,119,375
*Finlay Enterprises, Inc. ................................ 147,500 3,079,063
*Lechters, Inc. .......................................... 225,000 1,181,250
*Rex Stores Corp. ........................................ 225,000 2,601,563
Ruddick Corp. ............................................ 225,000 3,515,625
*Shopko Stores, Inc. ..................................... 300,000 7,518,750
-----------
28,015,626
- -------------------------------------------------------------------------------
SERVICES (5.5%)
*Ambassadors International, Inc. ......................... 86,200 2,176,550
*Anixter International, Inc. ............................. 225,000 4,246,875
Bowne & Co., Inc. ........................................ 140,000 4,882,500
*Devon Group, Inc. ....................................... 125,000 4,875,000
*Forensic Technologies International Corp. ............... 63,000 744,188
*Guest Supply, Inc. ...................................... 72,000 976,500
*Rexel, Inc. ............................................. 300,000 6,712,500
*Unitel Video, Inc. ...................................... 120,000 855,000
*VWR Scientific Products Corp. ........................... 130,300 2,866,600
-----------
28,335,713
- -------------------------------------------------------------------------------
TECHNOLOGY (8.1%)
AMETEK, Inc. ............................................. 230,000 5,419,375
*BancTec, Inc. ........................................... 300,000 6,862,500
C&D Technologies, Inc. ................................... 100,000 4,400,000
*ILC Technology, Inc. .................................... 145,500 2,037,000
*Marshall Industries...................................... 100,000 3,506,250
Methode Electronics, Inc., Class A........................ 200,000 3,900,000
*Microsemi Corporation.................................... 87,200 1,275,300
National Computer Systems, Inc. .......................... 150,000 5,587,500
Pioneer Standard Electronics.............................. 325,000 5,321,875
Quixote Corp. ............................................ 200,000 1,800,000
*SPACEHAB, Inc. .......................................... 166,000 1,680,750
-----------
41,790,550
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements

10
<PAGE>

ICM SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (2.7%)
ASA Holdings, Inc. ................................. 140,000 $ 3,850,000
Comair Holdings, Inc. .............................. 130,000 4,777,500
Rollins Truck Leasing Corp. ........................ 206,200 3,428,075
USFreightways Corp. ................................ 60,000 1,927,500
------------
13,983,075
- -------------------------------------------------------------------------------
UTILITIES (1.4%)
Comsat Corp. ....................................... 213,700 4,888,388
Public Service Company of North Carolina, Inc. ..... 130,000 2,624,375
------------
7,512,763
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $301,623,927).............. 458,925,479
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BOND (0.4%)
- -------------------------------------------------------------------------------
TECHNOLOGY (0.4%)
#SPACEHAB, Inc. 8.00%, 10/15/07 (COST $2,190,000)... $ 2,190,000 2,129,775
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (11.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (11.2%)
Chase Securities, Inc. 5.60% dated 10/31/97, due
11/3/97, to be repurchased at $58,135,117,
collateralized by $55,172,376 of various U.S.
Treasury Notes, 5.50%-8.75%, due 5/15/00-6/30/02,
valued at $58,140,781 (COST $58,108,000)........... 58,108,000 58,108,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%) (COST $361,921,927) (A)... 519,163,254
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.1%)................. (785,931)
- -------------------------------------------------------------------------------
NET ASSETS (100%).................................... $518,377,323
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
# 144A Security--certain conditions for public sale may exist.
(a) The cost for federal income tax purposes was $361,921,927. At October 31,
1997, net unrealized appreciation for all securities based on tax cost
was $157,241,327. This consisted of aggregate gross unrealized
appreciation for all securities of $167,066,718 and aggregate gross
unrealized depreciation for all securities of $9,825,391.

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

ICM SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, including Repurchase Agreement, at Cost............. $361,921,927
============
Investments, at Value (excluding Repurchase Agreement)........... $461,055,254
Repurchase Agreement, at Value................................... 58,108,000
Cash............................................................. 38,964
Receivable for Portfolio Shares Sold............................. 388,865
Dividends Receivable............................................. 264,028
Interest Receivable.............................................. 13,541
Other Assets..................................................... 10,659
- -------------------------------------------------------------------------------
Total Assets.................................................... 519,879,311
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................ 38,125
Payable for Portfolio Shares Redeemed............................ 1,032,314
Payable for Investment Advisory Fees--Note B..................... 311,648
Payable for Administrative Fees--Note C.......................... 57,617
Payable for Custodian Fees--Note D............................... 13,007
Payable for Directors' Fees--Note G.............................. 1,903
Payable for Account Services Fees--Note F........................ 760
Other Liabilities................................................ 46,614
- -------------------------------------------------------------------------------
Total Liabilities............................................... 1,501,988
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $518,377,323
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $323,997,719
Undistributed Net Investment Income.............................. 808,028
Accumulated Net Realized Gain.................................... 36,330,249
Unrealized Appreciation.......................................... 157,241,327
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $518,377,323
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
50,000,000)..................................................... 18,634,883
Net Asset Value, Offering and Redemption Price Per Share......... $ 27.82
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

ICM SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends........................................................ $ 5,065,172
Interest......................................................... 2,499,381
- --------------------------------------------------------------------------------
Total Income.................................................... 7,564,553
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................. 2,852,097
Administrative Fees--Note C...................................... 555,980
Registration and Filing Fees..................................... 44,545
Custodian Fees--Note D........................................... 31,089
Legal Fees....................................................... 26,364
Audit Fees....................................................... 14,827
Printing Fees.................................................... 13,090
Directors' Fees--Note G.......................................... 7,730
Account Services Fees--Note F.................................... 4,567
Other Expenses................................................... 56,653
- --------------------------------------------------------------------------------
Total Expenses.................................................. 3,606,942
Expense Offset--Note A........................................... (6,153)
- --------------------------------------------------------------------------------
Net Expenses.................................................... 3,600,789
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................. 3,963,764
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.................................. 36,350,962
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON
INVESTMENTS...................................................... 105,011,498
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS........................................... 141,362,460
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $145,326,224
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

ICM SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 3,963,764 $ 3,555,694
Net Realized Gain................................... 36,350,962 17,847,683
Net Change in Unrealized Appreciation/Depreciation.. 105,011,498 20,915,250
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations........................................ 145,326,224 42,318,627
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (3,327,143) (3,589,374)
Net Realized Gain................................... (17,875,094) (12,736,570)
- ----------------------------------------------------------------------------------
Total Distributions................................ (21,202,237) (16,325,944)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued.............................................. 142,441,708 89,883,861
--In Lieu of Cash Distributions................... 19,676,534 14,462,723
Redeemed............................................ (88,847,197) (60,154,751)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions....... 73,271,045 44,191,833
- ----------------------------------------------------------------------------------
Total Increase...................................... 197,395,032 70,184,516
Net Assets:
Beginning of Year................................... 320,982,291 250,797,775
- ----------------------------------------------------------------------------------
End of Year (including undistributed net investment
income of $808,028 and $391,542, respectively)..... $518,377,323 $320,982,291
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 6,082,066 4,584,935
In Lieu of Cash Distributions....................... 939,045 779,674
Shares Redeemed..................................... (3,882,603) (3,038,186)
- ----------------------------------------------------------------------------------
3,138,508 2,326,423
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

ICM SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 20.71 $ 19.04 $ 17.05 $ 18.75 $ 14.96
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... 0.23 0.24 0.16 0.09 0.08
Net Realized and Unrealized
Gain....................... 8.27 2.59 2.70 0.64 4.94
- -------------------------------------------------------------------------------
Total from Investment
Operations................ 8.50 2.83 2.86 0.73 5.02
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....... (0.20) (0.24) (0.14) (0.09) (0.07)
Net Realized Gain........... (1.19) (0.92) (0.73) (2.34) (1.16)
- -------------------------------------------------------------------------------
Total Distributions........ (1.39) (1.16) (0.87) (2.43) (1.23)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 27.82 $ 20.71 $ 19.04 $ 17.05 $ 18.75
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN................. 43.28% 15.62% 17.73% 4.59% 35.20%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $518,377 $320,982 $250,798 $115,761 $81,870
Ratio of Expenses to Average
Net Assets.................. 0.89% 0.88% 0.87% 0.93% 0.95%
Ratio of Net Investment
Income to Average Net
Assets...................... 0.97% 1.20% 1.02% 0.58% 0.46%
Portfolio Turnover Rate...... 23% 23% 20% 21% 47%
Average Commission Rate #.... $ 0.0588 $ 0.0595 N/A N/A N/A
- -------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets Including Expense
Offsets..................... 0.88% 0.88% 0.86% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
# For fiscal years beginning on or after September 30, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

ICM SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The ICM Small
Company Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1997, the
UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the Portfolio is to provide maximum, long-term total return consistent with
reasonable risk to principal, by investing primarily in the common stocks of
smaller companies in terms of revenues, assets, and market capitalization.

1. SECURITY VALUATION: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted securities are valued at the current
bid prices. Short-term investments that have remaining maturities of sixty
days or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available is determined in good faith at
fair value using methods determined by the Board of Directors.

16
<PAGE>

ICM SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications of $220,135 to decrease
undistributed net investment income, with increases to accumulated net
realized gain and paid in capital of $20,475 and $199,660, respectively.

Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 at an annual rate
of 0.04% of average daily net assets of the Portfolio. The Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent
services. Pursuant to the Mutual Funds Service Agreement, the Administrator
pays CGFSC a monthly fee. For the year ended October 31, 1997, UAM Fund
Services, Inc. earned $555,980 from the Portfolio as Administrator of which
$393,014 was paid to CGFSC for their services as sub-Administrator.

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

17
<PAGE>

ICM SMALL COMPANY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

F. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered into
an Account Services Agreement (the "Services Agreement") with UAM Retirement
Plan Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of
UAM. Under the Services Agreement, the Service Provider agrees to perform
certain services for participants in a self-directed, defined contribution
plan, and for whom the Service Provider provides participant recordkeeping.
Pursuant to the Services Agreement, the Service Provider is entitled to
receive, after the end of each month, a fee at the annual rate of 0.15% of the
average aggregate daily net asset value of shares of the UAM Funds in the
accounts for which they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $114,751,214 and sales of $82,462,898 of investment
securities other than long-term U.S. Government and short-term securities.
There were no purchases or sales of long-term U.S. Government Securities.

18
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Fund, Inc. and Shareholders of
ICM Small Company Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of ICM Small Company
Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc., at October 31,
1997, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)

The ICM Small Company Portfolio hereby designates $14,865,819 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return. For the year ended October 31, 1997, the percentage
of dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 46.6%.

19
<PAGE>

ICM EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.2%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.3%)
Lockheed Martin Corp. ...................................... 1,540 $ 146,396
- -------------------------------------------------------------------------------
AUTOMOTIVE (7.1%)
Ford Motor Corp. ........................................... 26,770 1,169,515
General Motors Corp. ....................................... 18,300 1,174,631
TRW Inc. ................................................... 17,200 984,700
---------
3,328,846
- -------------------------------------------------------------------------------
BASIC RESOURCES (5.9%)
Phelps Dodge Corp. ......................................... 12,170 905,144
*UCAR International, Inc. ................................... 21,000 787,500
USX-US Steel Group, Inc. ................................... 30,900 1,050,600
---------
2,743,244
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.1%)
UST, Inc. .................................................. 32,500 972,969
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.2%)
Cincinnati Milacron, Inc. .................................. 43,400 1,204,350
Kennametal, Inc. ........................................... 18,500 897,250
Parker-Hannifin Corp. ...................................... 18,910 790,674
---------
2,892,274
- -------------------------------------------------------------------------------
CHEMICALS (3.7%)
Dow Chemical Co. ........................................... 11,420 1,036,365
*FMC Corp. .................................................. 8,500 686,906
---------
1,723,271
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (2.1%)
Guilford Mills, Inc. ....................................... 40,480 966,460
- -------------------------------------------------------------------------------
ENERGY (8.6%)
Atlantic Richfield Co. ..................................... 7,020 577,834
Tidewater, Inc. ............................................ 23,200 1,523,950
Union Pacific Resources Group, Inc. ........................ 37,500 923,437
YPF S.A. ADR................................................ 30,460 974,720
---------
3,999,941
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

ICM EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (15.9%)
BankAmerica Corp. ..................................... 14,520 $ 1,038,180
Chase Manhattan Corp. ................................. 9,700 1,119,138
Comerica, Inc. ........................................ 12,680 1,002,513
First Union Corp. ..................................... 20,380 999,894
Morgan Stanley, Dean Witter, Discover and Co. ......... 20,800 1,019,200
NationsBank Corp. ..................................... 13,500 808,312
Norwest Corp. ......................................... 18,200 583,537
Republic New York Corp. ............................... 7,790 824,279
-----------
7,395,053
- -------------------------------------------------------------------------------
HEALTH CARE (4.8%)
Columbia/HCA Healthcare Corp. ......................... 43,700 1,234,525
Intergrated Health Services............................ 31,160 989,330
-----------
2,223,855
- -------------------------------------------------------------------------------
INSURANCE (5.2%)
Chubb Corp. ........................................... 2,300 152,375
Providian Corp. ....................................... 8,580 317,460
TIG Holdings, Inc. .................................... 31,000 1,050,125
Torchmark Corp. ....................................... 22,900 913,138
-----------
2,433,098
- -------------------------------------------------------------------------------
REAL ESTATE (2.6%)
Rouse Co. ............................................. 43,600 1,209,900
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (7.0%)
Omega Healthcare Investors, Inc. ...................... 33,500 1,206,000
Pacific Gulf Properties, Inc. ......................... 46,800 1,058,850
United Dominion Realty Trust, Inc. .................... 70,500 978,187
-----------
3,243,037
- -------------------------------------------------------------------------------
RETAIL (3.5%)
Dillard's Inc., Class A................................ 20,800 798,200
J.C. Penney Co., Inc. ................................. 14,400 845,100
-----------
1,643,300
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

ICM EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TECHNOLOGY (8.2%)
Hewlett-Packard Co. ................................. 2,980 $ 183,829
International Business Machines Corp. ............... 9,960 976,702
Nokia Corp. ADR...................................... 6,500 573,625
Philips Electronics N.V. ............................ 14,060 1,101,953
*Seagate Technology................................... 36,536 991,039
-----------
3,827,148
- -------------------------------------------------------------------------------
TRANSPORTATION (5.8%)
Burlington Northern, Inc. ........................... 10,400 988,000
Delta Air Lines, Inc. ............................... 17,300 1,742,975
-----------
2,730,975
- -------------------------------------------------------------------------------
UTILITIES (5.2%)
Consolidated Edison of New York...................... 29,200 1,000,100
Duke Energy Corp. ................................... 14,000 675,500
Edison International................................. 29,200 748,250
-----------
2,423,850
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $38,503,394)................ 43,903,617
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (9.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (9.9%)
Chase Securities, Inc., 5.60% dated 10/31/97, due
11/3/97, to be repurchased at $4,632,161,
collateralized by $4,439,119 of various U.S.
Treasury Notes, 5.50-8.75%, due from 5/15/00-
6/30/02, valued at $4,632,612 (COST $4,630,000)..... $4,630,000 4,630,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (104.1%) (COST $43,133,394) (A)..... 48,533,617
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-4.1%).................. (1,935,401)
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $46,598,216
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
ADR American Depositary Receipt
(a) The cost for federal income tax purposes was $43,133,394. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$5,400,223. This consisted of aggregate gross unrealized appreciation for
all securities of $6,122,163 and aggregate gross unrealized depreciation
for all securities of $721,940.

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

ICM EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost.............................................. $43,133,394
===========
Investments, at Value............................................. $48,533,617
Cash.............................................................. 925
Receivable for Shares Sold........................................ 117,003
Dividends Receivable.............................................. 53,697
Interest Receivable............................................... 720
Other Assets...................................................... 661
- -------------------------------------------------------------------------------
Total Assets..................................................... 48,706,623
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................. 2,037,488
Payable for Investment Advisory Fees--Note B...................... 30,044
Payable for Administrative Fees--Note C........................... 8,481
Payable for Custodian Fees--Note D................................ 2,385
Payable for Directors' Fees--Note F............................... 657
Other Liabilities................................................. 29,352
- -------------------------------------------------------------------------------
Total Liabilities................................................ 2,108,407
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $46,598,216
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital................................................... $40,095,913
Undistributed Net Investment Income............................... 107,725
Accumulated Net Realized Gain..................................... 994,355
Unrealized Appreciation........................................... 5,400,223
- -------------------------------------------------------------------------------
NET ASSETS......................................................... $46,598,216
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)...................................................... 2,550,282
Net Asset Value, Offering and Redemption Price Per Share.......... $ 18.27
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

ICM EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
Year Ended October 31, 1997

<TABLE>
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 571,855
Interest.................................................. 99,112
- ---------------------------------------------------------------------------------
Total Income............................................. 670,967
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............................................... $149,172
Less: Fees Waived........................................ (88,365) 60,807
--------
Administrative Fees--Note C............................... 89,499
Registration and Filing Fees.............................. 21,469
Printing Fees............................................. 14,190
Audit Fees................................................ 12,849
Custodian Fees--Note D.................................... 3,022
Directors' Fees--Note F................................... 2,225
Other Expenses............................................ 10,396
- ---------------------------------------------------------------------------------
Total Expenses........................................... 214,457
Expense Offset--Note A.................................... (240)
- ---------------------------------------------------------------------------------
Net Expenses............................................. 214,217
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME...................................... 456,750
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS........................... 1,008,509
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON IN-
VESTMENTS................................................. 3,935,992
- ---------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.................................... 4,944,501
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $5,401,251
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

ICM EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment Income.................................. $ 456,750 $ 163,182
Net Realized Gain...................................... 1,008,509 870,649
Net Change in Unrealized Appreciation/Depreciation..... 3,935,992 621,990
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.. 5,401,251 1,655,821
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................................. (352,820) (150,729)
Net Realized Gain...................................... (795,840) (244,703)
- ----------------------------------------------------------------------------------
Total Distributions................................... (1,148,660) (395,432)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued................................................. 34,636,573 1,827,059
--In Lieu of Cash Distributions...................... 1,125,401 392,817
Redeemed............................................... (1,284,354) (2,477,023)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions.......... 34,477,620 (257,147)
- ----------------------------------------------------------------------------------
Total Increase......................................... 38,730,211 1,003,242
Net Assets:
Beginning of Year...................................... 7,868,005 6,864,763
- ----------------------------------------------------------------------------------
End of Year (including undistributed net investment in-
come of $107,725 and $23,704, respectively)........... $46,598,216 $7,868,005
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 2,009,663 139,421
In Lieu of Cash Distributions......................... 75,945 31,573
Shares Redeemed....................................... (78,219) (193,752)
- ----------------------------------------------------------------------------------
2,007,389 (22,758)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

ICM EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
OCTOBER 1,
YEARS ENDED OCTOBER 31, 1993*** TO
-------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PE-
RIOD............................ $ 14.49 $ 12.14 $10.41 $ 9.94 $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).... 0.28 0.30 0.26 0.20 0.01
Net Realized and Unrealized Gain
(Loss)......................... 4.74 2.76 1.75 0.45 (0.07)
- --------------------------------------------------------------------------------
Total from Investment Opera-
tions......................... 5.02 3.06 2.01 0.65 (0.06)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.25) (0.28) (0.26) (0.18) --
Net Realized Gain............... (0.99) (0.43) (0.02) -- --
- --------------------------------------------------------------------------------
Total Distributions............ (1.24) (0.71) (0.28) (0.18) --
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 18.27 $ 14.49 $12.14 $10.41 $ 9.94
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN+.................... 36.98% 26.23% 19.62% 6.63% (0.60)%**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands).......................... $46,598 $ 7,868 $6,865 $3,659 $1,977
Ratio of Expenses to Average Net
Assets.......................... 0.90% 0.90% 0.92% 0.90% 0.90%*
Ratio of Net Investment Income
(Loss) to Average Net Assets.... 1.91% 2.30% 2.44% 2.15% 1.06%*
Portfolio Turnover Rate.......... 31% 57% 37% 17% 11%
Average Commission Rate #........ $0.0599 $0.0661 N/A N/A N/A
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and Ex-
penses Assumed by the Adviser
Per Share....................... $ 0.05 $ 0.24 $ 0.16 $ 0.21 $ 0.04
Ratio of Expenses to Average Net
Assets Including Expense
Offsets......................... 0.90% 0.90% 0.90% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
*** Commencement of Operations
+ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Advisor during the period.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

ICM EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The ICM
Equity Portfolio (the "Portfolio"), a portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1997, the
UAM Funds were comprised of forty-two active portfolios. The financial
statements of the remaining portfolios are presented separately. The objective
of the Portfolio is to provide maximum, long-term total return consistent with
reasonable risk to principal, by investing primarily in common stocks of
relatively large companies measured in terms of revenues, assets and market
capitalization.

1. SECURITY VALUATION: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted securities are valued at the current
bid prices. Short-term investments that have remaining maturities of sixty
days or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available is determined in good faith at
fair value using methods determined by the Board of Directors.

12
<PAGE>

ICM EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications of $19,909 to decrease
undistributed net investment income, with increases to accumulated net
realized gain and paid in capital of $667 and $19,242, respectively.

Current permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, Inc. (the "Adviser"), a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio at a monthly fee calculated at an annual
rate of 0.625% of average daily net assets for the month. The Adviser has
voluntarily agreed to waive a portion of its advisory fees and to assume
expenses, if necessary, in order to keep the Portfolio's total annual
operating expenses, after the effect of expense offset arrangements, from
exceeding 0.90% of average daily net assets.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 at an annual rate
of 0.06% of average daily net assets of the Portfolio. The Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent
services. Pursuant to the Mutual Funds Service Agreement, the Administrator
pays CGFSC a monthly fee. For the year ended October 31, 1997, UAM Fund
Services, Inc. earned $89,499 from the Portfolio as Administrator of which
$74,736 was paid to CGFSC for their services as sub-Administrator.

13
<PAGE>

ICM EQUITY PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement.

G. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $37,909,217 and sales of $6,785,166 of investment securities
other than long-term U.S. Government and short-term securities. The
Portfolio's purchases figure includes $3,872,535 of in-kind transactions.
There were no purchases or sales of long-term U.S. Government securities.

I. OTHER: At October 31, 1997, 52.2% of total shares outstanding were held by
3 record shareholders owning 10% or greater of the aggregate total shares
outstanding.

14
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
ICM Equity Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of ICM Equity
Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc., at October 31,
1997, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED)

At October 31, 1997, the Portfolio hereby designates $554,677 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return.

For the year ended October 31, 1997, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
44.2%.
<PAGE>

PART B
UAM FUNDS

MCKEE U.S. GOVERNMENT PORTFOLIO
MCKEE DOMESTIC EQUITY PORTFOLIO
MCKEE INTERNATIONAL EQUITY PORTFOLIO
MCKEE SMALL CAP EQUITY PORTFOLIO
Institutional Class Shares

STATEMENT OF ADDITIONAL INFORMATION - January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the McKee U.S. Government, McKee Domestic Equity, McKee International Equity and
McKee Small Cap Equity Portfolios' Institutional Class Shares dated January 22,
1998. 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 AND REDEMPTION OF SHARES..............................................8

VALUATION OF SHARES...........................................................10

SHAREHOLDER SERVICES..........................................................10

INVESTMENT LIMITATIONS........................................................12

MANAGEMENT OF THE FUND........................................................13

INVESTMENT ADVISER............................................................17

PORTFOLIO TRANSACTIONS........................................................20

ADMINISTRATIVE SERVICES.......................................................21

CUSTODIAN.....................................................................23

INDEPENDENT ACCOUNTANTS.......................................................24

DISTRIBUTOR...................................................................24

PERFORMANCE CALCULATIONS......................................................24

GENERAL INFORMATION...........................................................26

FINANCIAL STATEMENTS..........................................................28

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS...........................A-1

APPENDIX B - COMPARISONS.....................................................B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and
policies of the McKee U.S. Government, McKee Domestic Equity, McKee
International Equity and McKee Small Cap Equity Portfolios (the "McKee
Portfolios") as set forth in the McKee Prospectus.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "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). A Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of the collateral for the loan) at fair market value would
be committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed in the Prospectus.

SHORT-TERM INVESTMENTS

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are non-
negotiable deposits maintained in a banking institution for a specified period
of time at a stated interest rate. Time deposits maturing in more than seven
days will not be purchased by a Portfolio, and time

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<PAGE>

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 commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

(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, determined by the Adviser to be of comparable quality;

(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;

(6) Repurchase agreements collateralized by securities listed above.

INVESTMENTS IN FOREIGN SECURITIES

Investors in the McKee International Equity Portfolio should recognize
that investing in foreign companies involves certain special considerations
which are not typically associated

-3-
<PAGE>

with investing in U.S. companies. Since the securities of foreign companies are
frequently denominated in foreign currencies, the Portfolio may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.

As foreign companies are not generally subject to uniform accounting,
auditing 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.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.

Although the McKee International Equity Portfolio 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 income received from the companies comprising the Portfolio's
investments. However, these foreign withholding taxes are not expected to have
a significant impact.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The U.S. dollar value of the assets of the McKee International Equity
Portfolio may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Portfolio may
incur costs in connection with conversions between various currencies. The
Portfolio will conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward foreign currency exchange
contracts ("forward contracts") to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are

-4-
<PAGE>

traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for such trades.

The McKee International Equity Portfolio may enter into forward
contracts in several circumstances. When the Portfolio enters into a contract
for the purchase or sale of a security denominated in a foreign currency, or
when the Portfolio anticipates the receipt in a foreign currency of dividends or
interest payments on a security which it holds, the Portfolio may desire to
"lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such dividend or interest payment, as the case may be. By entering into a
forward contract for a fixed amount of dollars, for the purchase or sale of the
amount of foreign currency involved in the underlying transactions, the
Portfolio will be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received.

-5-
<PAGE>

forward contracts when it determines that the best interests of the performance
of the Portfolio will thereby be served. Except when the Portfolio enters into a
forward contract for the purchase or sale of a security denominated in a foreign
currency, which requires no segregation, a forward contract which obligates the
Portfolio to buy or sell currency will generally require the Fund's custodian to
hold an amount of that currency or liquid securities denominated in that
currency equal to the Portfolio's obligations, or to segregate liquid assets
equal to the amount of the Portfolio's obligation. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will be equal to the amount of the Portfolio's commitments with
respect to such contracts.

The Portfolio generally will not enter into a forward contract with a
term of greater than one year. At the maturity of a forward contract, the
Portfolio may either sell the security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency.

It is impossible to forecast with absolute precision the market value
of a particular portfolio security at the expiration of the contract.
Accordingly, it may be necessary for the Portfolio to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency
that the Portfolio is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency.

-6-
<PAGE>

should be realized that this method of protecting the value of portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.

RISKS OF FORWARD CONTRACTS ON FOREIGN CURRENCIES

Forward contracts are not traded on contract markets regulated by the
CFTC or by the Commission. To the contrary, such instruments are traded through
financial institutions acting as market-makers. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over a
period of time.

In addition, forward contracts may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

FEDERAL TAX TREATMENT OF FORWARD CONTRACTS

In order for the McKee International Equity Portfolio to continue to
qualify for federal income tax treatment as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"), at least 90% of its
gross income for a taxable year must be derived from certain qualifying income,
i.e., dividends, interest, income derived from loans of securities and gains
from the sale or other disposition of stock, securities or foreign currencies,
or other related income, including gains from forward contracts, derived with
respect to its business investing in stock, securities or currencies. Any net
gain realized from the closing out of forward contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement.

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal

-7-
<PAGE>

income tax purposes (including unrealized gains at the end of the Portfolio's
taxable year) on regulated futures transactions. Such distribution will be
combined with distributions of capital gains realized on the Portfolio's other
investments, and shareholders will be advised on the nature of the payment.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectus are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares. See "Financial
Highlights" in the Prospectus for the historical portfolio turnover rates with
respect to the Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Shares of each McKee Portfolio may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's
custodian. The minimum initial investment required for each of the McKee
Portfolios is $2,500. Certain exceptions may be determined from time to time by
the officers of the Fund. Other investment minimums are: initial IRA
investment, $500; initial spousal IRA investment, $250; minimum additional
investment for each of the McKee Portfolios is $100. An order received in
proper form prior to the close of regular trading on the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern Time) will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the close of the Exchange will be executed at the price computed on the
next day the Exchange is open after proper receipt. The Exchange will be closed
on the following days: Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day, New Year's Day, and Dr. Martin
Luther King, Jr. Day.

-8-
<PAGE>

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 Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any 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 Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares," and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.

No charge is made by a Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase
Global Funds Services Company ("CGFSC") from fraud, signature guarantees are
required for certain redemptions. Signature guarantees are required for (1)
redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s) or the registered address or (2) share transfer
requests. The purpose of signature guarantees is to verify the identity of the
party who has authorized a redemption.

-9-
<PAGE>

guarantor institution which participates in a signature guarantee program.

VALUATION OF SHARES

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost when the
Board of Directors determines that amortized cost reflects fair value.

SHAREHOLDER SERVICES

The following supplements the shareholder services information set
forth in the McKee Portfolios' Prospectus.

EXCHANGE PRIVILEGE

Institutional Class Shares of each McKee Portfolio may be exchanged
for Institutional Class Shares of the other McKee Portfolios. In addition,
Institutional Class Shares of each McKee Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in the UAM Funds which
is

-10-
<PAGE>

comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds - Institutional Class Shares at the end of the Prospectus.) Exchange
requests should be made by calling the Fund (1-800-638-7983) or by writing to
UAM Funds, UAM Funds Service Center, c/o Chase Global Funds Services Company,
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only available
with respect to Portfolios that are qualified for sale in the shareholder's
state of residence.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to the close of regular trading on the Exchange (generally 4:00
p.m. Eastern Time) will be processed as of the close of business on the same
day. Requests received after the close of the Exchange will be processed on the
next business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency, and to other
restrictions established by the Board of Directors to assure that such exchanges
do not disadvantage the Fund and its shareholders.

TRANSFER OF SHARES

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<PAGE>

certificate or any stock power must be guaranteed in the same manner as
described under "Purchase and Redemption of Shares." As in the case of
redemptions, the written request must be received in good order before any
transfer can be made.

INVESTMENT LIMITATIONS

The following limitations supplement those set forth in the
Prospectus. Whenever an investment limitation sets forth a percentage
limitation on investment or utilization of assets, such limitation shall be
determined immediately after and as a result of the Portfolios' acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with the Portfolios'
investment limitations. A Portfolio's fundamental investment limitations cannot
be changed without approval by a "majority of the outstanding shares" (as
defined in the 1940 Act) of that Portfolio. The Portfolios will not:

(1) invest in physical commodities or contracts on physical
commodities;

(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which
deal in real estate and may purchase and sell securities which
are secured by interests in real estate;

(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and (ii) by lending its portfolio
securities to banks, brokers, dealers and other financial
institutions so long as such loans are not inconsistent with the
1940 Act or the rules and regulations or interpretations of the
Commission thereunder;

(4) underwrite the securities of other issuers;

(5) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit a Portfolio from
(i) making any permitted borrowings, mortgages or pledges, or
(ii) entering into repurchase transactions;

(6) purchase on margin or sell short;

(7) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of

-12-
<PAGE>

such securities together own more than 5% of such securities;

(8) invest more than an aggregate of 15% of the assets of the
Portfolio, determined at the time of investment, in securities
subject to legal or contractual restrictions on resale or
securities for which there are no readily available markets;

(9) invest for the purpose of exercising control over management of
any company; and

(10) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

Nancy J. Dunn Director of the Fund; Vice President
10 Garden Street For Finance and Administration and
Cambridge, MA 02138 Treasurer of Radcliffe College since
8/14/51 1991.

Philip D. English Director of the Fund; President and
16 West Madison Street Chief Executive Officer of
Baltimore, MD 21201 Broventure Company, Inc.; Chairman
8/15/48 of the Board of Chektec Corporation
and Cyber Scientific, Inc.
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
William A. Humenuk Director of the Fund; Partner in the
4000 Bell Atlantic Tower Philadelphia office of the law firm
1717 Arch Street Dechert Price & Rhoads; Director,
Philadelphia, PA 19103 Hofler Corp.
4/21/42

Charles H. Salisbury, Jr.* Director of the Fund; Executive Vice
One International Place President of United Asset Management
Boston, MA 02110 Corporation; formerly an executive
8/24/40 officer and Director of T. Rowe
Price and President and Chief
Investment Officer of T. Rowe Price
Trust Company.

William H. Park Vice President of the Fund;
One International Place Executive Vice President and Chief
Boston, MA 02110 Financial Officer of United Asset
9/19/47 Management Corporation.

-14-
<PAGE>

<TABLE>
<S> <C>
Robert R. Flaherty Assistant Treasurer of the Fund;
211 Congress Street Vice President of UAM Fund Services,
Boston, MA 02110 Inc.; former Manager of Fund
9/18/63 Administration and Compliance of
Chase Global Funds Services Company
from 1995 to 1996; Deloitte & Touche
LLP from 1985 to 1995, formerly
Senior Manager.

Karl O. Hartmann Assistant Secretary of the Fund;
73 Tremont Street Senior Vice President and General
Boston, MA 02108 Counsel of Chase Global Funds
3/7/55 Services Company; Senior Vice
President, Secretary and General
Counsel of Leland, O'Brien,
Rubinstein Associates, Inc. from
November 1990 to November 1991.

</TABLE>
- ------------------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $6,300 per quarter. In

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<PAGE>

addition, each unaffiliated Director receives 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 remuneration for their service as
Directors. The Fund's officers and employees are paid by either the Adviser,
United Asset Management Corporation ("UAM"), the Administrator, or CGFSC and
receive no compensation from the Fund. The following table shows aggregate
compensation paid to each of the Fund's unaffiliated Directors by the Fund and
total compensation paid by the Fund and UAM Funds Trust (collectively the "Fund
Complex") in the fiscal year ended October 31, 1997.

Nancy J. Dunn $ 6,774 0 0 $ 8,300
Director................

Philip D. English $26,791 0 0 $32,750
Director................

William A. Humenuk $26,791 0 0 $32,750
Director................
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of the McKee Portfolios.

McKee International Equity Portfolio: Saxon & Co., FBO Westmoreland
County Employees Retirement Fund, A/C 10-01-002-1017501, P.O. Box 7780-1888,
Philadelphia, PA, 20.1%*; USBanCorp Trust Company, FBO Cambria Company 0814,
Attn: Beth Shank, Main and Franklin Streets, Johnstown, PA, 14.5%*; Fulvest &
Co. FBO Lancaster County EDA, P.O. Box 3215, Lancaster, PA, 10.7%; CoreStates
Bank N.A. FBO Northampton County Ret, P.O. Box 7829, Philadelphia, PA, 7.3%;
Saxon & Company, FBO Cumberland County CTY EMP RET CUST, A/C 35-27-002-16420007,
P.O. Box 7780-1888, Philadelphia, PA, 5.9%*; Saxon & Company, FBO Butler City
Retirement Fund A/C 10-01-002-1015876 U/A/D 6/22/78, P.O. Box 7780-1888,
Philadelphia, PA, 5.7%.

McKee U.S. Government Portfolio: The Chase Manhattan Bank as
Custodian for IBEW Local 317, Electrical Pension Fund, 770 Broadway, New York,
NY, 28.2%; Chase Manhattan Bank, FBO Servistar Corp. Profit Sharing Plan, Attn:
Alan L. Miller, 770 Broadway, New York, NY, 24.2%*; The Chase Manhattan Bank as

-16-
<PAGE>

Custodian for IBEW Local 575 Defined Contribution Pension Fund, 770 Broadway,
New York, NY, 15.6%; The Chase Manhattan Bank as Custodian, Iron Workers Local
549 Ironworkers Security Plan, 770 Broadway, New York, NY, 11.6%.

McKee Domestic Equity Portfolio: Chase Manhattan Bank, FBO Servistar
Corp. Profit Sharing Plan, Attn: Alan L. Miller, 770 Broadway, New York, NY,
43.8%*; The Chase Manhattan Bank as Custodian for the IBEW Local 317, Electrical
Pension Fund, 770 Broadway, New York, NY, 10.4%; Wesbanco Bank, Agent for City
of Wheeling Municipal Employees Retirement & Benefit Fund, 1 Bank Plaza,
Wheeling, WV, 7.4%; The Chase Manhattan Bank as Custodian, IBEW Local 575
Defined Contribution Pension Fund, 770 Broadway, New York, NY, 6.9%; Divrev
Company, P.O. Box 3985, Charleston, WV, 5.0%.

McKee Small Cap Equity Portfolio: Gruen Co., P.O. Box 2961,
Harrisburg, PA. 20.9%; Patterson & Company 327 FBO Lackawanna County, P.O. Box
7829, Philadelphia, PA., 13.0%; Saxon & Co. FBO Cumberland CTY EMP RET CUST,
ACCT 35-27-002-1642007, P.O. Box 7780-1888, Philadelphia, PA, 11.9%; Strafe &
Co. FAO Iron Workers, A/C 9388396001, P.O. Box 160, Westerville, OH, 8.8%.

- -------------------

* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

C.S. McKee & Company (the "Adviser") is a wholly-owned subsidiary of
UAM, a holding company incorporated in Delaware in December 1980 for the purpose
of acquiring and owning firms engaged primarily in institutional investment
management. Since its first acquisition in August 1983, UAM has acquired or
organized approximately 45 such wholly-owned affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to retain
control over their investment advisory decisions is necessary to allow them to
continue to provide

-17-
<PAGE>

investment management services that are intended to meet the particular needs of
their respective clients.

Accordingly, after acquisition by UAM, UAM Affiliated Firms continue
to operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each of
them.

SERVICES PERFORMED BY ADVISER

Pursuant to Investment Advisory Agreements ("Agreements") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreements, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreements, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error or judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services under the Agreements.

Unless sooner terminated, the Agreements shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreements or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolios. The Agreements
may be terminated at any time by a Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of a Portfolio on 60
days written notice to the Adviser. The Agreements may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days written
notice to the Fund. The Agreements will automatically and immediately terminate
in the event of their assignment.

-18-
<PAGE>

PHILOSOPHY AND STYLE

The Adviser's philosophical approach to all asset classes is to be
opportunistic while controlling risk. This approach captures opportunity, when
available, to provide capital growth, consistent with the Fund's pursuit of
total return while quantifying and controlling risk to protect capital. The
purpose of this approach is to generate favorable results through a high
quality, low risk portfolio. The Adviser's approach is to look for companies
which are statistically inexpensive yet have improving fundamentals. A number
of statistical measures are used to rank the initial pool of over 2,000 stocks.
The top-ranking stocks are then subjected to fundamental analytical screens
prior to investment.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included Highmark Blue Cross/Blue
Shield, City of Pittsburgh, The Dickinson School of Law of Pennsylvania State
University, City of Winston-Salem, North Carolina, Servistar Incorporated and
the American Lung Association of Western Pennsylvania.

ADVISORY FEES

As compensation for services rendered by the Adviser under the
Investment Advisory Agreements, the Portfolios pay the Adviser an annual fee in
monthly installments, calculated by applying the following annual percentage
rates to each Portfolio's average daily net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
McKee U.S. Government Portfolio....... 0.45%
McKee Domestic Equity Portfolio....... 0.65%
McKee International Equity Portfolio.. 0.70%
McKee Small Cap Equity Portfolio...... 1.00%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, the McKee
International Equity Portfolio paid advisory fees of approximately $453,000,
$618,081 and $738,184, respectively. For the period from March 2, 1995
(commencement of operations) to

-19-
<PAGE>

October 31, 1995, the McKee U.S. Government Portfolio and the McKee Domestic
Equity Portfolio paid no advisory fees, and for the fiscal years ended October
31, 1996 and 1997, these Portfolios paid advisory fees of $48,813 and $180,278
and $222,792 and $589,228, respectively. During the periods ended October 31,
1995 and for the fiscal year ended October 31, 1996, the Adviser voluntarily
waived advisory fees of approximately $9,000 and $18,140 for the U.S. Government
Portfolio, and $15,000 and $15,445 for the Domestic Equity Portfolio,
respectively.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or effect principal transactions with dealers on the basis of sales of shares
which may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended October 31, 1995, 1996 and 1997,
the Portfolios paid brokerage commissions as follows:

1995 1996 1997
---- ---- ----
<S> <C> <C> <C>

McKee U.S. Government
Portfolio $0 $0 $0

McKee Domestic Equity
Portfolio 9,715 73,898 172,158

McKee International
Equity Portfolio 38,389 46,342 199,969

</TABLE>

-20-
<PAGE>

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

The Board of Directors of the Fund approved a Fund Administration
Agreement effective April 15, 1996 ("Fund Administration Agreement") between UAM
Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of UAM, and the Fund.
Pursuant to the terms of the Fund Administration Agreement, UAMFSI manages,
administers, and conducts the general business activities of the Fund other than
those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Agreement.

<TABLE>
<CAPTION>
Annual Rate
<S> <C>
US Government Portfolio 0.04%
Domestic Equity Portfolio 0.04%
International Equity Portfolio 0.06%
Small Cap Equity Portfolio 0.04%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

0.19 of 1% of the first $200 million of combined Fund net assets;

0.11 of 1% of the next $800 million of combined Fund net assets;

0.07 of 1% of combined Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined Fund net assets in excess of $3 billion.

-21-
<PAGE>

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid to the Administrator by the McKee
International Equity Portfolio totaled $82,000, $137,744 and $178,372,
respectively. Of the total fees paid in the fiscal years ended October 31, 1996
and 1997, $56,555 and $115,116 was paid by UAMFSI to CGFSC, respectively. For
the period from March 2, 1995 to October 31, 1995, and for the fiscal years
ended October 31, 1996 and 1997, administrative services fees paid to the
Administrator by the McKee U.S. Government Portfolio totaled approximately
$20,000, $67,641 and $99,215, respectively and totaled $21,000, $74,694 and
$127,984, respectively on behalf of the McKee Domestic Equity Portfolio. Of the
fees paid in the fiscal years ended October 31, 1996 and 1997, $40,022 and
$83,206 and $38,491 and $91,727 was paid by UAMFSI to CGFSC on behalf of the
U.S. Government and Domestic Equity Portfolio, respectively. The services
provided by the Administrator and the basis of the fees payable to the
Administrator are described in the Portfolios' Prospectus.

-22-
<PAGE>

insurance premiums including fidelity bond premiums, outside legal expenses,
costs of maintenance of corporate existence, typesetting and printing of
prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund, printing and production costs of shareholders' reports
and corporate meetings, cost and expenses of Fund stationery and forms, costs of
special telephone and data lines and devices, trade association dues and
expenses, and any extraordinary expenses and other customary Fund expenses.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the McKee U.S.
Government, McKee Domestic Equity and McKee International Equity Portfolios paid
the Service Provider $35,675, $68,610 and $1,766, respectively, in fees pursuant
to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

-23-
<PAGE>

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves
as the Funds distributor. Shares of the Fund are offered continuously. While
the Distributor will use its best efforts to sell shares of the Fund, it is not
obligated to sell any particular amount of shares. The Distributor received no
compensation for its services from the Portfolios during the fiscal year ended
October 31, 1997.

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 quotations or, alternatively, that every non-
standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the
Commission. Current yield and average annual compounded total return quotations
used by the Fund are based on the standardized methods of computing performance
mandated by the Commission. An explanation of those and other methods used to
compute or express performance follows.

YIELD

Current yield reflects the income per share earned by a Portfolio's
investment. The current yield of the McKee U.S. Government Portfolio is
determined by dividing the net investment income per share earned during a 30-
day base period by the maximum offering price per share on the last day of the
period and annualizing the result. Expenses accrued for the period include any
fees charged to all shareholders during the base period. The yield for the
McKee U.S. Government Portfolio for the 30-day period ended on October 31, 1997
was 5.69%.

-24-
<PAGE>

This figure was obtained using the following formula:

Yield = 2[( a - b + 1 )/6/ - 1]
-----
cd

where:

a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period.

TOTAL RETURN

The average annual total return for the McKee International Equity
Portfolio, the McKee U.S. Government Portfolio, and the McKee Domestic Equity
Portfolio from inception and for the one year ended on the date of the Financial
Statements included herein are as follows:

<TABLE>
<CAPTION>
Since
Inception
through Year
One Year Ended Ended
October 31, October 31, Inception
1997 1997 Date
--------------- -------------- ---------
<S> <C> <C> <C>
McKee U.S. Government
Portfolio............. 7.73% 8.03% 3/2/95

McKee Domestic Equity
Portfolio............. 30.96% 24.59% 3/2/95

McKee International
Equity Portfolio....... 20.31% 8.47% 5/26/94
</TABLE>

-25-
<PAGE>

McKee Small Cap Equity Portfolio was not operational as of October 31,
1997. Accordingly, no total return figures are 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).

COMPARISONS

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

-26-
<PAGE>

One International Place, Boston, MA 02110; however, all investor correspondence
should be directed to the Fund at UAM Funds Service Center, c/o Chase Global
Mutual Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's
Articles of Incorporation, as amended, authorize the 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. The Board of Directors
has classified additional classes of shares of each Portfolio, known as
Institutional Service Shares and Advisor Shares. As of the date of this
Statement of Additional Information, no Institutional Service or Advisor Shares
of these Portfolios have been offered by the Funds.

The shares of each Portfolio of the Fund, when issued and paid for as
provided for in the Prospectuses, will be fully paid and nonassessable, have no
preferences as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held), then standing in his name on
the books of the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Any dividend or distribution paid shortly after the purchase of shares
of the Portfolios by an investor may have the effect of reducing the per share
net asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Prospectus.

-27-
<PAGE>

following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.

The Portfolios will be treated as a separate entity (and hence as a
separate "regulated investment company") for federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for federal income tax purposes) such gains against any
net capital losses of another Portfolio.

FEDERAL TAXES

In order for the Portfolios to continue to qualify for federal income
tax treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived with
respect to its business of investing in such securities or currencies.

The Portfolios will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes.
Shareholders will be advised on the nature of the payments.

CODE OF ETHICS

The Fund has adopted a Code of Ethics which restricts to a certain
extent personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the McKee
Portfolios and the Financial Highlights for the respective periods presented,
which appear in the Portfolios' 1997 Annual Report to Shareholders, and the
report thereon of Price Waterhouse LLP, independent accountants, also appearing
therein, are attached to this Statement of Additional Information.

-28-
<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS

DESCRIPTION OF CORPORATE BOND RATINGS

Moody's Investors Service, Inc. Corporate Bond Ratings:

Aaa - Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. 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
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security 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
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

A-1
<PAGE>

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 shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Standard & Poor's Ratings Services 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
principal 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
principal 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
interest 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
conditions.

C - The rating C is reserved for income bonds on which no interest is
being paid.

A-2
<PAGE>

D - Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears.

A-3
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages - an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices - an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividend.

(c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation
and finance stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity index or its component indices - represents
the return on the market value of all common equity securities
for which daily pricing is available. Comparisons of performance
assume reinvestment of dividends.

(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed
Income Fund Performance Analysis -measure total return and
average current yield for the mutual fund industry. Rank
individual mutual fund performance over specified time periods,
assuming reinvestment of all distributions, exclusive of any
applicable sales charges.

(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges
of countries in Europe, Australia and the Far East, and over
1,400 securities listed on the stock exchanges of these
continents, including North America.

(g) Goldman Sachs 100 Convertible Bond Index -currently includes 67
bonds and 33 preferred. The original list of names was generated
by screening for convertible issues of 100 million or greater in
market capitalization. The index is priced monthly.

B-1
<PAGE>

(h) Salomon Brothers GNMA Index - includes pools of mortgages
originated by private lenders and guaranteed by the mortgage
pools of the Government National Mortgage Association.

(i) Salomon Brothers High Grade Corporate Bond Index -consists of
publicly issued, non-convertible corporate bonds rated AA or AAA.
It is a value-weighted, total return index, including
approximately 800 issues with maturities of 12 years or greater.

(j) Salomon Brothers Broad Investment Grade Bond - is a market-
weighted index that contains approximately 4,700 individually
priced investment grade corporate bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass through securities.

(k) Lehman Brothers Long-Term Treasury Bond - is composed of all
bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater.

(l) Lehman Brothers Government/Corporate Index - is an unmanaged
index composed of a combination of the Government and Corporate
Bond Indices. The Government Index includes public obligations
of the U.S. Treasury, issues of Government agencies, and
corporate debt backed by the U.S. Government. The Corporate Bond
Index includes fixed-rate nonconvertible corporate debt. Also
included are Yankee Bonds and nonconvertible debt issued by or
guaranteed by foreign or international governments and agencies.
All issues are investment grade (BBB) or higher, with maturities
of at least one year and outstanding par value of at least $100
million for U.S. Government issues and $25 million for others.
Any security downgraded during the month is held in the index
until month-end and then removed. All returns are market value
weighted inclusive of accrued income.

(m) Lehman Brothers Government Bond Index - is an unmanaged index
made up of all public obligations of the U.S. Treasury, excluding
flower bonds and foreign-targeted issues.

(n) NASDAQ Industrial Index - is composed of more than 3,000
industrial issues. It is a value-weighted index calculated on
price change only and does not include income.

B-2
<PAGE>

(o) Value Line - composed of over 1,600 stocks in the Value Line
Investment Survey.

(p) Russell 2000 - composed of the 2,000 smallest stocks in the
Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.

(q) Composite indices - 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index
and 65% Salomon Brothers High Grade Bond Index; all stocks on the
NASDAQ system exclusive of those traded on an exchange, and 65%
Standard & Poor's 500 Stock Index and 35% Salomon Brothers High
Grade Bond Index.

(r) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. - analyzes price, current yield, risk, total return and
average rate of return (average compounded growth rate) over
specified time periods for the mutual fund industry.

(s) Mutual Fund Source Book published by Morningstar, Inc. - analyzes
price, yield, risk and total return for equity funds.

(t) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Wall Street Journal and
Weisenberger Investment Companies Service -publications that rate
fund performance over specified time periods.

(u) Consumer Price Index (or Cost of Living Index), published by the
U.S. Bureau of Labor Statistics -a statistical measure of change
over time in the price of goods and services in major expenditure
groups.

(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson
Associates -historical measure of yield, price and total return
for common and small company stock, long-term government bonds,
U.S. Treasury bills and inflation.

(w) Savings and Loan Historical Interest Rates - as published by the
U.S. Savings & Loan League Fact Book.

B-3
<PAGE>

(x) Historical data supplied by the research departments of First
Boston Corporation; the J.P. Morgan Companies; Salomon Brothers;
Merrill Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and
Bloomberg L.P.

B-4
<PAGE>

MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY SECURITIES (36.9%)
- --------------------------------------------------------------------------------
Federal Home Loan Bank
JK-01 1, 5.967%, 3/22/01............................... $ 470,835 $ 468,386
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
6.75%, 5/30/06......................................... 1,840,000 1,920,261
7.65%, 5/10/05......................................... 85,000 87,593
-----------
2,007,854
- --------------------------------------------------------------------------------
Federal National Mortgage Association
6.70%, 8/10/01......................................... 1,075,000 1,090,168
7.37%, 4/14/04......................................... 140,000 143,340
7.50%, 4/9/07.......................................... 1,535,000 1,604,720
-----------
2,838,228
- --------------------------------------------------------------------------------
U.S. Treasury Bond
9.375%, 2/15/06........................................ 3,791,000 4,647,007
- --------------------------------------------------------------------------------
U.S. Treasury Notes
5.875%, 11/30/01....................................... 4,983,000 4,996,553
8.50%, 2/15/20......................................... 4,935,000 6,263,946
-----------
11,260,499
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(COST $20,535,750)...................................... 21,221,974
- --------------------------------------------------------------------------------
MORTGAGE OBLIGATIONS (30.7%)
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
Gold Pool #C00387, 9.00%, 2/1/25....................... 256,168 272,739
Gold Pool #C80370, 6.50%, 12/1/25...................... 63,753 62,736
Gold Pool #C80462, 9.00%, 11/1/26...................... 513,620 546,845
Gold Pool #D61891, 7.50%, 7/1/25....................... 1,059,568 1,082,746
Gold Pool #D78434, 6.50%, 2/1/27....................... 1,051,423 1,034,666
Gold Pool #D80290, 7.50%, 6/1/27....................... 2,214,313 2,262,752
Gold Pool #E00491, 6.50%, 6/1/12....................... 1,620,071 1,619,565
Gold Pool #E61225, 6.50%, 8/1/10....................... 1,168,256 1,167,891
-----------
8,049,940
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE OBLIGATIONS--(CONTINUED)
- -------------------------------------------------------------------------------
Federal National Mortgage Association
Pool #124239, 8.50%, 2/1/07........................... $1,145,806 $ 1,191,281
Pool #303318, 8.50%, 5/1/10........................... 558,369 580,529
Pool #303998, 9.00%, 7/1/26........................... 1,123,304 1,194,564
Series 1997-8 K, CMO, REMIC 7.00%, 11/18/15........... 3,350,000 3,452,849
-----------
6,419,223
- -------------------------------------------------------------------------------
Government National Mortgage Association
Pool #372427, 8.00%, 6/15/27.......................... 1,226,680 1,272,680
Pool #423872, 6.50%, 6/15/26.......................... 1,281,944 1,267,522
Pool #423911, 8.00%, 8/15/26.......................... 606,730 629,483
-----------
3,169,685
- -------------------------------------------------------------------------------
TOTAL MORTGAGE OBLIGATIONS (COST $17,134,931)........... 17,638,848
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (3.1%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (3.1%)
Advanta Mortgage Loan Trust, Series 94-1 A1 6.30%,
7/25/25.............................................. 90,013 89,267
Contimortgage Home Equity Loan Trust, Series 97-1 A4
6.68%, 1/15/12 475,000 480,462
Green Tree Financial Corp., Series 94-7 A4 8.35%,
3/15/20.............................................. 250,000 261,991
The Money Store Home Equity Trust, Series 96-C A3
7.07%, 12/15/16...................................... 550,000 561,401
World Financial Network Credit Card, Series 96-B A
6.95%, 4/15/06....................................... 405,000 422,164
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $1,781,683)......... 1,815,285
- -------------------------------------------------------------------------------
CORPORATE BONDS (28.2%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (5.9%)
Associates Corp. N.A. 6.75%, 7/15/01.................. 75,000 76,500
Countrywide Funding Corp. 6.875%, 9/15/05............. 525,000 536,156
Lehman Brothers Holdings 7.125%, 9/15/03.............. 998,000 1,022,950
Lehman Brothers, Inc. 9.875%, 10/15/00................ 395,000 432,031
NB Capital Trust IV 8.25%, 4/15/27.................... 1,126,000 1,211,858
Progressive Corp. 7.30%, 6/1/06....................... 100,000 105,500
-----------
3,384,995
- -------------------------------------------------------------------------------
HEALTHCARE (3.9%)
Aetna Services, Inc. 6.75%, 8/15/01................... 100,000 102,125
Columbia/HCA Healthcare 7.25%, 5/20/08................ 2,146,000 2,162,095
-----------
2,264,220
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

MCKEE U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS--(CONTINUED)
- --------------------------------------------------------------------------------
INDUSTRIAL (13.2%)
Marriott International, Series B 7.875%, 4/15/05....... $1,210,000 $ 1,293,187
Nabisco, Inc. 7.55%, 6/15/15........................... 1,244,000 1,278,210
News America Holdings, Inc. 7.60%, 10/11/15............ 981,000 984,679
Olsten Corp. 7.00%, 3/15/06............................ 275,000 281,875
Philip Morris Cos., Inc. 7.25%, 9/15/01................ 200,000 205,500
Philip Morris Cos., Inc. 7.625%, 5/15/02............... 63,000 65,914
Seagate Technology, Inc. Senior Notes 7.125%, 3/1/04... 1,073,000 1,101,166
Sears, Roebuck and Co. 6.56%, 11/20/03................. 1,815,000 1,826,344
Time Warner Entertainment Co. 8.375%, 3/15/23.......... 500,000 552,500
-----------
7,589,375
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.2%)
Frontier Corp. 7.25%, 5/15/04.......................... 514,000 532,632
U.S. West Cap Funding, Inc. 6.75%, 10/1/05............. 140,000 141,750
-----------
674,382
- --------------------------------------------------------------------------------
UTILITIES (0.9%)
Pacific Bell Telephone 6.25%, 3/1/05................... 255,000 252,450
Pacific Gas & Electric 5.875%, 10/1/05................. 260,000 252,200
-----------
504,650
- --------------------------------------------------------------------------------
YANKEE BONDS (3.1%)
Barrick Gold Corp. 7.50%, 5/1/07....................... 1,425,000 1,503,375
Daimler-Benz N.A. 7.375%, 9/15/06...................... 265,000 281,894
-----------
1,785,269
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $15,611,664)................. 16,202,891
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.9%) (COST $55,064,028) (A)......... 56,878,998
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.1%)...................... 648,170
- --------------------------------------------------------------------------------
NET ASSETS (100%)........................................ $57,527,168
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
CMO Collateralized Mortgage Obligation
REMIC Real Estate Mortgage Investment Conduit
(a) The cost for federal income tax purposes was $55,248,951. At October
31, 1997, net unrealized appreciation for all securities based on tax
cost was $1,630,047. This consisted of aggregate gross unrealized
appreciation for all securities of $1,633,637 and aggregate gross
unrealized depreciation for all securities of $3,590.

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE +
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.4%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (1.0%)
General Motors Corp....................................... 17,100 $ 1,097,606
- --------------------------------------------------------------------------------
BANKS (6.1%)
BankBoston Corp........................................... 20,550 1,665,834
Bankers Trust New York Corp............................... 30,600 3,610,800
Golden West Financial Corp................................ 14,400 1,249,200
------------
6,525,834
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.2%)
Philip Morris Cos., Inc................................... 58,300 2,310,137
Pioneer Hi-Bred International, Inc........................ 24,200 2,217,325
------------
4,527,462
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (4.9%)
Cincinnati Milacron, Inc.................................. 85,200 2,364,300
ITT Industries, Inc....................................... 92,000 2,903,750
------------
5,268,050
- --------------------------------------------------------------------------------
CHEMICALS (4.1%)
Akzo Nobel N.V. ADR....................................... 38,500 3,368,750
Ethyl Corp................................................ 124,100 1,070,363
------------
4,439,113
- --------------------------------------------------------------------------------
COMPUTERS (5.6%)
*Ceridian Corp............................................ 101,600 3,968,750
Computer Associates International, Inc.................... 27,600 2,057,925
------------
6,026,675
- --------------------------------------------------------------------------------
CONSTRUCTION EQUIPMENT (2.0%)
Case Corp................................................. 36,500 2,183,156
- --------------------------------------------------------------------------------
ELECTRONICS (1.7%)
*MEMC Electronic Materials, Inc........................... 91,600 1,837,725
- --------------------------------------------------------------------------------
ENERGY (8.8%)
Mitchell Energy & Development Corp., Class B.............. 102,770 2,569,250
Occidental Petroleum Corp................................. 57,200 1,594,450
*Stone Energy Corp........................................ 73,400 2,449,725
Ultramar Diamond Shamrock Corp............................ 43,200 1,333,800
YPF S.A. ADR.............................................. 47,300 1,513,600
------------
9,460,825
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE +
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (5.8%)
Beneficial Corp........................................... 19,900 $ 1,526,081
Green Tree Financial Corp................................. 40,400 1,701,850
Lehman Brothers Holdings, Inc............................. 38,800 1,826,025
The PMI Group, Inc........................................ 19,000 1,148,313
------------
6,202,269
- --------------------------------------------------------------------------------
HEALTH CARE (1.5%)
*Foundation Health Systems, Inc., Class A................. 57,350 1,648,813
- --------------------------------------------------------------------------------
INSURANCE (1.1%)
CIGNA Corp................................................ 7,600 1,179,900
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.7%)
Loews Corp................................................ 17,100 1,909,856
Whitman Corp.............................................. 37,800 992,250
------------
2,902,106
- --------------------------------------------------------------------------------
PAPER & PACKAGING (2.8%)
Willamette Industries..................................... 92,500 3,058,281
- --------------------------------------------------------------------------------
PHARMACEUTICALS (10.3%)
American Home Products Corp............................... 33,300 2,468,363
*Biogen, Inc.............................................. 64,600 2,147,950
Becton, Dickinson & Co.................................... 33,900 1,561,519
Mylan Laboratories, Inc................................... 116,300 2,551,331
SmithKline Beecham plc ADR................................ 48,400 2,305,050
------------
11,034,213
- --------------------------------------------------------------------------------
RETAIL (8.1%)
American Stores Co........................................ 85,700 2,201,419
*BJ'S Wholesale Club, Inc................................. 62,200 1,792,138
Dayton-Hudson Corp........................................ 22,350 1,403,859
Dillard, Inc., Class A.................................... 43,600 1,673,150
Gap, Inc.................................................. 30,000 1,595,625
------------
8,666,191
- --------------------------------------------------------------------------------
SERVICES (3.7%)
*AccuStaff, Inc........................................... 70,700 2,019,369
Olsten Corp............................................... 125,600 1,915,400
------------
3,934,769
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

MCKEE DOMESTIC EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.6%)
Chase Securities, Inc. 5.60% dated 10/31/97, due
11/3/97, to be repurchased at 2,808,310,
collateralized by $2,691,276 of various U.S.
Treasury Notes, 5.50%-8.75% due from 5/15/00-
6/30/02, valued at $2,808,584 (COST $2,807,000)..... $2,807,000 $ 2,807,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.0%) (COST $91,258,044) (A)..... 108,513,501
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.0%).................. (1,124,999)
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $107,388,502
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
ADR American Depositary Receipt
(a) The cost for federal income tax purposes was $91,281,132 at October 31,
1997, net unrealized appreciation for all securities based on tax cost
was $17,232,369. This consisted of aggregate gross unrealized
appreciation for all securities of $19,419,539 and aggregate gross
unrealized depreciation for all securities of $2,187,170.

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.3%)
- --------------------------------------------------------------------------------
ARGENTINA (3.1%)
YPF S.A. ADR.............................................. 100,000 $ 3,200,000
- --------------------------------------------------------------------------------
AUSTRALIA (1.8%)
Westpac Banking Corp...................................... 312,000 1,816,096
- --------------------------------------------------------------------------------
CANADA (4.8%)
Alcan Aluminium Ltd....................................... 48,700 1,382,443
Canadian Imperial Bank of Commerce........................ 50,000 1,461,926
Seagram Co., Ltd.......................................... 31,830 1,075,231
West Coast Energy, Inc.................................... 25,000 512,738
West Coast Energy, Inc. ADR............................... 27,600 565,800
------------
4,998,138
- --------------------------------------------------------------------------------
CHINA (2.0%)
*Huaneng Power International, Inc. ADR.................... 93,000 2,046,000
- --------------------------------------------------------------------------------
DENMARK (2.2%)
Unidanmark A/S, Class A (Registered)...................... 33,950 2,292,975
- --------------------------------------------------------------------------------
FINLAND (3.7%)
Nokia AB.................................................. 44,200 3,829,409
- --------------------------------------------------------------------------------
FRANCE (7.5%)
Alcatel Alsthom........................................... 18,615 2,246,543
Coflexip.................................................. 23,000 2,536,457
Total S.A., Class B....................................... 26,400 2,929,722
------------
7,712,722
- --------------------------------------------------------------------------------
GERMANY (4.3%)
Bayer AG.................................................. 47,650 1,713,830
Bayer AG ADR.............................................. 19,900 699,501
Commerzbank AG............................................ 40,000 1,369,068
Commerzbank AG ADR........................................ 20,000 679,776
------------
4,462,175
- --------------------------------------------------------------------------------
HONG KONG (4.9%)
Cathay Pacific Airways Ltd................................ 835,000 880,369
Guangshen Railway Co., Ltd. ADR........................... 90,000 1,316,250
Hong Kong Electric Holdings............................... 240,000 813,454
</TABLE>

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HONG KONG--(CONTINUED)
Hong Kong Electric Holdings ADR......................... 244,800 $ 829,774
HSBC Holdings plc....................................... 53,000 1,199,870
------------
5,039,717
- --------------------------------------------------------------------------------
IRELAND (2.8%)
*Elan Corp. plc ADR..................................... 57,000 2,842,875
- --------------------------------------------------------------------------------
ISRAEL (2.4%)
Teva Pharmaceutical Industries Ltd. ADR................. 52,000 2,427,750
- --------------------------------------------------------------------------------
ITALY (1.3%)
Montedison S.p.A........................................ 1,270,580 1,031,021
Montedison S.p.A. ADR................................... 32,634 263,112
------------
1,294,133
- --------------------------------------------------------------------------------
JAPAN (13.2%)
Amada Co., Ltd.......................................... 258,000 1,372,340
Credit Saison Co........................................ 61,400 1,648,288
Hitachi Ltd............................................. 270,000 2,075,715
Hitachi Ltd. ADR........................................ 8,100 648,000
Ito-Yokado Co., Ltd..................................... 24,000 1,192,819
Kao Corp................................................ 61,000 851,729
Mitsui & Co., Ltd....................................... 59,000 447,698
Mitsui & Co., Ltd. ADR.................................. 4,900 743,575
Mitsui Marine & Fire Insurance.......................... 170,000 1,000,332
Mitsui Marine & Fire Insurance ADR...................... 10,630 625,761
Nissan Motor Co., Ltd................................... 52,000 277,028
Nissan Motor Co., Ltd. ADR.............................. 34,200 359,100
Sanwa Bank Ltd.......................................... 51,000 512,882
Sanwa Bank Ltd. ADR..................................... 4,000 402,428
Toyota Motor Corp....................................... 51,000 1,419,963
------------
13,577,658
- --------------------------------------------------------------------------------
KOREA (2.9%)
LG Electronics, Inc..................................... 128,556 1,740,863
Pohang Iron & Steel Co., Ltd............................ 13,700 603,656
Pohang Iron & Steel Co., Ltd. ADR....................... 42,000 682,500
------------
3,027,019
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
MEXICO (3.9%)
*Grupo Industrial Durango ADR........................... 180,000 $ 2,340,000
Telefonos de Mexico S.A. ADR, Class L................... 39,800 1,721,350
------------
4,061,350
- --------------------------------------------------------------------------------
NETHERLANDS (5.4%)
Akzo Nobel N.V.......................................... 20,000 3,524,987
Philips Electronics N.V................................. 26,000 2,036,064
------------
5,561,051
- --------------------------------------------------------------------------------
PHILIPPINES (3.1%)
Ionics Circuit, Inc..................................... 1,625,000 960,648
Philippine Long Distance Telephone Co................... 88,400 2,203,704
------------
3,164,352
- --------------------------------------------------------------------------------
SINGAPORE (2.0%)
Asia Pulp & Paper Co., Ltd. ADR......................... 183,600 2,088,450
- --------------------------------------------------------------------------------
SPAIN (2.1%)
Repsol S.A.............................................. 52,230 2,190,916
- --------------------------------------------------------------------------------
SWEDEN (1.9%)
Svenska Handelsbanken, Class A.......................... 62,000 1,959,540
- --------------------------------------------------------------------------------
SWITZERLAND (3.7%)
Nestle S.A. (Registered)................................ 2,670 3,761,449
- --------------------------------------------------------------------------------
THAILAND (0.9%)
Advanced Info Service Public Co., Ltd. (Foreign)........ 180,000 948,293
- --------------------------------------------------------------------------------
UNITED KINGDOM (14.4%)
BAT Industries plc ADR.................................. 201,000 3,592,875
British Steel plc....................................... 751,300 1,991,167
Carlton Communications plc.............................. 110,787 915,234
Grand Metropolitan plc.................................. 156,270 1,410,247
Rio Tinto plc ADR....................................... 14,600 759,200
RTZ Corp. plc (Registered).............................. 79,780 1,027,762
SmithKline Beecham plc ADR.............................. 67,000 3,190,875
*Waste Management International plc..................... 504,100 1,691,157
*Waste Management International plc ADR................. 43,900 301,812
------------
14,880,329
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $83,960,124)................... 97,182,397
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

19
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.3%)
Chase Securities, Inc. 5.60% dated 10/31/97, due
11/3/97, to be repurchased
at $1,289,602 collateralized by $1,235,858 of various
U.S. Treasury Notes, 5.50%-8.75% due from 5/15/00-
6/30/02, valued at $1,289,727
(COST $1,289,000)..................................... $1,289,000 $ 1,289,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (95.6%) (COST $85,249,124) (A)....... 98,471,397
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (4.4%).................... 4,578,376
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $103,049,773
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
ADR American Depositary Receipt
(a) The cost for federal income tax purposes was $85,249,752 at October 31,
1997, net unrealized appreciation for all securities based on tax cost
was $13,221,645. This consisted of aggregate gross unrealized
appreciation for all securities of $21,835,057 and aggregate gross
unrealized depreciation for all securities of $8,613,412.

The accompanying notes are an integral part of the financial statements.

20
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

At October 31, 1997 sector diversification of the Portfolio was as follows:

The accompanying notes are an integral part of the financial statements.

21
<PAGE>

MCKEE PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
<CAPTION>
MCKEE MCKEE MCKEE
U.S. DOMESTIC INTERNATIONAL
GOVERNMENT EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost................... $55,064,028 $ 91,258,044 $ 85,249,124
=========== ============ ============
Investments, at Value.................. $56,878,998 $108,513,501 $ 98,471,397
Foreign Currency, at Value (Cost
$14,932).............................. -- -- 14,995
Cash................................... -- -- 673
Receivable for Fund Shares Sold........ 36,880 63,351 4,478,477
Receivable for Investments Sold........ -- 183,056 --
Dividends Receivable................... -- 110,151 128,963
Foreign Withholding Tax Reclaim
Receivable............................ -- -- 127,122
Interest Receivable.................... 784,100 436 200
Other Assets........................... 1,436 2,628 2,966
- -------------------------------------------------------------------------------
Total Assets.......................... 57,701,414 108,873,123 103,224,793
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased...... -- 936,950 --
Payable for Fund Shares Redeemed....... -- 242,100 --
Payable for Investment Advisory Fees--
Note B................................ 22,337 63,728 64,314
Payable for Administrative Fees--Note
C..................................... 8,890 12,848 16,261
Payable for Custodian Fees--Note D..... 3,762 5,031 68,526
Payable for Account Services Fees--Note
F..................................... 5,962 9,625 250
Payable for Directors' Fees--Note G.... 718 834 877
Due to Custodian Bank--Note D.......... 105,782 187,234 --
Other Liabilities...................... 26,795 26,271 24,792
- -------------------------------------------------------------------------------
Total Liabilities..................... 174,246 1,484,621 175,020
- -------------------------------------------------------------------------------
NET ASSETS.............................. $57,527,168 $107,388,502 $103,049,773
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital........................ $55,224,446 $ 82,523,522 $ 79,904,908
Undistributed Net Investment Income.... 377,067 65,498 10,836
Accumulated Net Realized Gain.......... 110,685 7,544,025 9,927,764
Unrealized Appreciation................ 1,814,970 17,255,457 13,206,265
- -------------------------------------------------------------------------------
NET ASSETS.............................. $57,527,168 $107,388,502 $103,049,773
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001
par value) (Authorized 25,000,000).... 5,306,476 6,369,817 8,297,591
Net Asset Value, Offering and
Redemption Price Per Share............ $ 10.84 $ 16.86 $ 12.42
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

22
<PAGE>

MCKEE PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
<CAPTION>
MCKEE MCKEE MCKEE
U.S. DOMESTIC INTERNATIONAL
GOVERNMENT EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends................................ $ -- $ 1,325,721 $ 2,080,555
Interest................................. 2,642,874 106,968 120,254
Less: Foreign Taxes Withheld............. -- -- (166,538)
- ---------------------------------------------------------------------------------
Total Income............................ 2,642,874 1,432,689 2,034,271
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B......... 180,278 589,228 738,184
Administrative Fees--Note C.............. 99,215 127,984 178,372
Custodian Fees--Note D................... 9,600 10,700 54,812
Account Services Fees--Note F............ 35,675 68,610 1,766
Directors' Fees--Note G.................. 2,500 3,144 3,353
Registration and Filing Fees............. 18,789 17,606 16,013
Other Expenses........................... 28,866 34,904 44,647
- ---------------------------------------------------------------------------------
Total Expenses.......................... 374,923 852,176 1,037,147
Expense Offset--Note A................... (586) (158) (1,152)
- ---------------------------------------------------------------------------------
Net Expenses............................ 374,337 852,018 1,035,995
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME..................... 2,268,537 580,671 998,276
- ---------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments.............................. 235,130 7,558,630 9,934,719
Foreign Exchange Transactions............ -- -- (22,323)
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS............................. 235,130 7,558,630 9,912,396
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments.............................. 1,536,088 14,272,224 8,517,976
Foreign Exchange Translations............ -- -- (19,208)
- ---------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION/ DEPRECIATION............... 1,536,088 14,272,224 8,498,768
- ---------------------------------------------------------------------------------
NET GAIN(LOSS) ON INVESTMENTS AND FOREIGN
EXCHANGE TRANSACTIONS.................... 1,771,218 21,830,854 18,411,164
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $4,039,755 $22,411,525 $19,409,440
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

23
<PAGE>

MCKEE U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 2,268,537 $ 804,383
Net Realized Gain (Loss).............................. 235,130 (129,588)
Net Change in Unrealized Appreciation/Depreciation.... 1,536,088 169,467
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 4,039,755 844,262
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (2,031,045) (688,019)
Net Realized Gain..................................... -- (73,227)
- ----------------------------------------------------------------------------------
Total Distributions.................................. (2,031,045) (761,246)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued................................................ 46,890,798 16,987,714
--In Lieu of Cash Distributions..................... 2,025,173 756,964
Redeemed.............................................. (16,515,553) (778,902)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 32,400,418 16,965,776
- ----------------------------------------------------------------------------------
Total Increase........................................ 34,409,128 17,048,792
Net Assets:
Beginning of Period................................... 23,118,040 6,069,248
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $377,067 and $146,402, respectively)....... $57,527,168 $23,118,040
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 4,485,792 1,622,458
In Lieu of Cash Distributions........................ 191,612 72,730
Shares Redeemed...................................... (1,556,148) (74,046)
- ----------------------------------------------------------------------------------
3,121,256 1,621,142
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

24
<PAGE>

MCKEE DOMESTIC EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 580,671 $ 341,153
Net Realized Gain.................................... 7,558,630 2,272,594
Net Change in Unrealized Appreciation/Depreciation... 14,272,224 2,835,631
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions.............................................. 22,411,525 5,449,378
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (580,774) (279,306)
Net Realized Gain.................................... (2,289,510) (158,413)
- ----------------------------------------------------------------------------------
Total Distributions................................. (2,870,284) (437,719)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................... 42,565,470 51,350,923
--In Lieu of Cash Distributions.................... 2,870,017 437,720
Redeemed............................................. (19,758,239) (1,057,419)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 25,677,248 50,731,224
- ----------------------------------------------------------------------------------
Total Increase....................................... 45,218,489 55,742,883
Net Assets:
Beginning of Period.................................. 62,170,013 6,427,130
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $65,498 and $67,031, respectively)........ $107,388,502 $62,170,013
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 2,738,317 4,134,152
In Lieu of Cash Distributions....................... 207,257 35,299
Shares Redeemed..................................... (1,223,564) (83,413)
- ----------------------------------------------------------------------------------
1,722,010 4,086,038
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

25
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 998,276 $ 810,008
Net Realized Gain.................................... 9,912,396 1,085,575
Net Change in Unrealized Appreciation/Depreciation... 8,498,768 4,699,893
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions.............................................. 19,409,440 6,595,476
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (961,510) (769,177)
Net Realized Gain.................................... (1,154,956) (1,669,691)
- ----------------------------------------------------------------------------------
Total Distributions................................. (2,116,466) (2,438,868)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................... 56,400,614 12,382,787
--In Lieu of Cash Distributions.................... 1,966,598 2,274,394
Redeemed............................................. (63,834,286) (2,482,687)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions.............................................. (5,467,074) 12,174,494
- ----------------------------------------------------------------------------------
Total Increase....................................... 11,825,900 16,331,102
Net Assets:
Beginning of Period.................................. 91,223,873 74,892,771
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $10,836 and $61,752, respectively)........ $103,049,773 $91,223,873
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued....................................... 4,401,990 1,200,799
In Lieu of Cash Distributions....................... 170,717 224,800
Shares Redeemed..................................... (4,919,903) (244,706)
- ----------------------------------------------------------------------------------
(347,196) 1,180,893
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

26
<PAGE>

MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
MARCH 2,
YEARS ENDED OCTOBER 31, 1995** TO
----------------------- OCTOBER 31,
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. $ 10.58 $ 10.76 $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.54 0.46 0.28
Net Realized and Unrealized Gain
(Loss)............................. 0.25 (0.07)++ 0.71
- --------------------------------------------------------------------------------
Total From Investment Operations... 0.79 0.39 0.99
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............... (0.53) (0.44) (0.23)
In Excess of Net Realized Gain...... -- (0.13) --
- --------------------------------------------------------------------------------
Total Distributions................ (0.53) (0.57) (0.23)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....... $ 10.84 $ 10.58 $10.76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN......................... 7.73% 3.77%+ 9.96%+***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)......................... $ 57,527 $ 23,118 $6,069
Ratio of Expenses to Average Net
Assets.............................. 0.94% 1.13% 0.89%*
Ratio of Net Investment Income to
Average Net Assets.................. 5.67% 5.39% 5.39%*
Portfolio Turnover Rate.............. 124% 83% 104%
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and Expenses
Assumed by the
Adviser Per Share................... N/A $ 0.01 $ 0.10
Ratio of Expenses to Average Net
Assets Including Expense
Offsets............................. 0.94% 1.13% 0.85%*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Not Annualized
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
++ The amount shown for the year ended October 31, 1996 for a share
outstanding throughout the period does not accord with the aggregate net
gains on investments for that period because of the sales and repurchases
of Portfolio shares in relation to fluctuating market value of the
investments of the Portfolio.

The accompanying notes are an integral part of the financial statements.

27
<PAGE>

MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
MARCH 2,
YEARS ENDED OCTOBER 31, 1995** TO
----------------------- OCTOBER 31,
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. $ 13.38 $ 11.44 $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.10 0.10 0.08
Net Realized and Unrealized Gain.... 3.92 2.08 1.43
- --------------------------------------------------------------------------------
Total From Investment Operations... 4.02 2.18 1.51
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............... (0.10) (0.09) (0.07)
Net Realized Gain................... (0.44) (0.15) --
- --------------------------------------------------------------------------------
Total Distributions................ (0.54) (0.24) (0.07)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....... $ 16.86 $ 13.38 $11.44
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN......................... 30.96% 19.31%+ 15.13%+***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands).............................. $ 107,389 $ 62,170 $6,427
Ratio of Expenses to Average Net As-
sets................................ 0.94% 0.99% 1.08%*
Ratio of Net Investment Income to Av-
erage Net Assets.................... 0.64% 0.93% 1.12%*
Portfolio Turnover Rate.............. 47% 42% 27%
Average Commission Rate #............ $ 0.0497 $ 0.0482 N/A
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and Expenses
Assumed by the
Adviser Per Share................... N/A $ 0.00 $ 0.11
Ratio of Expenses to Average Net
Assets Including Expense Offsets.... 0.94% 0.99% 1.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Not Annualized
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

28
<PAGE>

MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
MAY 26,
YEARS ENDED OCTOBER 31, 1994** TO
-------------------------- OCTOBER 31,
1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERI-
OD................................. $ 10.55 $ 10.03 $ 10.40 $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.11 0.09 0.11 0.04
Net Realized and Unrealized Gain
(Loss)............................ 2.01 0.73 (0.39) 0.39
- --------------------------------------------------------------------------------
Total From Investment Operations.. 2.12 0.82 (0.28) 0.43
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............. (0.11) (0.09) (0.09) (0.03)
Net Realized Gain.................. (0.14) (0.21) -- --
- --------------------------------------------------------------------------------
Total Distributions............... (0.25) (0.30) (0.09) (0.03)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...... $ 12.42 $ 10.55 $ 10.03 $ 10.40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN........................ 20.31% 8.29% (2.69)% 4.31%***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands)............................. $103,050 $91,224 $74,893 $37,257
Ratio of Expenses to Average Net As-
sets............................... 0.98% 1.01% 0.97% 1.12%*
Ratio of Net Investment Income to
Average Net Assets................. 0.95% 0.92% 1.16% 0.97%*
Portfolio Turnover Rate............. 29% 9% 7% 11%
Average Commission Rate #........... $ 0.0428 $0.0560 N/A N/A
- --------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets Including
Expense Offsets.................... 0.98% 1.01% 0.96% N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Not Annualized
# 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.

29
<PAGE>

MCKEE PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The McKee
U.S. Government Portfolio, McKee Domestic Equity Portfolio, and McKee
International Equity Portfolio (the "Portfolios"), portfolios of UAM Funds,
Inc., are non-diversified, open-end management investment companies. At
October 31, 1997, the UAM Funds were comprised of forty-two active portfolios.
The financial statements of the remaining portfolios are presented separately.
The objectives of the McKee Portfolios is as follows:

MCKEE U.S. GOVERNMENT PORTFOLIO seeks to achieve a high level of current
income consistent with preservation of capital by investing primarily in
U.S. Treasury and Government agency securities.

MCKEE DOMESTIC EQUITY PORTFOLIO seeks to achieve a superior long-term total
return over a market cycle by investing primarily in equity securities of
U.S. issuers.

MCKEE INTERNATIONAL EQUITY PORTFOLIO seeks to achieve a superior long-term
total return over a market cycle by investing primarily in the equity
securities of non-U.S. issuers.

A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of
their financial statements. Generally accepted accounting principles may
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.

1. SECURITY VALUATION: Equity securities listed on a United States
securities exchange for which market quotations are readily available are
valued at the last quoted sales price as of the close of the exchange on
the day the valuation is made or, if no sale has occurred on such day, at
the bid price on such day. Securities listed on a foreign exchange are
valued at their closing price. Price information on listed securities is
taken from the exchange where the security is primarily traded. Over-the-
counter and unlisted equity securities are valued at the current bid
prices. Fixed income securities are stated on the basis of valuations
provided by brokers and/or a pricing service which uses information with
respect to transactions in fixed income securities, quotations from
dealers, market transactions in comparable securities, and various
relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at the
time of purchase are valued at amortized cost, if it approximates market
value. The value of other assets and securities for which no quotations are
readily available is determined in good faith at fair value using methods
determined by the Board of Directors.

2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of their taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.

The McKee International Equity Portfolio may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on either
income or gains earned or repatriated. The Portfolio accrues such taxes
when the related income or gains are earned.

3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, the Portfolios' custodian bank takes possession of
the underlying securities, the value of which exceeds the

30
<PAGE>

MCKEE PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
principal amount of the repurchase transaction, including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is monitored on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, each Portfolio has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. In the event of
default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.

4. FOREIGN CURRENCY TRANSLATION: The books and records of the McKee
International Equity Portfolio are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars on the date of valuation. The
McKee International Equity Portfolio does not isolate that portion of
realized or unrealized gains and losses resulting from changes in the
foreign exchange rate from fluctuations arising from changes in the market
prices of the securities. These gains and losses are included in net
realized and unrealized gain and loss on investments on the statement of
operations. Net realized and unrealized gains and losses on foreign
currency transactions represent net foreign exchange gains or losses from
forward foreign currency exchange contracts, disposition of foreign
currencies, currency gains or losses realized between trade and settlement
dates on securities transactions and the difference between the amount of
the investment income and foreign withholding taxes recorded on the McKee
International Equity Portfolio's books and the U.S. dollar equivalent
amounts actually received or paid.

5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The McKee International
Equity Portfolio may enter into forward foreign currency exchange contracts
to protect the value of securities held and related receivables and
payables against changes in future foreign exchange rates. A forward
currency contract is an agreement between two parties to buy and sell
currency at a set price on a future date. The market value of the contract
will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily using the current forward rate and the change in
market value is recorded by the McKee International Equity Portfolio as
unrealized gain or loss. The McKee International Equity Portfolio
recognizes realized gain or loss when the contract is closed, equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and are generally limited to the amount of
unrealized gain on the contracts, if any, at the date of default. Risks may
also arise from the unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.

4. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income quarterly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.

31
<PAGE>

MCKEE PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
differences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments and foreign
currency transactions.

Permanent book and tax basis differences relating to shareholder
distributions resulted in reclassifications as follows:

<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
MCKEE PORTFOLIOS INCOME (LOSS) GAIN (LOSS)
---------------- -------------- ------------
<S> <C> <C>
U.S. Government.................................. (6,827) 6,827
Domestic Equity.................................. (1,430) 1,430
International Equity............................. (87,682) 87,682
</TABLE>

5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon
as the McKee International Equity Portfolio is informed of the ex-dividend
date. Interest income is recognized on the accrual basis. Discounts and
premiums on securities purchased are amortized using the effective yield
basis over their respective lives. Most expenses of the UAM Funds can be
directly attributed to a particular portfolio. Expenses which cannot be
directly attributed are apportioned among the portfolios of the UAM Funds
based on their relative net assets. Custodian fees for the Portfolios have
been increased to include expense offsets, if any, for custodian balance
credits.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
C.S. McKee & Co., Inc. (the "Adviser"), a wholly-owned subsidiary of United
Asset Management Corporation ("UAM"), provides investment advisory services to
each Portfolio at a monthly fee calculated at an annual rate of 0.45%, 0.65%
and 0.70% of average daily net assets for the month for the McKee U.S.
Government, McKee Domestic Equity and McKee International Equity Portfolios,
respectively.

32
<PAGE>

MCKEE PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
McKee U.S. Government, McKee Domestic Equity, and McKee International Equity
Portfolios, respectively. The Administrator has entered into a Mutual Funds
Service Agreement with Chase Global Funds Services Company ("CGFSC"), an
affiliate of The Chase Manhattan Bank, under which CGFSC agrees to provide
certain services, including but not limited to, administration, fund
accounting, dividend disbursing and transfer agent services. Pursuant to the
Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly fee.
For the year ended October 31, 1997, UAM Fund Services, Inc. earned the
following amounts from the Portfolios as Administrator and paid the following
portion to CGFSC for its services as sub-Administrator:

<TABLE>
<CAPTION>
ADMINISTRATION PORTION PAID
MCKEE PORTFOLIOS FEES TO CGFSC
- ---------------- -------------- ------------
<S> <C> <C>
U.S. Government..................................... $ 99,215 $83,206
Domestic Equity..................................... 127,984 91,727
International Equity................................ 178,372 115,116
</TABLE>

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolios' assets held in accordance with the custodian
agreement. As part of the custodian agreement, the custodian bank has a lien
on the securities of the Portfolios to cover any advances made by the
custodian to the Portfolios. At October 31, 1997, the payable to the custodian
bank represents the amount due for cash advanced for the settlement of
securities purchased for the U.S. Government and Domestic Equity Portfolio.

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. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered into
an Account Services Agreement (the "Services Agreement") with UAM Retirement
Plan Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of
UAM. Under the Services Agreement, the Service Provider agrees to perform
certain services for participants in a self-directed, defined contribution
plan, and for whom the Service Provider provides participant recordkeeping.
Pursuant to the Services Agreement, the Service Provider is entitled to
receive, after the end of each month, a fee at the annual rate of 0.15% of the
average aggregate daily net asset value of shares of the UAM Funds in the
accounts for which they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, purchases and
sales of investment securities other than long-term U.S. Government and short-
term securities were:

<TABLE>
<CAPTION>
MCKEE PORTFOLIOS PURCHASES SALES
- ---------------- ----------- -----------
<S> <C> <C>
U.S. Government......................................... $19,124,477 $ 4,670,088
Domestic Equity......................................... 64,728,270 41,798,353
International Equity.................................... 30,279,594 41,992,848
</TABLE>

33
<PAGE>

MCKEE PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases and sales of long-term U.S. Government securities were $62,551,105
and $44,183,062 respectively, for the McKee U.S. Government Portfolio. There
were no purchases or sales of long-term U.S. Government securities for the
McKee Domestic Equity and the McKee International Equity Portfolios.

I. 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. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% 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, 1997, the Portfolios had no borrowings under the agreement.

J. OTHER: At October 31, 1997, the percentage of total shares outstanding were
held by record shareholders owning 10% or greater of the aggregate total
shares outstanding for each portfolio was as follows:

<TABLE>
<CAPTION>
NO. OF %
MCKEE PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ---------------- ------------ ---------
<S> <C> <C>
U.S. Government.......................................... 4 82.3%
Domestic Equity.......................................... 1 48.4%
International Equity..................................... 2 33.7%
</TABLE>

At October 31, 1997, the net assets of the McKee International Equity
Portfolio was substantially composed of foreign denominated securities and/or
currency. Changes in currency exchange rates will affect the value of and
investment income from such securities and currency.

34
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds Trust and the Shareholders of
McKee U.S. Government Portfolio McKee Domestic Equity Portfolio McKee
International Equity Portfolio

In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of McKee U.S.
Government Portfolio, McKee Domestic Equity Portfolio, and McKee International
Equity Portfolio (the "Portfolios"), Portfolios of the UAM Funds Trust, at
October 31, 1997, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Portfolios' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED):

At October 31, 1997, the McKee Domestic Equity and McKee International Equity
Portfolios hereby designate $104,069 and $1,073,044, respectively, as long-
term capital gain dividend for the purpose of the dividend paid deduction on
their Federal income tax return.

Foreign taxes during the fiscal year ended October 31, 1997 for the McKee
International Equity Portfolio amounted to $166,539 are expected to be passed
through to the shareholders as foreign tax credits on Form 1099-Dividend for
the year ending December 31, 1997, which shareholders of the McKee
International Equity Portfolio will receive in late January, 1998. In
addition, for the year ended October 31, 1997, gross income derived from
sources within foreign countries amounted to $2,081,773 for the McKee
International Equity Portfolio.

For the year ended October 31, 1997, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
23.6% for the McKee Domestic Equity Portfolio.

For the year ended October 31, 1997, the percentage of income earned from
direct Treasury obligations for the McKee U.S. Government Portfolio was 41.3%.

35
<PAGE>

PART B

UAM FUNDS

NWQ PORTFOLIOS

STATEMENT OF ADDITIONAL INFORMATION - January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the NWQ Balanced, NWQ Small Cap Value, NWQ Special Equity, and NWQ Value Equity
Portfolios' Institutional Class Shares (the "NWQ Portfolios" or singularly a
"Portfolio") and the Prospectus relating to the Institutional Service Class
Shares (the "Service Class Shares") both dated January 22, 1998. To obtain a
Prospectus, please call the UAM Funds Service Center at 1-800-638-7983.

TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES....................................... 2

PURCHASE AND REDEMPTION OF SHARES........................................ 10

VALUATION OF SHARES...................................................... 12

SHAREHOLDER SERVICES..................................................... 13

INVESTMENT LIMITATIONS................................................... 14

MANAGEMENT OF THE FUND................................................... 15

INVESTMENT ADVISER....................................................... 19

SERVICE AND DISTRIBUTION PLANS........................................... 22

PORTFOLIO TRANSACTIONS................................................... 25

ADMINISTRATIVE SERVICES.................................................. 26

CUSTODIAN................................................................ 28

INDEPENDENT ACCOUNTANTS.................................................. 29

DISTRIBUTOR.............................................................. 29

PERFORMANCE CALCULATIONS................................................. 29

GENERAL INFORMATION...................................................... 32

FINANCIAL STATEMENTS..................................................... 34

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS....................... A-1
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
APPENDIX B - COMPARISONS............................ B-1
INVESTMENT OBJECTIVES AND POLICIES
</TABLE>

The following discussion supplements the discussion of investment
objectives and policies of the NWQ Balanced, NWQ Small Cap Value, NWQ Special
Equity, and NWQ Value Equity Portfolios (the "Portfolios") as set forth in the
NWQ Prospectuses.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "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). The Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of the collateral) for the loans at fair market value would
be committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed in the Prospectuses.

FUTURES CONTRACTS

The NWQ Special Equity Portfolio may purchase and sell exchange-traded
interest rate, stock index and currency futures contracts for the purposes of
hedging against anticipated changes in prevailing interest rates, overall prices
of securities in which it may invest, and currency exchange rates. It may also
purchase and sell futures contracts to remain fully invested and to reduce
transaction costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated
under the Commodity Exchange
<PAGE>

Act by the Commodity Futures Trading Commission ("CFTC"), a U.S. Government
agency.

Futures contracts on securities indices or other indices do not
require the physical delivery of securities, but merely provide for profits and
losses resulting from changes in the market value of a contract to be credited
or debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date a final cash
settlement occurs and the futures position is simply closed out. Changes in
the market value of a particular futures contract reflect changes in the level
of the index on which the futures contract is based.

Futures traders are required to make a good faith margin deposit in
cash or acceptable securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure 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. Brokers may establish deposit requirements which are higher than the
exchange minimums. Generally, margin deposits are structured as percentages
(e.g., 5%) of the market value of the contracts being traded. After a futures
contract position is opened, the value of the contract is marked to market
daily. If the futures contract price changes to the extent that the margin on
deposit does not satisfy margin requirements, payment of additional "variation"
margin will be required. Conversely, changes in the contract value may reduce
the required margin, resulting in a repayment of excess margin to the contract
holder. Variation margin payments are made to and from the futures broker for
as long as the contract remains open. The Fund expects to earn interest income
on its margin deposits.

Traders in futures contracts may be broadly classified as "hedgers" or
"speculators." Hedgers use the futures markets primarily to offset unfavorable
changes in the value of securities otherwise held for investment purposes or
expected to be acquired by them. Speculators are less inclined to own

-3-
<PAGE>

securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in
interest rates. The Portfolio intends to use futures contracts only for hedging
purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of the Portfolio. The Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, the Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed," that is, equivalent
amounts of related securities will have been purchased or will be purchased by
the Portfolio on the settlement date of the futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control the Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Portfolio will incur commission expenses in
both opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

The NWQ Special Equity Portfolio will not enter into futures contract
transactions to the extent that, immediately thereafter, the sum of its initial
margin deposits on open contracts exceeds 5% of the market value of its total
assets. In addition, the Portfolio will not enter into futures contracts to the
extent that its outstanding obligations to purchase securities under these
contracts would exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

The NWQ Special 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
secondary market will exist for any particular futures contract at any specific
time. Thus, it may not be possible to close a futures position. In the event
of adverse price movements, the

-4-
<PAGE>

Portfolio would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if the Portfolio has insufficient cash,
it may have to sell portfolio securities to meet daily margin requirements at a
time when it may be disadvantageous to do so. In addition, the Portfolio may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close futures positions also could have an adverse
impact on the Portfolio's ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can
be substantial 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the 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 Portfolio 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 and
also experience a decline in value of portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option.

-5-
<PAGE>

trading day and, therefore, does not limit potential losses because the limit
may prevent the liquidation of unfavorable 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.

Futures contracts may be traded on foreign exchanges. Such
transactions are subject to the risks of governmental actions affecting trading
in or the prices of the securities. The value of such positions also could be
adversely affected by (i) other complex foreign political and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Portfolio's ability to act upon economic
events occurring in foreign markets during nonbusiness hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lesser
trading volume.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions the NWQ Special Equity Portfolio has
identified 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 recognized with respect to a futures contract is considered to be 60% long-
term capital gain or loss and 40% short-term capital gain or loss, without
regard to the holding period of the contract. Furthermore, sales of futures
contracts which are intended to hedge against a change in the value of
securities held by the Portfolio may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.

In order for the Portfolio to continue to qualify for federal income
tax treatment as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), at least 90% of its gross income, for a
taxable year must be derived from qualifying income, i.e., dividends, interest,
income derived from loans of securities, and gains from the sale of securities
or foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. 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.

-6-
<PAGE>

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.

OPTIONS

The NWQ Special Equity Portfolio may purchase and sell put and call
options and write covered call and put options on futures contracts generally
for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. For example, there are significant differences
between the securities, futures and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objective. A decision as to whether, when, and how to use options
involves the exercise of skill and judgment by the Adviser, and even a well-
conceived transaction may be unsuccessful because of market behavior or
unexpected events.

WRITING COVERED CALL AND PUT OPTIONS AND PURCHASING CALL AND PUT OPTIONS

The Portfolio may write exchange-traded covered call and put options
on or relating to specific securities in order to earn additional income or, in
the case of a call written, to minimize or hedge against anticipated declines in
the value of its portfolio securities. The Portfolio may write covered call
options on its portfolio securities in amounts up to 10% of its total assets in
order to earn additional income or to minimize or hedge against anticipated
declines in the value of those securities. All call options written by the
Portfolio are covered, which means that the Portfolio will own the securities
subject to the option as long as the option is outstanding. All put options
written by the Portfolio are covered, which means that the Portfolio has
deposited with its custodian cash or other liquid securities with a value at
least equal to the exercise price of the option. Call and put options written
by the Portfolio may also be covered to the extent that the Portfolio's
liabilities under such options are offset by its

-7-
<PAGE>

rights under call or put options purchased by the Portfolio and call options
written by the Portfolio may also be covered by depositing cash or securities
with its custodian in the same manner as written puts are covered.

Through the writing of a covered call option the Portfolio receives
premium income but obligates itself to sell to the purchaser of such an option
the particular security underlying the option at a specified price at any time
prior to the expiration of the option period, regardless of the market value of
the security during this period. Through the writing of a covered put option,
the Portfolio receives premium income but obligates itself to purchase a
particular security underlying the option at a specified price at any time prior
to the expiration of the option period, regardless of market value during the
option period.

The Portfolio may, in accordance with its investment objective, also
write exchange-traded covered call and put options on stock indices. The
Portfolio may write such options to generate additional income or as a hedging
technique to minimize anticipated declines in the value of the Portfolio's
securities. In economic effect, a stock index call or put option is similar to
an option on a particular security, except that the value of the option depends
on the weighted value of the group of securities comprising the index, rather
than a particular security, and settlements are made in cash rather than by
delivery of a particular security.

The Portfolio may also purchase exchange-traded call and put options
with respect to securities and with respect also to stock indices that correlate
with its particular portfolio securities. The Portfolio may purchase put
options for defensive purposes in order to protect against an anticipated
decline in the value of portfolio securities. As the holder of a put option
with respect to individual securities, the Portfolio has the right to sell the
securities underlying the options and to receive a cash payment at the exercise
price at any time during the option period. As the holder of a put option on an
index, the Portfolio has the right to receive, upon exercise of the option, a
cash payment equal to a multiple of any excess of the strike price specified by
the option over the value of the index.

The Portfolio may purchase call options on individual securities in
order to take advantage of anticipated increases in the price of those
securities by purchasing the right to acquire the securities underlying the
option (or, with respect to options on indices, to receive income equal to the
value of such index over the strike price). As the holder of a call option with
respect to individual securities, the Portfolio obtains the right to purchase
the underlying securities at the exercise price at

-8-
<PAGE>

any time during the option period. As the holder of a call option on a stock
index, the Portfolio obtains the right to receive upon exercise of the option, a
cash payment equal to the multiple of any excess of the value of the index on
the exercise date over the strike price specified in the option.

The Portfolio may also write and purchase unlisted covered call and
put options. Such options are not traded on an exchange and may not be as
actively traded as listed securities, making the valuation of these securities
more difficult. In addition, an unlisted option entails a risk not found in
connection with listed options -- that the party on the other side of the option
transaction will default. This may make it impossible to close out an unlisted
option position in some cases, and profits may be lost thereby. Except as
described below, such unlisted over-the-counter options will generally be
considered illiquid securities. The Portfolio will engage in such transactions
only with firms of sufficient credit to minimize these risks. Where the
Portfolio has entered into agreements with primary dealers with respect to the
unlisted options it has written, and such agreements would enable the Portfolio
to have an absolute right to repurchase, at a pre-established formula price, the
over-the-counter options written by it, the Portfolio will treat as illiquid
only the amount equal to the formula price described above less the amount by
which the option is "in the money."

In addition, the effectiveness of hedging the Portfolio through the
purchase or sale (writing)of stock index options will depend upon the extent to
which price movements in the Portfolio's holdings being hedged correlate with
price movements in the selected stock index. Perfect correlation may not be
possible because the securities held or to be acquired by the Portfolio may not
exactly match the composition of the stock index on which options are purchased
or written.

-9-
<PAGE>

SHORT-TERM INVESTMENTS

The Portfolios may invest in time deposits, certificates of deposit
(including marketable variable rate certificates of deposit) and bankers'
acceptances issued by a commercial bank or savings and loan association. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits 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 commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectuses are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares. See "Financial
Highlights" in the Prospectuses for each Portfolio's historical portfolio
turnover rates.

PURCHASE AND REDEMPTION OF SHARES

-10-
<PAGE>

York Stock Exchange ("Exchange") (generally 4:00 p.m. Eastern Time) will be
executed at the price computed on the date of receipt; and an order received not
in proper form or after the 4:00 p.m. close of the Exchange will be executed at
the price computed on the next day the Exchange is open after proper receipt.
The Exchange will be closed on the following days: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day; New
Year's Day and Dr. Martin Luther King, Jr. Day.

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 SEC, (2)
during any period when an emergency exists as defined by the rules of the SEC 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 SEC may permit. The Fund has made an election
with the SEC to pay in cash all redemptions requested by any shareholder of
record limited in amount during any 90-day period to the lesser of $250,000 or
1% of the net assets of the Fund at the beginning of such period. Such
commitment is irrevocable without the prior approval of the SEC. Redemptions in
excess of the above limits may be paid, in whole or in part, in investment
securities or in cash as the Directors may deem advisable; however, payment will
be made wholly in cash unless the Directors believe that economic or market
conditions exist which would make such a practice detrimental to the best
interests of the Fund. If redemptions are paid in investment securities, such
securities will be valued as set forth in the Prospectuses under "Valuation of
Shares," and a redeeming shareholder would normally incur brokerage expenses if
these securities were converted to cash.

No charge is made by a Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase Global Funds
Services Company ("CGFSC") from fraud, signature guarantees are required for
certain redemptions. The

-11-
<PAGE>

purpose of signature guarantees is to verify the identity of the person who has
authorized a redemption from your account. Signature guarantees are required for
(1) all redemptions when the proceeds are to be paid to someone other than the
registered owner(s) and/or registered address, or (2) share transfer
requests.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the transfer agent. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.

VALUATION OF SHARES

Bonds, other fixed income securities and fixed dividends 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.

-12-
<PAGE>

Securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, using methods approved by the Board of Directors.

SHAREHOLDER SERVICES

The following supplements the information set forth under "Shareholder
Services" in the NWQ Prospectuses.

EXCHANGE PRIVILEGE

Institutional Class Shares of a Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in the UAM Funds
complex which is comprised of the Fund and UAM Funds Trust. Institutional
Service Class Shares ("Service Class Shares") of a Portfolio may be exchanged
for Service Class Shares of any other UAM Portfolio offering such Shares. (See
the list of Portfolios of the UAM Funds for each class at the back of each
respective Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to UAM Funds, UAM Funds Service Center, c/o Chase
Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
exchange privilege is only available with respect to Portfolios that are
qualified for sale in the shareholder's state of residence.

-13-
<PAGE>

authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency and to other
restrictions established by the Board of Directors to assure that such exchanges
do not disadvantage the Fund and its shareholders.

TRANSFER OF SHARES

Shareholders may transfer shares of a Portfolio to another person by
making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Purchase
and Redemption of Shares." As in the case of redemptions, the written request
must be received in good order before any transfer can be made.

INVESTMENT LIMITATIONS

The following limitations supplement those set forth in the
Prospectuses. A Portfolio's fundamental investment limitations cannot be
changed without approval by a "majority of the outstanding shares" (as defined
in the 1940 Act) of the Portfolio. Whenever an investment limitation sets forth
a percentage limitation on investment or utilization of assets, such limitation
shall be determined immediately after and as a result of a Portfolio's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, net assets or other circumstances
will not be considered when determining whether the investment complies with a
Portfolio's investment limitations. Each Portfolio will not:

(1) invest in physical commodities or contracts on physical
commodities;

(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and

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<PAGE>

sell securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;

(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and (ii) by lending its portfolio
securities to banks, brokers, dealers and other financial
institutions so long as such loans are not inconsistent with the
1940 Act and the rules and regulations or interpretations of the
SEC thereunder;

(4) underwrite the securities of other issuers;

(6) purchase on margin or sell short;

(7) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;

(8) invest more than an aggregate of 15% of the net assets of the
Portfolio, determined at the time of investment, in securities
subject to legal or contractual restrictions on resale or
securities for which there are no readily available markets;

(9) invest for the purpose of exercising control over management of
any company; and

(10) write or acquire options or interests in oil, gas, mineral leases
or other mineral exploration or development programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

-15-
<PAGE>

of the Fund, their addresses and dates of birth, and a brief statement of their
present positions and principal occupations during the past five years.

Nancy J. Dunn Director of the Fund; Vice President for Finance and
10 Garden Street Administration and Treasurer of Radcliffe College since
Cambridge, MA 02138 1991.
8/14/51

Charles H. Salisbury, Director of the Fund; Executive Vice President of United
Jr.* Asset Management Corporation; formerly an executive
One International officer and Director of T. Rowe Price and President and
Place Chief Investment Officer of T. Rowe Price Trust Company.
Boston, MA 02110
8/24/40

-16-
<PAGE>

<TABLE>

<S> <C>

William H. Park Vice President of the Fund; Executive Vice President and
One International Chief Financial Officer of United Asset Management
Place Corporation.
Boston, MA 02110
9/19/47

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
7/30/56 Coopers & Lybrand LLP from 1983 to 1993.

Karl O. Hartmann Assistant Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Chase Global Funds Services
Boston, MA 02108 Company.
3/7/55
</TABLE>

- --------
* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned less
than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

-17-
<PAGE>

Pension or Estimated
Aggregate Retirement Benefits Annual Total Compensation
Name of Person, Compensation Accrued as Part of Benefits Upon from Registrant and
Position From Registrant Fund Expenses Retirement Fund Complex
--------- --------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr........ $ 26,791 0 0 $ 32,750
Director
Nancy J. Dunn.............. $ 6,774 0 0 $ 8,300
Director
Philip D. English.......... $ 26,791 0 0 $ 32,750
Director
William A. Humenuk......... $ 26,791 0 0 $ 32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of a Portfolio, as noted.

NWQ Balanced Portfolio Institutional Class Shares: Nabank & Co.,
Attention: Trust Securities, P.O. Box 2180, Tulsa, OK, 54.1%*; Hartnat & Co.,
Scottsdale Princess, P.O. Box 92800, Rochester, NY, 10.3%*; Fleet National Bank,
Trustee, FBO Charlotte Eye Ear Nose & Throat, P.O. Box 92800, Rochester, NY,
8.0%*; Hartnat & Co., Princess Hotels/John F. Price, P.O. Box 92800, Rochester,
NY, 7.0%*; Campbell Company Inc., Employees Retirement Trust, 1515 4th Avenue
South Avenue, Suite A, Seattle, WA, 5.5%* and William Park/Joseph R. Ramrath,
Trustees, FBO California Central Trust Bank Corp., FBO NWQ Balanced, Box 5024,
Costa Mesa, CA, 5.3%*.

-18-
<PAGE>

NWQ Balanced Portfolio Institutional Service Class Shares: Fleet
National Bank, Trustee, FBO Davies Medical Pension Plan, P.O. Box 92800,
Rochester, NY 27.1%*; Hoag Memorial Hospital, P.O. Box 92800, Rochester, NY,
12.9%*; Fleet National Bank, Trustee, Hoag Memorial Hospital, Conservative
Collective, P.O. Box 92800, Rochester, NY, 12.8%*; Fleet National Bank, Trustee,
Hoag Memorial Hospital, Moderate Collective, P.O. Box 92800, Rochester, NY,
10.8%*; Fleet National Bank, Trustee, Laidlow/Allied/NWQ, P.O. Box 92800,
Rochester, NY, 8.4%*; Fleet National Bank, Trustee, Hartnat & Co., North Texas,
P.O. Box 92800, Rochester, NY, 8.3%* and Chase Manhattan Bank, as Directed,
Trustee of the Mustang Employees, 401K Profit Sharing Plan 6/1/97, 770 Broadway
10th Floor, New York, NY, 6.4%.

NWQ Value Equity Portfolio Institutional Class Shares: Nix, Mann and
Associates, Inc., Profit Sharing Plan and Trust, 1382 Peachtree Street, NE,
Atlanta, GA, 21.1%; Charles Schwab & Co., Inc., Reinvest Account, Attention:
Mutual Funds, 101 Montgomery Street, San Francisco, CA, 20.5%*; Fleet National
Bank, Trustee for Arizona Bank, P.O. Box 92800, Rochester, NY 9.0%*; William
Park/Joseph R. Ramrath, Trustees, FBO California Central Trust Bank Corp., FBO
NWQ Value Equity, Box 5024, Costa Mesa, CA, 6.0%* and Brendan Kennedy, c/o
Tricoastal, 1212 Avenue of the Americas, New York, NY, 5.2%.

NWQ Small Cap Value Portfolio Institutional Class Shares: CNA Trust
Corporation FBO NWQ, AC 1040002245/2254, Box 5024, Costa Masa, CA, 92.4% and
Nancy Gibson Sternal, 2712 Glenhurst Avenue, St. Louis Park, MN, 6.2%.

NWQ Special Equity Portfolio Institutional Class Shares: CNA Trust
Corporation FBO NWQ, AC 1040002245/2254, Box 5024, Costa Masa, CA, 99.5%.

NWQ Special Equity Portfolio Institutional Service Class Shares: Linn
Family Partnership, 609 Edgewood Drive, Montgomery, TX, 62%; Jeffrey Chawenson
and Paul R. Botts, TRSTE, FBO King G. Neel Inc., Profit Sharing Plan Trust, 1164
Bishop Street, Suite 1710, Honolulu, HI, 13%; Roger H. Linn TRSTE, Sara Linn
TRUST, FBO Sara Linn, 609 Edgewood Drive, Montgomery, TX, 12% and Roger H. Linn
TRSTE, FBO Jennifer Linn Trust, FBO Jennifer Linn, 609 Edgewood Drive,
Montgomery, TX, 12%.

NWQ Value Equity Portfolio Institutional Service Class Shares: Chase
Manhattan Bank as Directed, Trustee of the Mustang Employees, 401K Profit
Sharing Plan 6/1/97, 770 Broadway, 10th Floor, New York, NY, 100.0%.

* Denotes shares held by a Trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

-19-
<PAGE>

INVESTMENT ADVISER

CONTROL OF ADVISER

NWQ Investment Management Company (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.

SERVICES PERFORMED BY ADVISER

Pursuant to an Investment Advisory Agreement ("Agreement") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment programs, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreement, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreement, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, for any error of judgment, mistake of law or any other act or omission in
the course of, or connected with, rendering services under the Agreement.

-20-
<PAGE>

voting on such approval, and (b) by the Board of Directors of the Fund or (c) by
vote of a majority of the outstanding voting securities of a Portfolio. The
Agreement may be terminated at any time by a Portfolio, without the payment of
any penalty, by vote of a majority of the entire Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities of such Portfolio
on 60 days' written notice to the Adviser. The Agreement may be terminated by
the Adviser at any time, without the payment of any penalty, upon 90 days'
written notice to the Fund. The Agreement will automatically and immediately
terminate in the event of its assignment.

PHILOSOPHY AND STYLE

The Adviser strives to achieve enhanced risk-adjusted returns or what
is commonly referred to as Northwest quadrant performance. The Adviser utilizes
a top-down, theme-driven approach to value and believes the most important
investment decision is determining the major, long-term, macro-economic trends
that drive market prices. From this macro-economic standpoint, the Adviser
develops a dominant theme that focuses on those market sectors that they believe
will be the primary beneficiaries of underlying economic/monetary/social trends.
Within these sectors that possess a fundamental "tailwind," the Adviser seeks to
identify statistically undervalued companies by applying traditional value
screens. The Adviser's fundamental research focuses on companies that possess
below-average price-to-book and price-to-earnings ratios and above-average
dividend yields. The Adviser's investment objective is to achieve consistently
enhanced returns on an absolute and risk-adjusted basis, throughout a variety of
economic environments.

Regarding the Special Equity Portfolio, the Advisor seeks to identify
statistically undervalued companies where a catalyst exists to recognize value
or improve a company's profitability. The stock selection process is
opportunistic and is driven by strong bottom-up fundamental research, focusing
on both qualitative and quantitative measures.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included the Archdiocese of
Milwaukee, Arizona State University Foundation, Coldwell Banker, United States
Air Force Association and the Washington, D.C. Metro Transit Authority.

In compiling this client list, the Adviser used objective criteria
such as account size, geographic location and client classification. The
Adviser did not use any performance-

-21-
<PAGE>

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 Portfolio pays the Adviser an annual fee in
monthly installments, calculated by applying the following annual percentage
rates to each Portfolio's average daily net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
NWQ Balanced Portfolio......... 0.70%
NWQ Small Cap Value Portfolio.. 1.00%
NWQ Special Equity Portfolio... 0.85%
NWQ Value Equity Portfolio..... 0.70%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, the NWQ
Balanced Portfolio paid $0, $0 and $226,063 in advisory fees. During these
years the Adviser voluntarily waived advisory fees of approximately $20,000,
$80,598 and $103,517, respectively.

For the fiscal years ended October 31, 1995, 1996 and 1997, the NWQ
Value Equity Portfolio paid no advisory fees. During this period the Adviser
voluntarily waived advisory fees of approximately $5,000, $20,776 and $35,666,
respectively.

SERVICE AND DISTRIBUTION PLANS

As stated in the Portfolios' Service Class Shares Prospectus, the
Distributor may enter into agreements with broker-dealers and other financial
institutions ("Service Agents"), pursuant to which they will provide
administrative support services to Service Class shareholders who are their
customers ("Customers") in consideration of the Fund's payment of 0.25% (on an
annualized basis) of the average daily net asset value ("NAV") of the Service
Class Shares held by the Service Agent for the benefit of its Customers. Such
services include: (a) acting as the sole shareholder of record and nominee for
beneficial owners; (b) maintaining account records for such beneficial owners of
the Fund's shares; (c) opening and closing accounts; (d) answering questions and
handling correspondence from shareholders about their accounts; (e) processing

-22-
<PAGE>

shareholder orders to purchase, redeem and exchange shares; (f) handling the
transmission of funds representing the purchase price or redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by shareholders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports; (i) assisting customers in completing
application forms, selecting dividend and other account options and opening any
necessary custody accounts; (j) providing account maintenance and accounting
support for all transactions; and (k) performing such additional shareholder
services as may be agreed upon by the Fund and the Service Agent, provided that
any such additional shareholder service must constitute a permissible non-
banking activity in accordance with the then current regulations of, and
interpretations thereof by, the Board of Governors of the Federal Reserve
System, if applicable.

-23-
<PAGE>

The maximum annual aggregate fee payable by the Fund under the Service
and Distribution Plans (the "Plans") is 0.75% of the Service Class Shares'
average daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares,
currently cannot exceed 0.50% of the average daily net assets represented by the
Service Class. While the current fee which will be payable under the Service
Plan and Distribution Plan has been set at 0.25% and 0.15%, respectively, the
Plans permit a full 0.75% on all assets to be paid at any time following
appropriate Board approval. Fees paid to Service Agents on behalf of the NWQ
Balanced and Value Equity Portfolios' Service Class for the fiscal year ended
October 31, 1997 totalled $145,874 and $3,504, respectively.

All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid by the Service
Class Shares will be borne by such persons without any reimbursement from such
Class. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for aid in
providing administrative services to shareholders.

-24-
<PAGE>

Plans, the Distribution Agreement and the related agreements must be approved
annually by the Board of Directors in the same manner, as specified above. The
Service Class of the NWQ Special Equity Fund commenced operations on November 7,
1997. Service Class Shares for the NWQ Small Cap Value Portfolio have not been
offered prior to the date of this Statement of Additional Information.

Each year the Directors must determine whether continuation of the
Plans is in the best interest of the shareholders of Service Class Shares and
that there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with any
broker-dealer or others relating to the Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
Class. Any amendment materially increasing the maximum percentage payable under
the Plans must likewise be approved by a majority vote of the relevant Class'
outstanding voting securities, as well as by a majority vote of those Directors
who are not "interested persons." Also, any other material amendment to the
Plans must be approved by a majority vote of the Directors including a majority
of the Directors of the Fund having no interest in the Plans. In addition, in
order for the Plans to remain effective, the selection and nomination of
Directors who are not "interested persons" of the Fund must be effected by the
Directors who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plans. Persons authorized to make payments
under the Plans must provide written reports at least quarterly to the Board of
Directors for their review. NASD Regulation, Inc. has adopted amendments to its
Conduct Rules relating to investment company sales charges. The Fund and the
Distributor intend to operate in compliance with these rules.

PORTFOLIO TRANSACTIONS

-25-
<PAGE>

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, 1995, 1996 and 1997, the NWQ Balanced and Value Equity
Portfolios paid brokerage commissions of approximately $2,692, $19,189, and
$29,327, and $3,651, $2,491 and $6,977, respectively.

Some securities considered for investment by the 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 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

The Board of Directors of the Fund has approved a Fund Administration
Agreement ("Fund Administration Agreement"), effective April 15, 1996, between
UAM Fund Services, Inc., a wholly owned subsidiary of UAM, and the Fund.
Pursuant to the terms of the Fund Administration Agreement, UAMFSI manages,
administers and conducts the general business activities of the Fund other than
those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Agreement.

UAMFSI has subcontracted some of these services to CGFSC, an affiliate
of The Chase Manhattan Bank, pursuant to a Mutual Fund Service Agreement between
UAMFSI and CGFSC (collectively, with the Fund Administration Agreement between
UAMFSI and the Fund, the "Agreements").

Pursuant to the terms of the Agreements, each Portfolio of the Fund
pays UAMFSI a two-part monthly fee: a Portfolio-specific fee which is retained
by UAMFSI and a sub-administration fee which UAMFSI in turn pays to CGFSC. The
following Portfolio-specific fees for each Portfolio are calculated from the
aggregate net assets of each Portfolio:

<TABLE>
<CAPTION>
Annual Rate
<S> <C>
NWQ Balanced Portfolio..................................... 0.06%
NWQ Small Cap Value Portfolio.............................. 0.04%
NWQ Special Equity Portfolio............................... 0.04%
</TABLE>

-26-
<PAGE>

<TABLE>
<S> <C>
Annual Rate
NWQ Value Equity Portfolio................................. 0.04%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

0.19 of 1% of the first $200 million of combined Fund net assets;

0.11 of 1% of the next $800 million of combined Fund net assets;

0.07 of 1% of combined Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined Fund net assets in excess of $3 billion.

Prior to April 15, 1996, Chase Global Funds Services Company ("CGFSC")
or its predecessor, Mutual Funds Service Company, provided certain
administrative services to the Fund under an Administration Agreement between
the Fund and U.S. Trust Company of New York. The basis of the fees paid to
CGFSC for the period prior to April 15, 1996 was as follows: the Fund paid a
monthly fee for CGFSC's 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.

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid to the Administrator by the NWQ Balanced and
NWQ Value Equity Portfolios approximately totaled $48,000, $95,007 and $126,732;
and $44,000, $72,798 and $85,646 respectively. Of the fees paid during the year
ended October 31, 1996, NWQ Balanced Portfolio paid $90,165 to CGFSC and $4,842
to UAMFSI, and NWQ Value Equity Portfolio paid $72,120 to CGFSC and $678 to
UAMFSI. Of the fees paid during the year ended October 31, 1997, the NWQ
Balanced Portfolio paid $98,488 to CGFSC and $28,244 to UAMFSI,

-27-
<PAGE>

and the NWQ Value Equity Portfolio paid $83,609 to CGFSC and $2,037 to UAMFSI.
The services provided by UAMFSI and the basis of the fees payable to UAMFSI are
described in the Portfolios' Prospectuses.

-28-
<PAGE>

Pursuant to the Services Agreement, the Service Provider is entitled to receive,
after the end of each month, a fee at the annual rate of 0.15% of the average
aggregate daily net asset value of shares of the Portfolios in the accounts for
which it provides services. During the fiscal year ended October 31, 1997, the
NWQ Balanced, NWQ Small Cap Value, NWQ Special Equity and NWQ Value Equity
Portfolios paid the Service Provider $41,119, $0, $0 and $3,198, respectively,
in fees pursuant to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase Metro Tech Center, Brooklyn, NY
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, serves as
independent accountants for the Fund.

DISTRIBUTOR

UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves
as the Funds' Distributor. Shares of the Fund are offered continuously. While
the Distributer will use its best efforts to sell shares of the Fund, it is not
obligated to sell any particular amount of shares. The Distributor received no
compensation for its services from the Portfolios during the fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolios may from time to time quote various performance figures
to illustrate the past performance of each class of the Portfolios. Performance
quotations by investment companies are subject to rules adopted by the SEC,
which require the use of standardized performance quotations or, alternatively,
that every non-standardized performance quotation furnished by each class of the
Portfolios be accompanied by certain standardized performance information
computed as required by the SEC. 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 SEC. An explanation of

-29-
<PAGE>

those and other methods used by each class of the Portfolios to compute or
express performance follows.

YIELD

Current yield reflects the income per share earned by a Portfolio's
investment. The current yield of a Portfolio is determined by dividing the net
investment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the base period. Since Service Class Shares of the NWQ
Portfolios bear additional service and distribution expenses, the yield of the
Service Class Shares of a Portfolio will generally be lower than that of the
Institutional Class Shares of the same Portfolio.

A yield figure is obtained using the following formula:
<TABLE>
<CAPTION>
Yield = 2[(a - b + 1)/6/ - 1]
------
cd

where:
<S> <C> <C>
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.
</TABLE>
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 redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each 1, 5 and 10 year period and the deduction
of all applicable Fund expenses on an annual basis. Since Service Class Shares
of the NWQ Portfolios bear additional service and distribution expenses, the
average annual total return of the Service Class Shares of a Portfolio will
generally be lower than that of the Institutional Class Shares of the same
Portfolio.

The average annual total return of the NWQ Balanced Portfolio
Institutional Class Shares and the NWQ Value Equity

-30-
<PAGE>

Portfolio Institutional Class Shares from inception and for the one year period
ended on the date of the Financial Statements included herein are as follows:

<TABLE>
<CAPTION>
Since Inception
One Year Through Fiscal
Ended Year Ended Inception
October 31, 1997 October 31, 1997 Date
----------------- ----------------- ---------
<S> <C> <C> <C>
NWQ Balanced Portfolio 22.82% 16.07% 8/2/94
Institutional Class Shares..
NWQ Value Equity Portfolio 35.77% 24.09% 9/21/94
Institutional Class Shares..
</TABLE>

The cumulative total return of the NWQ Balanced Portfolio
Institutional Service Class Shares from inception to the date of the Financial
Statements included herein is as follows:

<TABLE>
<CAPTION>
Since Inception
One Year Through Fiscal
Ended Year Ended Inception
October 31, 1997 October 31, 1997 Date
----------------- ----------------- ---------
<S> <C> <C> <C>
NWQ Balanced Portfolio 23.39% 17.36% 1/22/96
Service Class Shares
NWQ Value Equity Portfolio
Service Class Shares -- 5.81% 6/16/97
</TABLE>

These figures are calculated according to the following formula:
<TABLE>
<CAPTION>

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).
</TABLE>

-31-
<PAGE>

Institutional Class Shares and Service Class Shares of the NWQ Small
Cap Value and NWQ Special Equity Portfolios were not offered as of October 31,
1997. Accordingly, no total return figures are available.

COMPARISONS

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation 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 located
at One International Place, Boston, MA 02110; however, all investor
correspondence should be addressed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of common
stock and to classify or reclassify any unissued shares with respect to such
Portfolios, without further action by shareholders. The Board of Directors has
classified an additional class of shares in certain Portfolios of the Fund,
known as Advisor shares. As of the date of this Statement of Additional
Information, no Advisor shares have been offered by the Fund.

-32-
<PAGE>

Both classes of shares of each Portfolio of the Fund, when issued and
paid for as provided for in the Prospectuses, will be fully paid and
nonassessable, have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemptive rights. The shares of the
Fund have noncumulative voting rights, which means that the holders of more than
50% of the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his name on the books of the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of each
Portfolio's net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the federal excise
tax on undistributed income and capital gains. (See discussion under
"Dividends, Capital Gains Distributions and Taxes" in the Prospectuses.) The
amounts of any income dividends or capital gains distributions cannot be
predicted.

Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the
Prospectuses.

As set forth in the Prospectuses, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of the respective Portfolio of the
Fund at net asset value (as of the business day following the record date).
This will remain in effect until the Fund is notified by the shareholder in
writing at least three days prior to the record date that either the Income
Option (income dividends in cash and capital gains distributions in additional
shares at net asset value) or the Cash Option (both income dividends and capital
gains distributions in cash) has been elected. An account statement is sent to
shareholders whenever an income dividend or capital gains distribution is
paid.

-33-

<PAGE>

without need to offset (for federal income tax purposes) such gains
against any net capital losses of another Portfolio.

FEDERAL TAXES

The Portfolios will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes.
Shareholders will be advised on the nature of the payments.

CODE OF ETHICS

The Fund has adopted a Code of Ethics which restricts to a certain
extent personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of NWQ Balanced and
NWQ Value Equity Portfolios and the Financial Highlights for the respective
periods presented, which appear in the Portfolios' 1997 Annual Report to
Shareholders, and the report thereon of Price Waterhouse LLP, independent
accountants, also appearing therein, are attached to this Statement of
Additional Information.

-34-
<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF CORPORATE BOND RATINGS

Moody's Investors Service, Inc. Corporate Bond Ratings:

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of

A-1
<PAGE>

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 shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Standard & Poor's Ratings Services 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
principal 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-2
<PAGE>

characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

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
categories except in the AAA, CC, C, CI and D categories.

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of
securities which are issued or guaranteed by the U.S. Government, and by various
instrumentalities which have been established or sponsored by the U.S.
Government.

U.S. Treasury securities are backed by the "full faith and credit" of
the U.S. 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 U.S.

In the case of securities not backed by the full faith and credit of
the U.S., the investor must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the U.S. 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 U.S. include the Export-Import Bank, Farmers Home
Administration, Federal Financing Bank, and others. Certain agencies and
instrumentalities, such as the Government National Mortgage Association are, in
effect, backed by the full faith and credit of the U.S. through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, is not guaranteed by the U.S., but those institutions are
protected by the discretionary authority of the U.S. Treasury to purchase
certain amounts of their securities to assist the institution in meeting its
debt obligations. Finally, other agencies and instrumentalities, such as the
Farm Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the credit worthiness of those institutions, not the U.S.
Government.

A-3
<PAGE>

Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the U.S., Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.

III. DESCRIPTION OF COMMERCIAL PAPER

A Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's, or, if
unrated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. Commercial paper refers to short-term,
unsecured promissory notes issued by corporations to finance short-term credit
needs. Commercial paper is usually sold on a discount basis and has a maturity
at the time of issuance not exceeding nine months. Variable amount master
demand notes are demand obligations that permit the investment of fluctuating
amounts at varying market rates of interest pursuant to arrangement between the
issuer and a commercial bank acting as agent for the payees of such notes,
whereby both parties have the right to vary the amount of the outstanding
indebtedness on the notes. Because variable amount master demand notes are
direct lending arrangements between a lender and a borrower, it is not generally
contemplated that such instruments will be traded, and there is no secondary
market for these notes, although they are redeemable (and thus immediately
repayable by the borrower) at face value, plus accrued interest, at any time.
In connection with the Portfolio's investment in variable amount master demand
notes, the Adviser's investment management staff will monitor, on an ongoing
basis, the earning power, cash flow and other liquidity ratios of the issuer,
and the borrower's ability to pay principal and interest on demand.

Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation of
the management of the issuer; (2) economic evaluation of the issuer's industry
or industries and the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer

A-4
<PAGE>

acceptance; (4) liquidity; (5) amount and quality of long term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer, and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.

IV. DESCRIPTION OF BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may be increased or decreased periodically.
Frequently, dealers selling variable rate certificates of deposit to a Portfolio
will agree to repurchase such instruments, at the Portfolio's option, at par on
or near the coupon dates. The dealers' obligations to repurchase these
instruments are subject to conditions imposed by various dealers; such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolio is also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). The borrower is liable for payment as well as the bank,
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and are
traded in the secondary markets prior to maturity.

A-5
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an
unmanaged index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividend.

(c) Standard & Poor's 400 Mid Cap Index -- an unmanaged, market-value
weighted index composed of 400 domestic stocks chosen for market size,
liquidity, and industry group representation.

(d) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.

(e) Wilshire 5000 Equity Index or its component indices -- represents
the return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.

(f) Lipper - Mutual Fund Performance Analysis and Lipper -- Fixed
Income Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry and Rank individual mutual fund performance
over specified time periods, assuming reinvestment of all distributions,
exclusive of any applicable sales charges.

(g) Lipper Capital Appreciation Funds Index -- a Fund that aims at
maximum capital appreciation, frequently by means of 100% or more portfolio
turnover, leveraging, purchasing unregistered securities, purchasing options,
etc.

(h) Lipper Equity Income Funds Index -- is comprised of the 30 largest
funds, in terms of total net assets, which seek relatively high current income
and growth of income through investing 60% or more of their portfolio in
equities.

(i) Lipper Small Cap Funds Index -- a Fund that by prospectus or
portfolio practice invests primarily in companies with market capitalizations
less than $1 billion at the time of purchase.

B-1
<PAGE>

(j) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the performance of
over 900 securities listed on the stock exchanges of countries in Europe,
Australia and the Far East, and over 1,400 securities listed on the stock
exchanges of these continents, including North America.

(k) 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.

(l) Salomon Brothers GNMA Index -- includes pools of mortgages
originated by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.

(m) Salomon Brothers High Grade Corporate Bond Index
- -- consists of publicly issued, non-convertible corporate bonds rated AA or AAA.
It is a value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.

(n) Salomon Brothers Broad Investment Grade Bond -- is a market-
weighted index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues and
mortgage pass through securities.

(o) 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.

(p) Lehman Brothers Government/Corporate Index -- is a combination of
the Government and Corporate Bond Indices. The Government Index includes public
obligations of the U.S. Treasury, issues of Government agencies, and corporate
debt backed by the U.S. Government. The Corporate Bond Index includes fixed-
rate nonconvertible corporate debt. Also included are Yankee Bonds and
nonconvertible debt issued by or guaranteed by foreign or international
governments and agencies. All issues are investment grade (BBB) or higher, with
maturities of at least one year and an outstanding par value of at least $100
million for U.S. Government issues and $25 million for others. Any security
downgraded during the month is held in the index until month-end and then
removed. All returns are market value weighted inclusive of accrued
income.

(q) 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.

B-2
<PAGE>

(r) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.

(s) 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. publicly-
traded companies.

(t) The Salomon Brothers 3-month T-Bill Average -- The average return
for all treasury bills for the previous three-month period.

(u) Composite indices -- 60% Standard & Poor's 500 Stock Index, 30%
Lehman LONG-TERM Treasury Bond and 10% U.S. Treasury Bills; 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 Index, and 60%
Standard & Poor's 500 Stock Index, 30% Lehman Brothers Government/Corporate
Index and 10% Salomon Brothers 3-Month T-Bill Average.

(v) 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.

(w) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

(x) 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 Investment Companies
Service -- publications that rate fund performance over specified time
periods.

(y) 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.

(z) Stocks, Bonds, Bills and Inflation, published by Ibbotson
Associates -- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills and
inflation.

(aa) Savings and Loan Historical Interest Rates -- as published by the
U.S. Savings & Loan League Fact Book.

B-3
<PAGE>

(bb) Historical data supplied by the research departments of First
Boston Corporation; the J.P. Morgan Companies; Salomon Brothers; Merrill Lynch,
Pierce, Fenner & Smith; Lehman Brothers and Bloomberg L.P.

B-4
<PAGE>

NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (62.0%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.2%)
Boeing Co. ............................................... 15,600 $ 746,850
*DONCASTERS plc ADR........................................ 7,500 202,031
Sundstrand Corp. ......................................... 7,800 424,125
United Technologies Corp. ................................ 5,200 364,000
-----------
1,737,006
- -------------------------------------------------------------------------------
BASIC MATERIALS (7.6%)
Air Products & Chemical, Inc. ............................ 4,150 315,400
*Alumax, Inc. ............................................. 10,400 338,000
Champion International Corp. ............................. 4,600 253,863
Du Pont (E.I.) de Nemours & Co. .......................... 9,200 523,250
Grace (W.R.) & Co. ....................................... 9,800 666,400
IMC Global, Inc. ......................................... 13,500 454,781
Morton International, Inc. ............................... 16,100 531,300
Placer Dome, Inc. ........................................ 25,000 387,500
Reynolds Metals Co. ...................................... 3,600 219,375
USX-US Steel Group, Inc. ................................. 11,750 399,500
-----------
4,089,369
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (10.0%)
Case Corp. ............................................... 8,100 484,481
Caterpillar, Inc. ........................................ 27,900 1,429,875
Cooper Industries, Inc. .................................. 6,400 333,600
Deere & Co. .............................................. 20,500 1,078,812
Flowserve Corp. .......................................... 644 19,159
Foster Wheeler Corp. ..................................... 9,200 301,875
Harnischfeger Industries, Inc. ........................... 5,000 196,875
Ingersoll-Rand Co. ....................................... 20,550 800,166
Kennametal, Inc. ......................................... 5,000 242,500
York International Corp. ................................. 10,950 499,594
-----------
5,386,937
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (6.9%)
Exide Corp. ............................................. 14,550 339,197
*Federated Department Stores, Inc. ....................... 17,000 748,000
General Motors Corp. .................................... 10,050 645,084
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--(CONTINUED)
Maytag Corp. .............................................. 12,000 $ 400,500
Time Warner, Inc. ......................................... 12,500 721,094
*U.S. West Media Group ..................................... 34,500 871,125
-----------
3,725,000
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.3%)
Unilever N.V.--New York Shares............................. 13,600 725,900
- --------------------------------------------------------------------------------
ELECTRONICS (2.6%)
Emerson Electric Co. ...................................... 12,000 629,250
Grainger (W.W.), Inc. ..................................... 8,500 743,219
-----------
1,372,469
- --------------------------------------------------------------------------------
ENERGY (9.6%)
Coastal Corp. ............................................. 1,050 63,131
Dresser Industries, Inc. .................................. 14,100 593,962
Halliburton Co. ........................................... 12,500 745,313
*Noble Drilling Corp. ...................................... 19,200 682,800
*Reading & Bates Corp. ..................................... 10,000 423,750
Santa Fe International Corp. .............................. 14,500 713,219
Tidewater, Inc. ........................................... 9,400 617,462
Transocean Offshore, Inc. ................................. 15,000 810,000
*United Meridian Corp. ..................................... 16,100 546,394
-----------
5,196,031
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (10.8%)
Allstate Corp. ............................................ 9,000 746,437
American International Group, Inc. ........................ 6,625 676,164
Bank of New York Co., Inc. ................................ 14,000 658,875
Bear Stearns Cos., Inc. ................................... 8,820 350,044
Chase Manhattan Corp. ..................................... 7,000 807,625
First Union Corp. ......................................... 11,500 564,219
*Highlands Insurance Group.................................. 145 3,335
Household International, Inc. ............................. 4,000 453,000
National City Corp. ....................................... 8,025 479,494
Norwest Corp. ............................................. 35,000 1,122,187
-----------
5,861,380
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HEALTH CARE (1.4%)
Aetna, Inc. .......................................... 6,000 $ 426,375
Columbia/HCA Healthcare Corp. ........................ 11,800 333,350
-----------
759,725
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.0%)
Loews Corp. .......................................... 9,800 1,094,538
- --------------------------------------------------------------------------------
TECHNOLOGY (4.4%)
*Ceridian Corp. ....................................... 14,000 546,875
Texas Instruments, Inc. .............................. 7,450 794,822
Thomas & Betts Corp. ................................. 8,200 407,950
Xerox Corp. .......................................... 8,000 634,500
-----------
2,384,147
- --------------------------------------------------------------------------------
TRANSPORTATION (2.2%)
*AMR Corp. ............................................ 3,100 360,956
Delta Air Lines, Inc. ................................ 8,400 846,300
-----------
1,207,256
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $26,169,618).................. 33,539,758
- --------------------------------------------------------------------------------
PREFERRED STOCKS (0.0%)
- --------------------------------------------------------------------------------
HEALTH CARE (0.0%)
Fresenius Medical Care AG (COST $79)................... 800 48
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (31.7%)
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (18.7%)
10.375%, 11/15/12...................................... $4,500,000 5,942,813
7.25%, 5/15/16......................................... 3,750,000 4,184,767
-----------
10,127,580
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (13.0%)
5.625%, 1/31/98........................................ 1,000,000 1,000,000
5.50%, 11/15/98........................................ 2,500,000 2,497,658
8.00%, 8/15/99......................................... 25,000 25,984
6.375%, 8/15/02........................................ 200,000 205,125
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

NWQ BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES--(CONTINUED)
5.875%, 2/15/04........................................ $2,500,000 $ 2,510,158
7.25%, 5/15/04......................................... 750,000 806,953
-----------
7,045,878
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $16,613,013)..... 17,173,458
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.9%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $2,652,237,
collateralized by $2,541,707 of various U.S. Treasury
Notes, 5.50%-8.75% due 5/15/00-6/30/02, valued at
$2,652,496 (COST $2,651,000).......................... 2,651,000 2,651,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.6%) (COST $45,433,710) (A)........ 53,364,264
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.4%)..................... 754,157
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $54,118,421
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
ADR American Depositary Receipt
(a) The cost for Federal income tax purposes was $45,433,710. At October 31,
1997, net unrealized appreciation for all securities based on tax cost
was $7,930,554. This consisted of aggregate gross unrealized
appreciation for all securities of $8,474,124 and gross unrealized
depreciation for all securities of $543,570.

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.3%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (5.7%)
Boeing Co. ................................................. 2,400 $ 114,900
*DONCASTERS plc ADR.......................................... 2,500 67,344
Sundstrand Corp. ........................................... 1,700 92,437
United Technologies Corp. .................................. 2,300 161,000
----------
435,681
- --------------------------------------------------------------------------------
BASIC MATERIALS (13.4%)
Air Products & Chemical, Inc. .............................. 350 26,600
*Alumax, Inc. ............................................... 3,775 122,688
Champion International Corp. ............................... 1,200 66,225
Du Pont (E.I.) de Nemours & Co. ............................ 2,200 125,125
Georgia-Pacific Corp. ...................................... 700 59,369
Grace (W.R.) & Co. ......................................... 2,525 171,700
IMC Global, Inc. ........................................... 2,550 85,903
Morton International, Inc. ................................. 3,700 122,100
Placer Dome, Inc. .......................................... 5,700 88,350
USX-US Steel Group, Inc. ................................... 3,000 102,000
Weyerhaeuser Co. ........................................... 950 45,363
----------
1,015,423
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (13.2%)
Case Corp. ................................................. 1,900 113,644
Caterpillar Inc. ........................................... 4,050 207,562
Cooper Industries, Inc. .................................... 2,450 127,706
Deere & Co. ................................................ 3,900 205,237
Flowserve Corp. ............................................ 156 4,641
Foster Wheeler Corp. ....................................... 300 9,844
Harnischfeger Industries, Inc. ............................. 1,100 43,313
Ingersoll-Rand Co. ......................................... 3,825 148,936
Kennametal, Inc. ........................................... 1,600 77,600
York International Corp. ................................... 1,300 59,313
----------
997,796
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (9.1%)
Exide Corp. ................................................ 1,450 33,803
*Federated Department Stores, Inc. .......................... 3,800 167,200
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--(CONTINUED)
General Motors Corp. ...................................... 2,175 $ 139,608
Time Warner, Inc. ......................................... 2,800 161,525
*U.S. West Media Group...................................... 7,500 189,375
-----------
691,511
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.7%)
Unilever N.V.--New York Shares............................. 2,400 128,100
- --------------------------------------------------------------------------------
ELECTRONICS (3.6%)
Emerson Electric Co. ...................................... 2,900 152,069
Grainger (W.W.) Inc. ...................................... 1,400 122,412
-----------
274,481
- --------------------------------------------------------------------------------
ENERGY (14.7%)
*BJ Services Co. ........................................... 1,500 127,125
Coastal Corp. ............................................. 1,775 106,722
Dresser Industries, Inc. .................................. 2,025 85,303
Halliburton Co. ........................................... 2,750 163,969
Noble Affiliates, Inc. .................................... 1,600 65,700
*Noble Drilling Corp. ...................................... 2,800 99,575
*Reading & Bates Corp. ..................................... 2,900 122,887
Tidewater, Inc. ........................................... 900 59,119
Transocean Offshore, Inc. ................................. 3,000 162,000
*United Meridian Corp. ..................................... 3,500 118,781
-----------
1,111,181
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (15.5%)
Allstate Corp. ............................................ 1,900 157,581
American International Group, Inc. ........................ 1,900 193,919
Bank of New York Co., Inc. ................................ 2,700 127,069
Bear Stearns Cos., Inc. ................................... 1,470 58,341
Chase Manhattan Corp. ..................................... 700 80,762
First Union Corp. ......................................... 3,600 176,625
*Highlands Insurance Group.................................. 57 1,311
Household International, Inc. ............................. 600 67,950
National City Corp. ....................................... 2,475 147,881
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--(CONTINUED)
Norwest Corp. .............................................. 5,100 $ 163,519
----------
1,174,958
- --------------------------------------------------------------------------------
HEALTH CARE (2.8%)
Aetna, Inc. ................................................ 1,700 120,806
Columbia/HCA Healthcare Corp. .............................. 3,300 93,225
----------
214,031
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (4.1%)
Loews Corp. ................................................ 2,800 312,725
- --------------------------------------------------------------------------------
TECHNOLOGY (6.2%)
*Ceridian Corp. ............................................. 2,000 78,125
Texas Instruments, Inc. .................................... 1,300 138,694
Thomas & Betts Corp. ....................................... 2,200 109,450
Xerox Corp. ................................................ 1,800 142,762
----------
469,031
- --------------------------------------------------------------------------------
TRANSPORTATION (4.3%)
*AMR Corp. .................................................. 800 93,150
Burlington Northern, Inc. .................................. 525 49,875
Delta Air Lines, Inc. ...................................... 1,800 181,350
----------
324,375
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $5,717,736)......................... 7,149,293
- --------------------------------------------------------------------------------
PREFERRED STOCKS (0.0%)
- --------------------------------------------------------------------------------
HEALTH CARE (0.0%)
Fresenius Medical Care AG (COST $20)........................ 225 13
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

NWQ VALUE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.2%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.2%)
Chase Securities, Inc., 5.60% dated 10/31/97, due 11/03/97,
to be repurchased at $317,148, collateralized by $303,931
of various U.S. Treasury Notes 5.50%-8.75% due 5/15/00-
6/30/02, valued at $317,179 (COST $317,000)............... $317,000 $ 317,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%) (COST $6,034,756) (A)............. 7,466,306
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.5%)......................... 115,701
- --------------------------------------------------------------------------------
NET ASSETS (100%)........................................... $7,582,007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
ADR American Depositary Receipt
(a) The cost for Federal income tax purposes was $6,037,871. At October 31,
1997, net unrealized appreciation for all securities on tax cost was
$1,428,435. This consisted of aggregate gross unrealized appreciation
for all securities of $1,554,431, and the gross unrealized depreciation
for all securities of $125,996.

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

NWQ PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<CAPTION>
NWQ NWQ VALUE
BALANCED EQUITY
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Cost................................... $45,433,710 $6,034,756
=========== ==========
Investments, at Value.................................. $53,364,264 $7,466,306
Cash................................................... 113 921
Interest Receivable.................................... 478,793 49
Receivable for Investments Sold........................ 374,406 24,155
Receivable for Portfolio Shares Sold................... 60,312 111,504
Dividends Receivable................................... 23,257 5,137
Receivable due from Investment Adviser--Note B......... -- 3,670
Other Assets........................................... 1,295 159
- -------------------------------------------------------------------------------
Total Assets.......................................... 54,302,440 7,611,901
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Shares Redeemed............................ 95,510 152
Payable for Investment Advisory Fees--Note B........... 33,361 --
Payable for Administrative Fees--Note C................ 10,817 7,984
Payable for Custodian Fees--Note D..................... 2,662 1,062
Distribution and Service Fees Payable--Note E.......... 14,614 877
Payable for Directors' Fees--Note G.................... 726 612
Other Liabilities...................................... 26,329 19,207
- -------------------------------------------------------------------------------
Total Liabilities..................................... 184,019 29,894
- -------------------------------------------------------------------------------
NET ASSETS.............................................. $54,118,421 $7,582,007
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital........................................ $44,378,004 $5,857,978
Undistributed Net Investment Income.................... 106,311 422
Accumulated Net Realized Gain.......................... 1,703,552 292,057
Unrealized Appreciation................................ 7,930,554 1,431,550
- -------------------------------------------------------------------------------
NET ASSETS.............................................. $54,118,421 $7,582,007
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES:
Net Assets............................................. $12,697,636 $5,096,690
Shares Issued and Outstanding ($0.001 par value) (Au-
thorized 25,000,000).................................. 857,102 277,297
Net Asset Value, Offering and Redemption Price Per
Share................................................. $ 14.81 $ 18.38
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES:
Net Assets............................................. $41,420,785 $2,485,317
Shares Issued and Outstanding ($0.001 par value) (Au-
thorized 10,000,000).................................. 2,798,767 135,264
Net Asset Value, Offering and Redemption Price Per
Share................................................. $ 14.80 $ 18.37
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

NWQ PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
<CAPTION>
NWQ NWQ
BALANCED VALUE EQUITY
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.......................... $ 368,464 $ 59,888
Interest........................... 1,179,693 23,216
- ----------------------------------------------------------------------------------
Total Income...................... 1,548,157 83,104
- ----------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees........................ $ 329,580 $ 35,666
Less: Fees Waived................. (103,517) 226,063 (35,666) --
--------- --------
Administrative Fees--Note C........ 126,732 85,646
Custodian Fees--Note D............. 4,670 969
Distribution and Service Plan
Fees--Note E:
Institutional Service Class....... 145,874 3,504
Account Services Fee--Note F....... 41,119 3,198
Directors' Fees--Note G............ 2,594 2,247
Audit Fees......................... 16,282 13,930
Printing Fees...................... 22,440 26,167
Registration and Filing Fees....... 20,698 17,462
Other Expenses..................... 8,305 4,197
Fees Assumed by Adviser--Note B.... -- (102,963)
- ----------------------------------------------------------------------------------
Total Expenses.................... 614,777 54,357
Expense Offset--Note A............. -- --
- ----------------------------------------------------------------------------------
Net Expenses...................... 614,777 54,357
- ----------------------------------------------------------------------------------
NET INVESTMENT INCOME............... 933,380 28,747
- ----------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.... 1,712,730 300,616
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON IN-
VESTMENTS.......................... 6,839,163 979,347
- ----------------------------------------------------------------------------------
TOTAL NET GAIN ON INVESTMENTS....... 8,551,893 1,279,963
- ----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $9,485,273 $1,308,710
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

NWQ BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 933,380 $ 301,601
Net Realized Gain..................................... 1,712,730 111,335
Net Change in Unrealized Appreciation/Depreciation.... 6,839,163 841,697
- -----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations. 9,485,273 1,254,633
- -----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class.................................. (245,374) (178,657)
Institutional Service Class.......................... (641,089) (80,539)
Net Realized Gain:
Institutional Class.................................. (35,446) (29,997)
Institutional Service Class.......................... (84,765) --
- -----------------------------------------------------------------------------------
Total Distributions.................................. (1,006,674) (289,193)
- -----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE J:
Institutional Class:
Issued............................................... 6,073,340 7,412,068
--In Lieu of Cash Distributions.................... 280,813 208,650
Redeemed............................................. (4,173,967) (4,990,173)
- -----------------------------------------------------------------------------------
Net Increase from Institutional Class Shares.......... 2,180,186 2,630,545
- -----------------------------------------------------------------------------------
Institutional Service Class*:
Issued............................................... 26,562,604 21,033,336
--In Lieu of Cash Distributions.................... 725,851 80,539
Redeemed............................................. (12,451,810) (1,420,979)
- -----------------------------------------------------------------------------------
Net Increase from Institutional Service Class Shares.. 14,836,645 19,692,896
- -----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 17,016,831 22,323,441
- -----------------------------------------------------------------------------------
Total Increase........................................ 25,495,430 23,288,881
Net Assets:
Beginning of Period................................... 28,622,991 5,334,110
- -----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $106,311 and $59,394, respectively)........ $ 54,118,421 $28,622,991
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on January 22,
1996.

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

NWQ VALUE EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.................................. $ 28,747 $ 33,093
Net Realized Gain...................................... 300,616 108,836
Net Change in Unrealized Appreciation/Depreciation..... 979,347 435,937
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations.. 1,308,710 577,866
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class................................... (30,242) (31,968)
Institutional Service Class........................... (3,598) --
Net Realized Gain--Institutional Class................. (117,395) (2,209)
- ----------------------------------------------------------------------------------
Total Distributions................................... (151,235) (34,177)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE J:
Institutional Class:
--------------------
Issued................................................ 2,132,517 950,630
--In Lieu of Cash Distributions..................... 147,637 34,153
Redeemed.............................................. (1,494,014) (709,280)
- ----------------------------------------------------------------------------------
Net Increase from Institutional Class Shares........... 786,140 275,503
- ----------------------------------------------------------------------------------
Institutional Service Class*:
-----------------------------
Issued................................................ 2,589,371 --
--In Lieu of Cash Distributions..................... 3,598 --
Redeemed.............................................. (237,988) --
- ----------------------------------------------------------------------------------
Net Increase from Institutional Service Class Shares... 2,354,981 --
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions.......... 3,141,121 275,503
- ----------------------------------------------------------------------------------
Total Increase......................................... 4,298,596 819,192
Net Assets:
Beginning of Period.................................... 3,283,411 2,464,219
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $422 and $5,515, respectively).............. $ 7,582,007 $3,283,411
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on June 16,
1997.

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

19
<PAGE>

NWQ BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
---------------------------------------------
YEARS ENDED OCTOBER 31, AUGUST 2, 1994**
--------------------------- TO
1997 1996 1995 OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PE-
RIOD............................ $ 12.39 $ 11.24 $ 9.84 $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.31 0.31 0.32 0.06
Net Realized and Unrealized Gain
(Loss) on Investments.......... 2.47 1.21 1.40 (0.19)
- --------------------------------------------------------------------------------
Total from Investment Opera-
tions......................... 2.78 1.52 1.72 (0.13)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.31) (0.30) (0.32) (0.03)
Net Realized Gain............... (0.05) (0.07) -- --
- --------------------------------------------------------------------------------
Total Distributions............ (0.36) (0.37) (0.32) (0.03)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 14.81 $ 12.39 $ 11.24 $ 9.84
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN+.................... 22.82% 13.68% 17.80% (1.30)%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands).......................... $ 12,697 $ 8,624 $ 5,334 $1,584
Ratio of Expenses to Average Net
Assets.......................... 1.00% 1.01% 1.04% 1.00%*
Ratio of Net Investment Income to
Average Net Assets.............. 2.29% 2.79% 3.30% 3.59%*
Portfolio Turnover Rate.......... 20% 31% 31% 1%
Average Commssion Rate #......... $ 0.0619 $ 0.0717 N/A N/A
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and
Expenses Assumed by the Adviser
Per Share....................... $ 0.03 $ 0.14 $ 0.26 $ 0.21
Ratio of Expenses to Average Net
Assets Including Expense
Offsets......................... 1.00% 1.00% 1.00% N/A
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Initial offering of Institutional Service Class shares
+ Total return would have been lower had the Adviser not waived and assumed
certain expenses during the periods.
++ Not Annualized
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose their average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

20
<PAGE>

<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE CLASS SHARES
-------------------------------------
YEAR JANUARY 22, 1996***
ENDED TO
OCTOBER 31, 1997 OCTOBER 31, 1996
- ------------------------------------------------------------------------
<S> <S> <C>
NET ASSET VALUE, BEGINNING OF PE-
RIOD............................ $ 12.37 $ 11.57
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.26 0.21
Net Realized and Unrealized Gain
(Loss) on Investments.......... 2.47 0.78
- ------------------------------------------------------------------------
Total from Investment Opera-
tions......................... 2.73 0.99
- ------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.25) (0.19)
Net Realized Gain............... (0.05) --
- ------------------------------------------------------------------------
Total Distributions............ (0.30) (0.19)
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 14.80 $ 12.37
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
TOTAL RETURN+.................... 22.39% 8.60%++
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands).......................... $41,421 $19,999
Ratio of Expenses to Average Net
Assets.......................... 1.40% 1.41%*
Ratio of Net Investment Income to
Average Net Assets.............. 1.89% 2.39%*
Portfolio Turnover Rate.......... 20% 31%
Average Commssion Rate #......... $0.0619 $0.0717
- ------------------------------------------------------------------------
Voluntarily Waived Fees and
Expenses Assumed by the Adviser
Per Share....................... $ 0.03 $ 0.09
Ratio of Expenses to Average Net
Assets Including Expense
Offsets......................... 1.40% 1.40%*
- ------------------------------------------------------------------------
</TABLE>

* Annualized
** Commencement of Operations
*** Initial offering of Institutional Service Class shares
+ Total return would have been lower had the Adviser not waived and assumed
certain expenses during the periods.
++ Not Annualized
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose their average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

<PAGE>

NWQ VALUE EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
INSTITUTIONAL CLASS SHARES CLASS SHARES
---------------------------------------------- ---------------------
YEARS ENDED SEPTEMBER 21, 1994** JUNE 16, 1997***
------------------------ TO TO
1997 1996 1995 OCTOBER 31, 1994 OCTOBER 31, 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 14.13 $ 11.65 $ 9.98 $10.00 $ 17.39
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.11 0.14 0.12 0.01 0.01
Net Realized and
Unrealized Gain (Loss)
on Investments........ 4.76 2.49 1.65# (0.03) 1.00
- ----------------------------------------------------------------------------------------------
Total from Investment
Operations........... 4.87 2.63 1.77 (0.02) 1.01
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.12) (0.14) (0.10) -- (0.03)
Net Realized Gain...... (0.50) (0.01) -- -- --
- ----------------------------------------------------------------------------------------------
Total Distributions... (0.62) (0.15) (0.10) -- (0.03)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 18.38 $ 14.13 $11.65 $ 9.98 $ 18.37
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
TOTAL RETURN+........... 35.77% 22.69% 17.84% (0.20)%++ 5.81%++
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Pe-
riod (Thousands)....... $ 5,097 $ 3,283 $2,464 $ 253 $ 2,485
Ratio of Expenses to Av-
erage Net Assets....... 1.00% 1.03% 1.21% 1.00%* 1.40%*
Ratio of Net Investment
Income to Average Net
Assets................. 0.66% 1.11% 1.39% 1.36%* 0.09%*
Portfolio Turnover Rate. 31% 25% 4% 0% 31%
Average Commission Rate
#...................... $0.0627 $0.0705 N/A N/A $0.0627
- ----------------------------------------------------------------------------------------------
Voluntarily Waived Fees
and Expenses Assumed by
the Adviser Per Share.. $ 0.46 $ 0.52 $ 0.82 $ 1.06 $ 0.23
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ 1.00% 1.00% 1.00% N/A 1.40%*
- ----------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Initial Offering of Institutional Service Class Shares
+ Total return would have been lower had the Advisor not waived and assumed
certain expenses during the period.
++ Not Annualized
# 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.

22
<PAGE>

NWQ PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The NWQ
Balanced Portfolio and the NWQ Value Equity Portfolio (the "Portfolios"),
portfolios of UAM Funds Inc., are diversified, open-end management investment
companies. At October 31, 1997, the UAM Funds were composed of forty-two
active portfolios. The financial statements of the remaining portfolios are
presented separately. The Portfolios are authorized to offer two separate
classes of shares--Institutional Class Shares and Institutional Service Class
Shares. Both classes have identical voting rights (except Institutional
Service Class shareholders have exclusive voting rights with respect to
matters relating to distributions and shareholder servicing of such shares),
dividend, liquidation and other rights. The objectives of the Portfolios are
as follows:

NWQ BALANCED PORTFOLIO seeks to achieve consistent, above-average returns
with minimum risk to principal by investing primarily in a combination of
investment grade fixed income securities and common stocks of companies
with above-average statistical value which are in fundamentally attractive
industries and which, in the Adviser's opinion, are undervalued at the time
of purchase.

NWQ VALUE EQUITY PORTFOLIO seeks to achieve consistent, superior total
return with minimum risk to principal by investing primarily in common
stocks with above-average statistical value which are in fundamentally
attractive industries and which, in the Adviser's opinion, are undervalued
at the time of purchase.

A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
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
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.

1. SECURITY VALUATION: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the mean of the bid and
asked prices. 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 current bid prices. Fixed income
securities are stated on the basis of valuations provided by brokers and/or
a pricing service which uses information with respect to transactions in
fixed income securities, quotations from dealers, market transactions in
comparable securities and various relationships between securities in
determining value. Short-term investments that have remaining maturities of
sixty days or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available is determined in good faith at
fair value using methods determined by the Board of Directors.

2. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements.

3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the

23
<PAGE>

NWQ PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

principal amount of the repurchase transaction, including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is monitored on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, each Portfolio has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. In the event of
default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.

5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Discounts and premiums
on securities purchased are amortized using the effective yield basis over
their respective lives. Most expenses of the UAM Funds can be directly
attributed to a particular portfolio. Expenses which cannot be directly
attributed are apportioned among the portfolios of the UAM Funds based on
their relative net assets. Income, expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated to
each class of shares based upon their relative net assets. Custodian fees
for the Portfolio have been increased to include expense offsets for
custodian balance credits.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement, NWQ
Investment Management Company (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the NWQ Balanced and NWQ Value Equity Portfolios at a monthly fee
calculated at an annual rate of 0.70% of each Portfolio's average daily net
assets for the month. The Adviser has voluntarily agreed to waive a portion of
its advisory fees and to assume expenses, if necessary, in order to keep each
Portfolio's total annual operating expenses, after the effect of expense
offset arrangements, from exceeding 1.00% of average daily net assets for each
Portfolio's Institutional Class Shares and 1.40% of the average daily net
assets for each Portfolio's Institutional Service Class Shares until February
28, 1999.

24
<PAGE>

NWQ PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 at an annual rate
of 0.06% and 0.04% of average daily net assets of NWQ Balanced Portfolio and
NWQ Value Equity Portfolio, respectively. The Administrator has entered into a
Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC agrees
to provide certain services, including but not limited to, administration,
fund accounting, dividend disbursing and transfer agent services. Pursuant to
the Mutual Funds Service Agreement, the Administrator pays CGFSC a monthly
fee. For the year ended October 31, 1997, UAM Fund Services, Inc. earned the
following amounts from the Portfolio as Administrator and paid the following
portion to CGFSC for their services as sub-Administrator:

<TABLE>
<CAPTION>
ADMINISTRATION PORTION PAID
NWQ PORTFOLIOS FEES TO CGFSC
- -------------- -------------- ------------
<S> <C> <C>
Balanced............................................ $126,732 $98,488
Value Equity........................................ 85,646 83,609
</TABLE>

D. CUSTODIAN: The Chase Manhattan Bank, an affiliate of CGFSC, is custodian
for the Portfolios' assets held in accordance with the custodian agreement.

E. DISTRIBUTION AND SERVICE PLAN: UAM Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of UAM, distributes the shares of
the Portfolios.

The NWQ Portfolios have adopted a Distribution and Service Plan (the "Plans")
on behalf of the Institutional Service Class Shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. Under the Plans, each Portfolio may
not incur distribution and service fees which exceed an annual rate of 0.75%
of their net assets, however, the Board has currently limited aggregate
payments under the Plans to 0.50% per annum of each Portfolios' net assets.
Each Portfolio's Institutional Service Class Shares are currently making
payments for distribution fees at 0.15% of average daily net assets.

In addition, the NWQ Portfolios' Institutional Service Class Shares pay
service fees at an annual rate of 0.25% of the average daily value of
Institutional Service Class Shares owned by clients of the Service Agents.

25
<PAGE>

NWQ PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

wholly-owned subsidiary of UAM. Under the Services Agreement, the Service
Provider agrees to perform certain services for participants in a self-
directed, defined contribution plan, and for whom the Service Provider
provides participant recordkeeping. Pursuant to the Services Agreement, the
Service Provider is entitled to receive, after the end of each month, a fee at
the annual rate of 0.15% of the average aggregate daily net asset value of
shares of the UAM Funds in the accounts for which it provides services.

H. PURCHASES AND SALES: For the year ended October 31, 1997, purchases and
sales of investment securities other than long-term U.S. Government securities
and short-term securities were:

<TABLE>
<CAPTION>
NWQ PORTFOLIOS PURCHASES SALES
- -------------- ----------- ----------
<S> <C> <C>
Balanced................................................. $17,652,245 $7,555,577
Value Equity............................................. 4,208,597 1,454,028
</TABLE>

Purchases and sales of long-term U.S. Government securities were approximately
$14,210,781 and $600,000, respectively, for NWQ Balanced Portfolio. There were
no purchases or sales of long-term U.S. Government securities for NWQ Value
Equity Portfolio.

I. 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. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% 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, 1997, the Portfolios had no borrowings under the agreement.

26
<PAGE>

NWQ PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

J. OTHER: Transactions in capital shares for the Portfolios, by class, were as
follows:

<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL CLASS SHARES SERVICE CLASS SHARES*
------------------------------ -------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
NWQ BALANCED PORTFOLIO:
Shares Issued........... 448,160 625,426 2,026,550 1,729,243
In Lieu of Cash Distri-
butions................ 20,838 17,597 53,941 6,660
Shares Redeemed......... (308,186) (421,298) (898,610) (119,017)
------------- ------------- --------- ---------
Net Increase (Decrease)
from Capital Share
Transactions........... 160,812 221,725 1,181,881 1,616,886
============= ============= ========= =========
NWQ VALUE EQUITY PORTFO-
LIO:
Shares Issued........... 127,379 72,988 147,786
In Lieu of Cash Distri-
butions................ 10,331 2,614 199
Shares Redeemed......... (92,847) (54,688) (12,721)
------------- ------------- ---------
Net Increase (Decrease)
from Capital Share
Transactions........... 44,863 20,914 135,264
============= ============= =========
</TABLE>

At October 31, 1997, the percentage of total shares outstanding held by record
shareholders owning 10% or greater of the aggregate total shares outstanding
for each Portfolio were as follows:

<TABLE>
<CAPTION>
NO. OF
NWQ PORTFOLIOS SHAREHOLDERS % OWNERSHIP
- -------------- ------------ -----------
<S> <C> <C>
Balanced--Institutional Class.......................... 2 60.8%
Balanced--Institutional Service Class.................. 4 63.4%
Value Equity Institutional Class....................... 2 41.2%
Value Equity Institutional Service Class............... 1 100.0%
</TABLE>

At October 31, 1997, 5.7% of the NWQ Value Equity Portfolio's shares were
beneficially held by a related party of the portfolio.
- --------
* Initial offering of Institutional Service Class Shares for NWQ Balanced and
NWQ Value Equity began on January 22, 1996 and June 16, 1997, respectively.

27
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
NWQ Balanced Portfolio
NWQ Value Equity Portfolio

In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the NWQ Balanced
Portfolio and the NWQ Value Equity Portfolio (the "Portfolios"), Portfolios of
the UAM Funds, Inc., at October 31, 1997, and the results of each of their
operations, the changes in each of their net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Portfolios' management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):

At October 31, 1997 NWQ Balanced Portfolio and NWQ Value Equity Portfolio
hereby designate $97,000 and $61,000, respectively, as long-term capital gains
dividends for the purpose of the dividend paid deduction on their Federal
income tax return.

For the period ended October 31, 1997 the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
23.7% and 56.2%, respectively, for NWQ Balanced Portfolio and NWQ Value Equity
Portfolio. For the period ended October 31, 1997, the percentage of income
earned from direct Treasury obligations for NWQ Balanced Portfolio is 62.3%.

28
<PAGE>

PART B

UAM FUNDS, INC.

- --------------------------------------------------------------------------------
RICE, HALL, JAMES SMALL CAP PORTFOLIO

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Fund" or the "Fund") for the
Rice, Hall, James Small Cap and Rice, Hall, James Small/Mid Cap Portfolios'
Institutional Class Shares dated January 22, 1998. To obtain the Prospectus,
please call the UAM Funds Service Center: 1-800-638-7983

TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES..................................... 2

PURCHASE AND REDEMPTION OF SHARES...................................... 14

VALUATION OF SHARES.................................................... 16

SHAREHOLDER SERVICES................................................... 17

INVESTMENT LIMITATIONS................................................. 18

MANAGEMENT OF THE FUND................................................. 19

INVESTMENT ADVISER..................................................... 23

PORTFOLIO TRANSACTIONS................................................. 26

ADMINISTRATIVE SERVICES................................................ 27

CUSTODIAN.............................................................. 29

INDEPENDENT ACCOUNTANTS................................................ 30

DISTRIBUTOR............................................................ 30

PERFORMANCE CALCULATIONS............................................... 30

GENERAL INFORMATION.................................................... 32

FINANCIAL STATEMENTS................................................... 34

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS.................... A-1

APPENDIX B - COMPARISONS............................................... B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and policies of
the Rice, Hall, James Small Cap and Rice, Hall, James Small/Mid Cap Portfolios
(the "Portfolios") as set forth in the Rice, Hall, James Portfolios' Prospectus.

LENDING OF SECURITIES

Each Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC" or the "Commission") thereunder, which currently
require that (a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). A Portfolio will not loan securities to the extent that greater
than one-third of its assets (including the value of the collateral for the
loans) at fair market value would be committed to loans. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. These risks are similar to the ones involved with repurchase
agreements as discussed in the Prospectus.

SHORT-TERM INVESTMENTS

Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan

-2-
<PAGE>

associations collateralized by the funds deposited 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 bankers' acceptance is a time draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods).

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 purchased by each
Portfolio;

(2) Commercial paper and A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's
or, if not rated, determined by the Adviser to be of comparable quality;

(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;

(6) Repurchase agreements collateralized by securities listed above.

INVESTMENTS IN FOREIGN SECURITIES

Investors in the Portfolios should recognize that investing in foreign
companies involves certain 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 Portfolios may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with conversions
between various currencies.

-3-
<PAGE>

Although the Portfolios will endeavor to achieve the most favorable
execution costs in their 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 income
received from the companies comprising the Portfolios' investments. However,
these foreign withholding taxes are not expected to have a significant impact.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The U.S. dollar value of the assets of each Portfolio may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and a Portfolio may incur costs in connection with
conversions between various currencies. Each Portfolio will conduct their
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward foreign currency exchange contracts ("forward contracts")
to purchase or sell foreign currencies. A forward contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward contract generally has
no deposit requirement, and no commissions are charged at any stage for such
trades.

Each Portfolio may enter into forward contracts in several circumstances.
When a Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency,

-4-
<PAGE>

or when a Portfolio anticipates the receipt in a foreign currency of dividends
or interest payments on a security which it holds, a Portfolio may desire to
"lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such dividend or interest payment, as the case may be. By entering into a
forward contract for a fixed amount of dollars, for the purchase or sale of the
amount of foreign currency involved in the underlying transactions, such
Portfolio will be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received.

Additionally, when a Portfolio anticipates that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
such Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The Portfolios do not intend to enter
into such forward contracts to protect the value of portfolio securities on a
regular or continuous basis. The Portfolios will not enter into such forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate such Portfolio to deliver an amount of foreign
currency in excess of the value of such Portfolio securities or other assets
denominated in that currency.

Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. The Fund's Custodian will place cash or
liquid securities into a segregated account of each Portfolio in an amount equal
to the value of each Portfolio's total assets committed to the consummation of
forward contracts. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the account on
a daily basis so that the value of the account will be

-5-
<PAGE>

equal to the amount of such Portfolio's commitments with respect to such
contracts.

The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio
may either sell the security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency.

It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.

If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, such Portfolio
will realize a gain to the extent that the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, such Portfolio would suffer a loss to the extent that
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.

Each Portfolio's dealings in forward contracts will be limited to the
transactions described above. Of course, the Portfolios are not required to
enter into such transactions with regard to their foreign currency-denominated
securities. It also should be realized that this method of protecting the value
of portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.

-6-
<PAGE>

FUTURES CONTRACTS

The Portfolios may enter into futures and options and interest rate futures
contracts for the purposes of hedging, remaining fully invested and reducing
transaction costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated
under the Commodity Exchange Act by the Commodity Futures Trading Commission
("CFTC"), a U.S. Government Agency.

Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
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.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Generally, margin deposits are structured as percentages (e.g., 5%)
of the market value of the contracts being traded. After a futures contract
position is opened, the value of the contract is marked to market daily. If the
futures contract price changes to the extent that the margin on deposit does not
satisfy margin requirements, payment of additional "variation" margin will be
required. Conversely, changes in the contract value may reduce the required
margin, resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as long as
the contract remains open. The Portfolios expect to earn interest income on
their margin deposits.

-7-
<PAGE>

securities underlying the futures contracts which they trade and use futures
contracts with the expectation of realizing profits from a fluctuation in
interest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed 5% of the liquidation value of each
Portfolio. The Portfolios will only sell futures contracts to protect
securities they own against price declines or purchase contracts to protect
against an increase in the price of securities they intend to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed"; that is, equivalent
amounts of related securities will have been purchased or are being purchased by
a Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolios' exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolios will incur commission expenses in both opening and closing
out future positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

Each Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposit on
open contracts exceeds 5% of the market value of its total assets. In addition,
a Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

Each Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to
maintain its required

-8-
<PAGE>

margin. In such situations, if a Portfolio has insufficient cash, it may have to
sell securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, a Portfolio may be required to make
delivery of the instruments underlying futures contracts it holds. The inability
to close futures positions also could have an adverse impact on a Portfolio's
ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can be
substantial 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 substantial
loss (as well as gain) to the investor. For example, if at the time of
purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio is engaged in only for hedging purposes, the
Adviser does not believe that a Portfolio is subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the
decline.

Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying the futures
contracts have different maturities than such Portfolio's securities being
hedged. It is also possible that a Portfolio could lose money on futures
contracts and also experience a decline in value of portfolio securities. There
is also the risk of loss by a Portfolio of margin deposits in the event of
bankruptcy of a broker with whom such Portfolio has an open position in a
futures contract or related option.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and, therefore, does not limit
potential losses because the limit may prevent the liquidation of unfavorable

-9-
<PAGE>

positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.

OPTIONS

Each Portfolio may purchase and sell put and call options on futures
contracts for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. For example, there are significant differences
between the securities, futures and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objective. A decision as to whether, when, and how to use options
involves the exercise of skill and judgement by the Adviser, and even a well-
conceived transaction may be unsuccessful because of market behavior or
unexpected events.

OPTIONS ON FOREIGN CURRENCIES

Each Portfolio may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminutions in the value of portfolio securities, a Portfolio may purchase
put options on the foreign currency. If the value of the currency does decline,
a Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

-10-
<PAGE>

options, however, the benefit to a Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, a Portfolio could sustain losses on
transaction in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.

Each Portfolio may write options on foreign currencies for the same types
of hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.

Each Portfolio intends to write covered call options on foreign currencies.
A call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Custodian) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if a Portfolio has a call
on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written of (b) is greater than the exercise price
of the call written if the difference is maintained by the Portfolio in cash or
liquid securities in a segregated account with the Custodian.

-11-
<PAGE>

Each Portfolio also intends to write call options on foreign currencies
that are not covered for cross-hedging purposes. A call option on a foreign
currency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which a
Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate. In
such circumstances, a Portfolio collateralizes the option by maintaining in a
segregated account with the Custodian, cash or liquid securities in an amount
not less than the value of the underlying foreign currency in U.S. dollars
marked to market daily.

RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES

Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to the regulation of the Commission. Similarly, options on currencies
may be traded over-the-counter. In an over-the-counter trading environment, many
of the protection afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting a Portfolio to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event of
adverse market movements.

-12-
<PAGE>

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (1) other complex foreign
political and economic factors, (2) lesser availability than in the United
States of data on which to make trading decisions, (3) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (4) the imposition of different exercise
and settlement terms and procedures and margin requirements than in the United
States, and (5) lesser trading volume.

FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS

-13-
<PAGE>

derived from certain qualifying income, i.e., dividends, interest, income
derived from loans of securities and gains from the sale or other disposition of
stock, securities or foreign currencies, or other related income, including
gains from options, futures and forward contracts, derived with respect to its
business investing in stock, securities or currencies. Any net gain realized
from the closing out of futures contracts will, therefore, generally be
qualifying income for purposes of the 90% requirement.

Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of a Portfolio's taxable year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on a Portfolio's other investments, and shareholders will be
advised on the nature of the payment.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectus are calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average of the value of the portfolio securities. The calculation
excludes all securities, including options, whose maturities at the time of
acquisition were one year or less. Portfolio turnover may vary greatly from year
to year as well as within a particular year, and may also be affected by cash
requirements for redemptions of shares. See "Financial Highlights" in the
Prospectus for the historical portfolio turnover rates with respect to the Small
Cap and Small/Mid Cap Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund and payment is received by the Fund's Custodian. The minimum
initial investment required for each Portfolio is $2,500 with certain exceptions
as may be determined from time to time by the officers of the Fund. Other
investment minimums are: initial IRA investment, $500; initial spousal IRA
investment, $250; minimum additional investment for all accounts, $100. An
order received in proper form prior to the close of regular trading on the New
York Stock Exchange ("Exchange") (generally 4:00 p.m. Eastern time) will be
executed at the price computed on the date of receipt; and an order received not
in proper form or after the close of the Exchange will be executed at the price
computed on the next day the Exchange is open after proper receipt. The
Exchange will be closed on the following days: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day;

-14-
<PAGE>

Christmas Day; New Year's Day and Dr. Martin Luther King, Jr. Day.

Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interests of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts, such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.

Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that either the Exchange or custodian bank is
closed or trading on the Exchange is restricted as determined by the Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any 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 Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Portfolio. If redemptions
are paid in investment securities, such securities will be valued as set forth
in the Prospectus under "Valuation of Shares," and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.

No charge is made by a Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by a Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of the signature guarantee is to verify
the identity of the person who has authorized a redemption from your account.
Signature guarantees are required for (1) redemptions where the proceeds are to
be sent to someone other than the registered

-15-
<PAGE>

shareowner(s) and/or the registered address, or (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institution is
available from the Transfer Agent. Broker-dealers guaranteeing signatures must
be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.

The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.

VALUATION OF SHARES

Equity securities listed on a securities exchange for which market
quotations 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 securities
not traded on the valuation date for which market quotations are readily
available are valued neither exceeding the current asked prices nor less than
the current bid prices. Quotations of foreign securities in a foreign currency
are converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major bank
or by a broker.

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost when the
Board of Directors determines that amortized cost reflects fair value.

The value of other assets and securities for which no quotations are
readily available (including restricted

-16-
<PAGE>

securities) is determined in good faith at fair value using methods determined
by the Directors.

SHAREHOLDER SERVICES

The following supplements the shareholder services information set forth in
the Rice, Hall, James Portfolios' Prospectus.

EXCHANGE PRIVILEGE

Institutional Class Shares of each Rice, Hall, James Portfolio may be
exchanged for Institutional Class Shares of the other Rice, Hall, James
Portfolio. In addition, Institutional Class Shares of each Rice, Hall, James
Portfolio may be exchanged for any other Institutional Class Shares of a
Portfolio included in the UAM Funds which is comprised of the Fund and UAM Funds
Trust. (See the list of Portfolios of the UAM Funds -- Institutional Class
Shares at the end of the Prospectus.) Exchange requests should be made by
calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Service
Center, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA
02208-2798. The exchange privilege is only available with respect to Portfolios
that are registered for sale in the shareholder's state of residence.

Any such exchange will be based on the respective net asset values of the
shares involved. There is no sale commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
the UAM Funds Service Center at 1-800-638-7983.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time) will
be processed as of the close of business on the same day. Requests received
after the close of regular trading on the Exchange will be processed on the next
business day. Neither the Fund nor CGFSC, the Fund's Transfer Agent, will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.

-17-
<PAGE>

TRANSFER OF SHARES

INVESTMENT LIMITATIONS

The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such security
or other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered when
determining whether the investment complies with a Portfolio's investment
limitations. Investment limitations (1), (2), (3), (4) and (5) are classified
as fundamental. The Portfolios' fundamental investment limitations cannot be
changed without approval by a "majority of the outstanding shares" (as defined
in the 1940 Act) of each Portfolio. The Portfolios will not:

(1) invest in physical commodities or contracts on physical commodities;

(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal
in real estate and may purchase and sell securities which are secured
by interests in real estate;

(3) make loans except (i) by purchasing debt securities in accordance with
its investment objectives and (ii) by

-18-
<PAGE>

lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent with
the 1940 Act or the rules and regulations or interpretations of the
Commission thereunder;

(4) underwrite the securities of other issuers;

(5) Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii)
entering into options, futures or repurchase transactions;

(6) invest in stock or bond futures and/or options on futures unless (i)
not more than 5% of the Portfolio's assets are required as deposit to
secure obligations under such futures and/or options on futures
contracts provided, however, that in the case of an option that is in-
the-money at the time of purchase, the in-the-money amount may be
excluded in computing such 5% and (ii) not more than 20% of the
Portfolio's assets are invested in stock or bond futures and options;

(7) purchase on margin or sell short except as specified in (6) above;

(8) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than 1/2
of 1% of such securities together own more than 5% of such securities;

(9) invest for the purpose of exercising control over management of any
company.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

-19-
<PAGE>

<TABLE>

<C> <S>
John T. Bennett, Jr. Director of the Fund;
College Road-RFD 3 President of Squam
Meredith, NH 03253 Investment Management
1/26/29 Company, Inc. and Great
Island Investment Company,
Inc.; President of Bennett
Management Company from
1988 to 1993.

Nancy J. Dunn Director of the Fund; Vice
10 Garden Street President for Finance and
Cambridge, MA 02138 Administration and
8/14/51 Treasurer of Radcliffe
College since 1991.

Philip D. English Director of the Fund;
16 West Madison Street President and Chief
Baltimore, MD 21201 Executive Officer of
8/15/48 Broventure Company, Inc.;
Chairman of the Board of
Chektec Corporation and
Cyber Scientific, Inc.

William A. Humenuk Director of the Fund;
4000 Bell Atlantic Tower Partner in the Philadelphia
1717 Arch Street office of the law firm
Philadelphia, PA 19103 Dechert Price & Rhoads;
4/21/42 Director, Hofler Corp.

Norton H. Reamer* Director, President and
One International Place Chairman of the Fund;
Boston, MA 02110 President, Chief Executive
3/21/35 Officer and a Director of
United Asset Management
Corporation; Director,
Partner or Trustee of each
of the Investment Companies
of the Eaton Vance Group of
Mutual Funds.

Charles H. Salisbury, Jr. * Director of the Fund;
One International Place Executive Vice President of
Boston, MA 02110 United Asset Management
8/24/40 Corporation; formerly an
Executive Officer and
Director of T. Rowe Price
and President and Chief
Investment Officer of T.
Rowe Price Trust Company.
</TABLE>

-20-

<PAGE>

<TABLE>
<S> <C>
Peter M. Whitman, Jr.* Director of the Fund;
One Financial Center President and Chief
Boston, MA 02111 Investment Officer of Dewey
7/1/43 Square Investors
Corporation since 1988;
Director and Chief
Executive Officer of H.T.
Investors, Inc., formerly a
subsidiary of Dewey Square.

William H. Park Vice President of the Fund;
One International Place Executive Vice President
Boston, MA 02110 and Chief Financial Officer
9/19/47 of United Asset Management
Corporation.

Gary L. French Treasurer of the Fund;
211 Congress Street President of UAM Fund
Boston, MA 02110 Services, Inc. and UAM Fund
7/4/51 Distributors, Inc.; Vice
President of Operations,
Development and Control of
Fidelity Investments in
1995; Treasurer of the
Fidelity Group of Mutual
Funds from 1991 to 1995.

Robert R. Flaherty Assistant Treasurer of the
211 Congress Street Fund; Vice President of UAM
Boston, MA 02110 Fund Services, Inc.; former
9/18/63 Manager of Fund
Administration and
Compliance of Chase Global
Fund Services Company from
1995 to 1996; Senior
Manager of Deloitte &
Touche LLP from 1985 to
1995.

Gordon M. Shone Assistant Treasurer of the
73 Tremont Street Fund; Vice President of
Boston, MA 02108 Fund Administration and
7/30/56 Compliance of Chase Global
Funds Services Company;
formerly Senior Audit
Manager of Coopers &
Lybrand LLP from 1983 and
1993.

</TABLE>
-21-
<PAGE>

<TABLE>
<S> <C>
Michael DeFao Secretary of the Fund; Vice
211 Congress Street President and General
Boston, MA 02110 Counsel of UAM Fund
2/28/68 Services, Inc. and UAM Fund
Distributors, Inc.;
Associate Attorney of Ropes
& Gray (a law firm) from
1993 to 1995.

Karl O. Hartmann Assistant Secretary of the
73 Tremont Street Fund; Senior Vice President
Boston, MA 02108 and General Counsel of
3/7/55 Chase Global Funds Services
Company.

</TABLE>
- ------------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned less
than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

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<PAGE>

Pension or
Retirement Total
Benefits Estimated Compensation
Registrant Aggregate Accrued as Annual from
Name of Person, Compensation Part of Benefits Upon and Fund
Position From Registrant Fund Expenses Retirement Complex
- ---------------------- --------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>

John T. Bennett, Jr.
Director............ $26,791 0 0 $32,750
Nancy J. Dunn
Director............ $ 6,774 0 0 $ 8,300
Philip D. English
Director............ $26,791 0 0 $32,750
William A. Humenuk
Director............ $26,791 0 0 $32,750
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held of
record or beneficially 5% or more of the shares of the Portfolios:

Rice, Hall, James Small Cap Portfolio: Charles Schwab & Co., Inc., Reinvest
Account, Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA,
22.9%.

Rice, Hall, James Small/Mid Cap Portfolio: Hartnat & Co., Nana Regional,
Attn: 0173440-070, P.O. Box 92800, Rochester, NY, 26.7% and Charles Schwab &
Co., Inc., FBO Reinvest Account, Attn: Mutual Funds, 101 Montgomery Street, San
Francisco, CA, 6.4%.

_____________
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

Rice, Hall, James & Associates (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December, 1980, for the
purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such wholly-owned

-23-
<PAGE>

affiliated firms (the "UAM Affiliated Firms"). UAM believes that permitting UAM
Affiliated Firms to retain control over their investment advisory decisions is
necessary to allow them to continue to provide investment management services
that are intended to meet the particular needs of their respective clients.

Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each of
them.

SERVICES PERFORMED BY ADVISER

In the absence of (i) willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties under
the Agreements, (ii) reckless disregard by the Adviser of its obligations and
duties under the Agreements, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services, the
Adviser shall not be subject to any liability whatsoever to the Fund, or to any
shareholder of the Fund, for any error or judgment, mistake of law or any other
act or omission in the course of, or connected with, rendering services under
the Agreements.

-24-
<PAGE>

penalty, upon 90 days' written notice to the Fund. The Agreements will
automatically and immediately terminate in the event of their assignment.

PHILOSOPHY AND STYLE

Rice, Hall, James Small Cap Portfolio

The Adviser applies a value oriented approach to small capitalization
growth stocks. The Rice, Hall, James Small Cap Portfolio is constructed through
bottom up research where stocks selected must possess catalysts -- positive
fundamental changes which the Adviser believes should lead to greater investor
recognition and, subsequently, higher stock prices. The price earnings ratios
of selected stocks are typically lower than the projected 3 to 5 year earnings
growth rates. Stocks are sold when they reach preset upside targets, violate
preset downside price limits or when a deterioration of the fundamental
assumptions or catalysts occur.

Rice, Hall, James Small/Mid Cap Portfolio

The Adviser practices a fundamentally driven bottom-up research approach.
This approach focuses on identifying stocks of growth companies that are selling
at a discount to the companies' projected earnings growth rates. Specifically,
the Adviser requires that candidates for inclusion in the Portfolio have
price/earnings ratios that are lower than the 3 to 5 year projected earnings
growth rate. In addition, the stocks must possess catalysts, which are defined
by the Adviser as fundamental events that ultimately lead to increases in
revenue growth rates, expanding profit margins and/or increases in earnings
growth rates that are generally not anticipated by the market. Such events can
include new product introductions or applications, discovery of niche markets,
new management, corporate or industry restructures, regulatory change, end
market expansion, etc. Most importantly, the Adviser must be convinced that such
change will lead to greater investor recognition and a subsequent rise in the
stock prices within a 12 to 24 month period. Stocks are sold when they reach
their upside target, violate the present downside limit or when a deterioration
of the fundamental assumptions or catalysts occurs.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included University of Kansas Endowment,
San Diego Society of Natural History, American Business Products, City of San
Diego and California Western School of Law.

-25-
<PAGE>

In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.

ADVISORY FEES

As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, the Portfolios pay the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rate to
each Portfolio's average daily net assets for the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
Small Cap Portfolio 0.75%

Small/Mid Cap Portfolio 0.80%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, the Small Cap
Portfolio paid advisory fees of approximately $85,000, $197,797 and $320,608,
respectively. During the same periods, the Adviser voluntarily waived advisory
fees of approximately $15,000, $0 and $0, respectively. For the period November
1, 1996 (commencement of operations) to October 31, 1997, the Small/Mid Cap
Portfolio paid advisory fees of $0. During the same period, the Adviser
voluntarily waived fees of $42,239 for the Small/Mid Cap Portfolio.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or effect principal transactions with dealers on the basis of sales of shares
which may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended October 31, 1995, 1996 and 1997,
the Small Cap Portfolio paid brokerage commissions of approximately $48,167,
$72,700 and $93,309, respectively. For the period

-26-
<PAGE>

November 1 1996 (commencement of operations) to October 31, 1997, the
Small/MidCap Portfolio paid brokerage commissions of $31,408.

Some securities considered for investment by a Portfolio 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 time, transactions in such securities will be allocated among the
Portfolios and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Directors.

ADMINISTRATIVE SERVICES

The Board of Directors of the Fund approved a Fund Administration Agreement
("Fund Administration Agreement"), effective April 15, 1996, between UAM Fund
Services, Inc., a wholly-owned subsidiary of UAM, and the Fund. Pursuant to the
terms of the Fund Administration Agreement, UAMFSI manages, administers and
conducts the general business activities of the Fund other than those which have
been contracted to other third parties by the Fund. Additionally, UAMFSI has
agreed to provide transfer agency services to the Portfolios pursuant to the
terms of the Agreement.

<TABLE>
<CAPTION>
Annual Rate
<S> <C>
Small Cap Portfolio 0.04%
Small/Mid Cap Portfolio 0.04%
</TABLE>

CGFSC's monthly fee for its services is calculated on an annualized basis
as follows:

0.19 of 1% of the first $200 million of combined Fund net assets;

-27-
<PAGE>

0.11 of 1% of the next $800 million of combined Fund net assets;

0.07 of 1% of combined Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined Fund net assets in excess of $3 billion.

Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds Services
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 the period prior to April 15, 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 years ended October 31, 1995, 1996 and 1997, administrative
fees paid by Small Cap Portfolio totaled approximately $52,000, $88,251 and
$93,851, respectively. Of the fees paid during the years ended October 31, 1996
and 1997, the Small Cap Portfolio paid $81,427 and $76,774 to CGFSC and $6,824
and $17,077 to UAMFSI, respectively. For the period November 1, 1996
(commencement of operations) to October 31, 1997, administrative fees paid by
the Small/Mid Cap Portfolio totaled approximately $36,970. Of such amount,
$34,858 was paid to CGFSC and $2,112 was paid to UAMFSI.

-28-
<PAGE>

advisory and administration fees, charges and expenses of pricing and data
services, independent public accountants and custodians, insurance premiums
including fidelity bond premiums, outside legal expenses, costs of maintenance
of corporate existence, typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund, printing and
production costs of shareholders' reports and corporate meetings, cost and
expenses of Fund stationery and forms, costs of special telephone and data lines
and devices, trade association dues and expenses, and any extraordinary expenses
and other customary Fund expenses.

Unless sooner terminated, the Fund Administration Agreement shall continue
in effect from year to year provided such continuance is specifically approved
at least annually by the Board. The Fund Administration Agreement is
terminable, without penalty, by the Board or by UAMFSI, on not less than ninety
(90) days' written notice. The Fund Administration Agreement shall
automatically terminate upon its assignment by UAMFSI without the prior written
consent of the Fund.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the Small Cap Portfolio
and Small/Mid Cap Portfolio paid the Service Provider $4,801 and $ 0,
respectively, in fees pursuant to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

-29-
<PAGE>

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

The Distributor received no compensation for its services directly or
indirectly from either of the Small Cap Portfolio or the Small/Mid Cap Portfolio
during the Fund's fiscal year ended October 31, 1997.

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 quotations or, alternatively, that every non-
standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the
Commission. 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 the method used to compute or express performance
follows.

TOTAL RETURN

The average annual total rates of return for the Institutional Class Shares
of the Rice, Hall, James Portfolios

-30-
<PAGE>

from inception and for the one year period ended on the date of the Financial
Statements included herein are as follows:

<TABLE>
<CAPTION>
Since
Inception
One Year Through
Ended Year Ended
October 31, October 31, Inception
1997 1997 Date
------------ ------------ ---------
<S> <C> <C> <C>
Small Cap Portfolio...... 31.44% 31.47% 7/1/94
Small/Mid Cap Portfolio.. 26.76% 26.76% 11/1/96
</TABLE>

These figures are calculated according to the following formula:

P(1 +T )/n/ = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical 1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the
1, 5 or 10 year periods (or fractional portion thereof).

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
calculated above) to performance as reported by other investments, indices and
averages. Please see Appendix B for publications, indices and averages which may
be used.

In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a Portfolio, 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 a
Portfolio to calculate its performance. In addition,

-31-
<PAGE>

there can be no assurance that a Portfolio 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
corporation 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 located
at One International Place, Boston, MA 02110; however, all investor
correspondence 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. The Board of Directors has
classified additional classes of shares in each Portfolio, known as
Institutional Service Shares and Advisor shares. As of the date of this
Statement of Additional Information, no Institutional Service Shares or Advisor
shares of these Portfolios have been offered to the public.

Shares of each Portfolio of the Fund, when issued and paid for as provided
for in the Prospectus, will be fully paid and nonassessable, have no preference
as to conversion, exchange, dividends, retirement or other features and have no
preemptive rights. The shares of the Fund have noncumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so.
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his or her name on the
books of the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of a Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the federal excise tax on undistributed income
and capital gains. (See discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus.) The amounts of any income
dividends or capital gains distributions cannot be predicted.

-32-
<PAGE>

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 asset
value of the Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.

As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of a Portfolio at net asset value (as of the business day
following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.

Each Portfolio will be treated as a separate entity (and hence as a
separate "regulated investment company") for federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for federal income tax purposes) such gains against any
net capital losses of another Portfolio.

FEDERAL TAXES

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
disclosure and reporting obligations.

-33-
<PAGE>

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the Small Cap
and Small/Mid Cap Portfolios for the fiscal year ended October 31, 1997, which
appear in the Portfolio's 1997 Annual Report to Shareholders, and the report
thereon of Price Waterhouse LLP, the Fund's independent accountants, also
appearing therein, are attached to this Statement of Additional Information.

-34-
<PAGE>

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF BOND RATINGS

Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its highest bond ratings: Aaa -- judged to be the best quality; carry the
smallest degree of investment risk: Aa -- judged to be of high quality by all
standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.

Excerpts from Standard & Poor's Ratings Services ("S&P") description of its
highest bond ratings: AAA -- highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
- -- regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.

U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.

A-1
<PAGE>

of the United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the U.S. Treasury, if needed to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under Government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.

Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.

III. DESCRIPTION OF COMMERCIAL PAPER

The Portfolios may invest in commercial paper (including variable amount
master demand notes) rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with a Portfolio's investment
in variable amount master demand notes, the Adviser's investment management
staff will monitor, on an ongoing basis, the earning power, cash flow and other
liquidity ratios of the issuer and the borrower's ability to pay principal and
interest on demand.

Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better;

A-2
<PAGE>

(3) the issuer has access to at least two additional channels of borrowing; (4)
basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances; (5) typically, the issuer's industry is well established,
and the issuer has a strong position within the industry; and (6) the
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
A-1, A-2 or A-3. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and the appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to completion and customer acceptance; (4)
liquidity; (5) amount and quality of long term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of issuer of obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations.

IV. DESCRIPTION OF BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolios will agree to repurchase such instruments, at the Portfolios' option,
at par on or near the coupon dates. The dealers' obligations to repurchase
these instruments are subject to conditions imposed by various dealers. Such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolios are also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of

A-3
<PAGE>

six months or less and are traded in the secondary markets prior to maturity.

V. DESCRIPTION OF FOREIGN INVESTMENTS

Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, a Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.

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 income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.

A-4
<PAGE>

APPENDIX B - COMPARISONS

(c) S&P Midcap 400 Index -- consists of 400 domestic stocks chosen for
market size (medium market capitalization of $993 million as of
February 1995), liquidity and industry group representation. It is a
market-weighted index with each stock affecting the index in
proportion to its market value.

(d) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.

(e) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.

(f) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.

(g) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.

(h) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list

B-1
<PAGE>

of names was generated by screening for convertible issues of 100
million or greater in market capitalization. The index is priced
monthly.

(i) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.

(j) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.

(k) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass through securities.

(l) Lehman Brothers Long-Term Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.

(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.

(n) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.

(o) Russell 2000 Index -- consists of the smallest 2,000 companies in the
Russell 3000 Index, a U.S. equity index of the 3,000 large U.S.
companies, with an average market capitalization of $1.74 billion.

(p) Russell Midcap Index -- consists of the smallest 800 companies in the
Russell 1000 Index, a U.S. equity index of the 1,000 largest companies
in the Russell 3000 Index, with an average capitalization of $1.96
billion.

(q) Russell Top 200 Index -- is an unmanaged index of the 200 largest
companies in the Russell 2000 Index.

(r) 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

B-2
<PAGE>

exclusive of those traded on an exchange, and 65% Standard & Poor's
500 Stock Index and 35% Salomon Brothers High Grade Bond Index.

(s) 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.

(t) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

(u) 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
Investment Companies Service -- publications that rate fund
performance over specified time periods.

(v) 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.

(w) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates -
- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.

(x) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.

(y) 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.

B-3
<PAGE>

RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.9%)
- -------------------------------------------------------------------------------
BANKS (5.7%)
*AmeriCredit Corp......................................... 20,000 $ 581,250
*Granite Financial, Inc................................... 34,000 348,500
*Surety Capital Corp...................................... 90,000 618,750
UnionBancorp, Inc. ...................................... 40,000 700,000
*Willis Lease Finance Corp................................ 40,000 720,000
-----------
2,968,500
- -------------------------------------------------------------------------------
BASIC INDUSTRIES (18.6%)
*Benchmark Electronics, Inc............................... 25,000 623,437
Brunswick Technologies, Inc.............................. 25,000 462,500
Excel Industries, Inc.................................... 27,000 480,938
*Flanders Corp. .......................................... 60,000 472,500
Harmon Industries, Inc. ................................. 40,000 1,070,000
*Holophane Corp. ......................................... 25,000 562,500
*Mansur Industries, Inc. ................................. 25,000 537,500
NN Ball & Roller, Inc. .................................. 50,000 437,500
*Northwest Pipe Co. ...................................... 30,000 712,500
Spartech Corp. .......................................... 50,000 793,750
*Tetra Tech, Inc. ........................................ 25,000 643,750
*TETRA Technologies, Inc.................................. 50,000 1,153,125
*Universal Stainless & Alloy Products, Inc................ 50,000 743,750
*Whitehall Corp. ......................................... 20,000 370,000
X-Rite, Inc.............................................. 30,000 562,500
-----------
9,626,250
- -------------------------------------------------------------------------------
CONSUMER DURABLES (5.9%)
*Carson, Inc.............................................. 50,000 450,000
Cavalier Homes, Inc...................................... 86,000 843,875
*Keystone Automotive Industries, Inc...................... 35,000 761,250
Rock of Ages Corp........................................ 30,000 566,250
*TurboChef, Inc. ......................................... 37,000 416,250
-----------
3,037,625
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (10.3%)
*Belmont Homes, Inc........................................ 55,000 $ 398,750
*Craig Corp................................................ 30,000 566,250
*Home Products International, Inc.......................... 70,000 831,250
*O'Charleys, Inc........................................... 45,000 821,250
*Quiksilver, Inc........................................... 20,000 590,000
*Rio Hotel & Casino, Inc. ................................. 36,000 789,750
*Tarrant Apparel Group..................................... 15,000 178,125
*The Harvey Entertainment Company.......................... 27,400 383,600
*Vans, Inc. ............................................... 20,000 335,000
Zindart Ltd. ADR.......................................... 37,000 462,500
-----------
5,356,475
- --------------------------------------------------------------------------------
ENERGY RELATED (11.3%)
Domain Energy Corp........................................ 75,000 1,293,750
*Fortune Natural Resources Corp............................ 75,000 215,625
*HS Resources, Inc......................................... 76,000 1,339,500
*Magnum Hunter Resources Inc............................... 120,000 847,500
Midcoast Energy Resources, Inc............................ 35,000 842,188
*Swift Energy Co........................................... 45,000 1,167,187
Transcoastal Marine Services, Inc......................... 5,000 121,250
-----------
5,827,000
- --------------------------------------------------------------------------------
HEALTH CARE (10.6%)
*Andrx Corp................................................ 20,000 747,500
*Curative Health Services, Inc. ........................... 15,000 448,125
First Commonwealth, Inc. ................................. 50,000 712,500
*IGEN International, Inc. ................................. 50,000 568,750
Meridian Diagnostics, Inc. ............................... 55,000 598,125
*Prime Medical Services, Inc. ............................. 90,000 1,170,000
*ResMed, Inc. ............................................. 30,000 817,500
*Texas Biotechnology Corp.................................. 80,000 430,000
-----------
5,492,500
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INSURANCE (4.3%)
Argonaut Group, Inc....................................... 15,000 $ 474,375
Chartwell Re Corp. ....................................... 13,000 420,875
E. W. Blanch Holdings, Inc. .............................. 15,000 502,500
*Superior National Insurance Group, Inc.................... 60,000 855,000
-----------
2,252,750
- --------------------------------------------------------------------------------
NATURAL RESOURCES (2.3%)
*Layne Christensen Co. .................................... 60,000 1,185,000
- --------------------------------------------------------------------------------
RETAIL (5.9%)
*Kenneth Cole Productions, Inc., Class A................... 15,000 206,250
*Marks Bros. Jewelers, Inc. ............................... 40,000 610,000
*Piercing Pagoda, Inc. .................................... 20,000 500,000
*Stage Stores, Inc. ....................................... 15,000 540,000
Tropical Sportsware International Corp. .................. 25,000 300,000
*The Bombay Company, Inc. ................................. 145,000 879,062
-----------
3,035,312
- --------------------------------------------------------------------------------
SERVICES (5.9%)
*Butler International, Inc. ............................... 45,000 810,000
*Daisytek International Corp. ............................. 5,000 190,625
*F.Y.I., Inc. ............................................. 25,000 621,875
*The Vincam Group, Inc. ................................... 20,000 625,000
*United Stationers, Inc. .................................. 20,000 795,000
-----------
3,042,500
- --------------------------------------------------------------------------------
TECHNOLOGY (13.7%)
*Barringer Technologies, Inc. ............................. 25,000 242,188
*DataWorks, Corp. ......................................... 50,000 990,625
FARO Technologies, Inc. .................................. 40,000 540,000
H.T.E., Inc. ............................................. 65,000 1,080,625
*INTERSOLV, Inc. .......................................... 100,000 1,250,000
*Phoenix International Ltd., Inc. ......................... 70,000 1,207,500
*Pomeroy Computer Resources, Inc. ......................... 30,000 765,000
Power-One, Inc. .......................................... 55,000 1,017,500
-----------
7,093,438
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

RICE, HALL, JAMES SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.8%)
- -------------------------------------------------------------------------------
BANKS (3.6%)
National Commerce Bancorp................................. 16,000 $ 466,000
- -------------------------------------------------------------------------------
BASIC INDUSTRIES (14.9%)
Dexter Corp............................................... 12,000 471,000
General Signal Corp....................................... 11,000 441,375
*Hexcel Corporation....................................... 16,600 445,088
Mark IV Industries, Inc................................... 16,305 395,396
*Royal Group Technologies, Ltd............................ 7,000 177,625
-----------
1,930,484
- -------------------------------------------------------------------------------
CAPITAL CONSTRUCTION (2.3%)
*Jacobs Engineering Group, Inc............................. 10,800 291,600
- -------------------------------------------------------------------------------
CONSUMER DURABLES (4.2%)
International Game Technology............................. 21,300 544,481
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (11.5%)
Applebee's International, Inc............................. 11,600 255,200
*Harrah's Entertainment, Inc............................... 19,600 385,875
Sysco Corp................................................ 10,500 420,000
Warnaco Group, Inc........................................ 15,300 432,225
-----------
1,493,300
- -------------------------------------------------------------------------------
ENERGY RELATED (3.9%)
*Weatherford Enterra, Inc.................................. 10,000 510,625
- -------------------------------------------------------------------------------
HEALTH CARE (15.6%)
*Acuson Corp............................................... 16,000 300,000
*Alza Corp................................................. 16,800 437,850
DENTSPLY International, Inc............................... 16,600 471,025
*HEALTHSOUTH Corp.......................................... 13,000 332,312
*Sofamor Danek Group, Inc.................................. 7,000 482,125
-----------
2,023,312
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INSURANCE (12.1%)
HCC Insurance Holdings, Inc................................ 14,000 $ 327,250
Mercury General Corp....................................... 8,000 339,500
Mutual Risk Management Ltd................................. 16,400 425,375
Orion Capital Corp......................................... 10,700 481,500
-----------
1,573,625
- --------------------------------------------------------------------------------
RETAIL (11.4%)
*Cole National Corp., Class A............................... 6,400 271,200
*Linens 'N Things, Inc...................................... 9,800 352,188
*Michaels Stores, Inc....................................... 12,500 371,875
*Zale Corp.................................................. 19,000 479,750
-----------
1,475,013
- --------------------------------------------------------------------------------
SERVICES (7.1%)
*Concord EFS, Inc........................................... 18,500 548,063
Lesco, Inc................................................. 13,000 269,750
*SITEL Corp................................................. 12,000 106,500
-----------
924,313
- --------------------------------------------------------------------------------
TECHNOLOGY (3.4%)
*Gemstar International Group Ltd............................ 9,800 213,150
*Network Appliance, Inc..................................... 4,500 223,875
-----------
437,025
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.2%)
*PanAmSat Corp.............................................. 6,800 283,050
- --------------------------------------------------------------------------------
TRANSPORTATION (5.6%)
ASA Holdings, Inc.......................................... 16,600 456,500
Interpool, Inc............................................. 16,850 269,600
-----------
726,100
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $11,806,865)....................... 12,678,928
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.3%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $686,320, collateralized
by $657,718 of various U.S. Treasury Notes, 5.50%-8.75%
due 5/15/00-6/30/02, valued at $686,387
(COST $686,000)........................................ $686,000 $ 686,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.1%) (COST $12,492,865) (a)........ 13,364,928
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-3.1%)............... (407,467)
- -------------------------------------------------------------------------------
NET ASSETS (100%)........................................ $12,957,461
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for Federal income tax purposes was $12,493,353. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$871,575. This consisted of aggregate gross unrealized appreciation for
all securities of $1,159,679 and aggregate gross unrealized depreciation
for all securities of $288,104.

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

RICE, HALL, JAMES PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
<CAPTION>
SMALL CAP SMALL/MID CAP
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Cost............................... $42,264,443 $12,492,865
=========== ===========
Investments, at Value ............................. $51,216,038 $13,364,928
Cash............................................... -- 695
Receivable for Investments Sold.................... 3,316,549 --
Receivable for Portfolio Shares Sold............... 448,895 71,080
Dividends Receivable............................... 10,480 639
Interest Receivable................................ -- 106
Other Assets....................................... 1,114 146
- -------------------------------------------------------------------------------
Total Assets...................................... 54,993,076 13,437,594
- -------------------------------------------------------------------------------
LIABILITIES
Due to Custodian Bank--Note D...................... 2,233,291 --
Payable for Investments Purchased.................. 555,625 432,077
Payable for Portfolio Shares Redeemed.............. 356,427 5,060
Payable for Investment Advisory Fees--Note B....... 35,237 16,473
Payable for Administrative Fees--Note C............ 8,239 4,074
Payable for Custodian Fees--Note D................. 4,023 1,104
Payable for Account Services Fees--Note F ......... 453 --
Payable for Directors' Fees--Note G................ 702 613
Other Liabilities.................................. 26,928 20,732
- -------------------------------------------------------------------------------
Total Liabilities................................. 3,220,925 480,133
- -------------------------------------------------------------------------------
NET ASSETS.......................................... $51,772,151 $12,957,461
===============================================================================
NET ASSETS CONSIST OF:
Paid in Capital.................................... $36,871,841 $11,923,355
Undistributed Net Investment Income (Loss)......... (224,474) 3,479
Accumulated Net Realized Gain...................... 6,173,189 158,564
Unrealized Appreciation............................ 8,951,595 872,063
- -------------------------------------------------------------------------------
NET ASSETS.......................................... $51,772,151 $12,957,461
===============================================================================
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value)
(Authorized 25,000,000)........................... 2,759,014 1,025,304
Net Asset Value, Offering and Redemption Price Per
Share............................................. $ 18.76 $ 12.64
===============================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

RICE, HALL, JAMES PORTFOLIOS
STATEMENT OF OPERATIONS
Year Ended October 31, 1997

<TABLE>
<CAPTION>
SMALL CAP SMALL/MID CAP
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.......................... $ 184,305 $ 44,909
Dividends......................... 105,300 33,769
- ---------------------------------------------------------------------------------
Total Income..................... 289,605 78,678
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees....................... $320,608 $ 42,239
Less: Fees Waived................ -- 320,608 (42,239) --
-------- --------
Administrative Fees--Note C....... 93,851 36,970
Custodian Fees--Note D............ 7,219 3,992
Account Services Fees--Note F..... 4,801 --
Directors' Fees--Note G........... 2,498 2,162
Audit Fees........................ 14,971 13,234
Legal Fees........................ 1,956 1,099
Printing Fees..................... 24,736 22,116
Registration and Filing Fees...... 30,150 9,236
Other............................. 17,067 3,116
Expenses Assumed by the Adviser--
Note B........................... -- (25,794)
- ---------------------------------------------------------------------------------
Total Expenses.................. 517,857 66,131
Expense Offset--Note A............ (3,778) --
- ---------------------------------------------------------------------------------
Net Expenses.................... 514,079 66,131
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME(LOSS)........ (224,474) 12,547
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS... 6,189,598 158,564
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON IN-
VESTMENTS......................... 5,992,504 872,063
- ---------------------------------------------------------------------------------
TOTAL NET GAIN ON INVESTMENTS...... 12,182,102 1,030,627
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......... $11,957,628 $1,043,174
=================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss.................................. $ (224,474) $ (205,126)
Net Realized Gain.................................... 6,189,598 3,396,281
Net Change in Unrealized Appreciation/Depreciation... 5,992,504 733,634
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions.............................................. 11,957,628 3,924,789
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain.................................... (3,197,327) (3,317,853)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................... 34,602,981 13,453,557
--In Lieu of Cash Distributions.................... 3,051,692 3,273,715
Redeemed............................................. (28,131,214) (2,755,914)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 9,523,459 13,971,358
- ----------------------------------------------------------------------------------
Total Increase....................................... 18,283,760 14,578,294
Net Assets:
Beginning of Period.................................. 33,488,391 18,910,097
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income (loss) of $(224,474) and $0, respectively)... $ 51,772,151 $33,488,391
==================================================================================
(1) Shares Issued and Redeemed:
Shares Issued..................................... 1,973,490 865,521
In Lieu of Cash Distributions..................... 210,469 242,677
Redeemed.......................................... (1,553,527) (171,457)
- ----------------------------------------------------------------------------------
630,432 936,741
==================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997
- ----------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income........................................... $ 12,547
Net Realized Gain............................................... 158,564
Net Change in Unrealized Appreciation/Depreciation.............. 872,063
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations........... 1,043,174
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........................................... (9,068)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued.......................................................... 13,404,528
--In Lieu of Cash Distributions.............................. 8,451
Redeemed........................................................ (1,489,624)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions................... 11,923,355
- ----------------------------------------------------------------------------------
Total Increase.................................................. 12,957,461
Net Assets:
Beginning of Period............................................. --
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment income of
$3,479) $12,957,461
==================================================================================
(1) Shares Issued and Redeemed:
Issued....................................................... 1,157,280
In Lieu of Cash Distributions................................ 781
Redeemed..................................................... (132,757)
- ----------------------------------------------------------------------------------
1,025,304
==================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
JULY 1,
YEARS ENDED OCTOBER 31, 1994*** TO
--------------------------- OCTOBER 31,
1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERI-
OD................................ $ 15.73 $ 15.87 $ 11.14 $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)...... (0.08) (0.10) (0.07) 0.01
Net Realized and Unrealized Gain.. 4.59 2.73 4.81 1.13
- --------------------------------------------------------------------------------
Total From Investment Operations. 4.51 2.63 4.74 1.14
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............. -- -- (0.01) --
In Excess of Net Investment In-
come............................. -- -- (0.00)# --
Net Realized Gain................. (1.48) (2.77) -- --
- --------------------------------------------------------------------------------
Total Distributions.............. (1.48) (2.77) (0.01) --
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $ 18.76 $ 15.73 $ 15.87 $11.14
================================================================================
TOTAL RETURN....................... 31.44 % 19.43 % 42.59 %+ 11.40%**+
================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands)............................ $51,772 $33,488 $18,910 $8,287
Ratio of Expenses to Average Net
Assets............................ 1.21 % 1.37 % 1.40 % 1.40%*
Ratio of Net Investment Income
(Loss) to Average Net Assets...... (0.53)% (0.78)% (0.63)% 0.30%*
Portfolio Turnover Rate............ 158 % 181 % 180 % 5%
Average Commission Rate ##......... $0.0498 $0.0509 N/A N/A
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and
Expenses Assumed by the Adviser
Per Share......................... N/A N/A $ 0.01 $ 0.05
Ratio of Expenses to Average Net
Assets Including Expense Offsets.. 1.21 % 1.37 % 1.40 % N/A
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
*** Commencement of Operations
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# Value is less than $0.01 per share.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
NOVEMBER 1, 1996*
TO OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................................... 0.03
Net Realized and Unrealized Gain.......................... 2.64
- --------------------------------------------------------------------------------
Total From Investment Operations......................... 2.67
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income..................................... (0.03)
- --------------------------------------------------------------------------------
Total Distributions...................................... (0.03)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............................. $ 12.64
================================================================================
TOTAL RETURN............................................... 26.76%+
================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)...................... $12,957
Ratio of Expenses to Average Net Assets.................... 1.25%
Ratio of Net Investment Income to Average Net Assets....... 0.24%
Portfolio Turnover Rate.................................... 56%
Average Commission Rate.................................... $0.0732
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and Expenses Assumed by the Adviser
Per Share................................................. $ 0.18
Ratio of Expenses to Average Net Assets Including Expense
Offsets................................................... 1.25%
- --------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period.

The accompanying notes are an integral part of the financial statements.

19
<PAGE>

RICE, HALL, JAMES PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The Rice,
Hall, James Small Cap Portfolio and Rice, Hall, James Small/Mid Cap Portfolio
(the "Portfolios"), portfolios of UAM Funds, Inc., are diversified, open-end
management investment companies. At October 31, 1997, the UAM Funds were
comprised of forty-two active portfolios. The financial statements of the
remaining portfolios are presented separately. The objectives of the
Portfolios are as follows:

RICE, HALL, JAMES SMALL CAP PORTFOLIO seeks to provide maximum capital
appreciation, consistent with reasonable risk to principal by investing
primarily in small market capitalization companies.

RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO seeks to provide maximum capital
appreciation, consistent with reasonable risk to principal by investing
primarily in small/mid market capitalization companies.

A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolios in the preparation of
their financial statements. Generally accepted accounting principles may
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.

1. SECURITY VALUATION: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid prices. Short-term investments that have
remaining maturities of sixty days or less at time of purchase are valued
at amortized cost, if it approximates market value. The value of other
assets and securities for which no quotations are readily available is
determined in good faith at fair value using methods determined by the
Board of Directors.

20
<PAGE>

RICE, HALL, JAMES PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Rice, Hall, James & Associates (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Rice, Hall, James Small Cap Portfolio and the Rice, Hall,
James Small/Mid Cap Portfolio at a monthly fee calculated at an annual rate of
0.75% and 0.80% of average daily net assets for the month, respectively. The
Adviser has voluntarily agreed to waive a portion of its advisory fees and to
assume expenses, if necessary, in order to keep the Rice, Hall, James Small
Cap Portfolio and the Rice, Hall, James Small/Mid Cap Portfolio total annual
operating expenses, after the effect of expense offset arrangements, from
exceeding 1.40% and 1.25% of average daily net assets, respectively.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, computed
daily and payable monthly, of 0.19% of the first $200 million of the combined
aggregate net assets; plus 0.11% of the next $800 million of the combined
aggregate net assets; plus 0.07% of the next $2 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 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 at an annual rate of 0.04% of average daily net assets of each Portfolio.
The Administrator has entered into a Mutual Funds Service Agreement with Chase
Global Funds Services Company ("CGFSC"), an affiliate of The Chase Manhattan
Bank, under which CGFSC agrees to provide certain services, including but not
limited to, administration, fund accounting, dividend disbursing and transfer
agent services. Pursuant to the Mutual Funds Service Agreement, the
Administrator pays CGFSC a monthly fee. For

21
<PAGE>

RICE, HALL, JAMES PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the year ended October 31, 1997, UAM Fund Service, Inc. earned the following
amounts from the Portfolios as Administrator and paid the following portion to
CGFSC for its services as sub-Administrator:

<TABLE>
<CAPTION>
PORTION
ADMINISTRATION PAID TO
RICE, HALL, JAMES PORTFOLIOS FEES CGFSC
---------------------------- -------------- -------
<S> <C> <C>
Small Cap.......................................... $93,851 $76,774
Small/Mid Cap...................................... 36,970 34,858
</TABLE>

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement. As part of the custodian agreement, the custodian bank has a lien
on the securities of the Portfolios to cover any advances made by the
custodian to the Portfolios. At October 31, 1997, the payable to the custodian
bank represents the amount due for cash advanced for shareholder redemptions
for the Small Cap Portfolio.

F. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered into
an Account Services Agreement (the "Services Agreement") with UAM Retirement
Plan Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of
UAM. Under the Services Agreement, the Service Provider agrees to perform
certain services for participants in a self-directed, defined contribution
plan, and for whom the Service Provider provides participant recordkeeping.
Pursuant to the Services Agreement, the Service Provider is entitled to
receive, after the end of each month, a fee at the annual rate of 0.15% of the
average aggregate daily net asset value of shares of the UAM Funds in the
accounts for which they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

H. PURCHASES AND SALES: For the year ended October 31, 1997, the Rice, Hall,
James Small Cap Portfolio and the Rice, Hall, James Small/Mid Cap Portfolio
made purchases of $69,102,164 and $14,276,269 and sales of $61,479,181 and
$2,633,143 of investment securities other than long-term U.S. Government and
short-term securities, respectively There were no purchases or sales of long-
term U.S. Government securities.

22
<PAGE>

RICE, HALL, JAMES PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
NO. OF %
RICE, HALL, JAMES PORTFOLIOS SHAREHOLDERS OWNERSHIP
---------------------------- ------------ ---------
<S> <C> <C>
Small Cap........................................... 1 25.2%
Small/Mid Cap....................................... 1 26.9%
</TABLE>

23
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Rice, Hall, James Small Cap Portfolio
Rice, Hall, James Small/Mid Cap Portfolio

In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Rice, Hall,
James Small Cap Portfolio and the Rice, Hall, James Small/Mid Cap Portfolio
(the "Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 1997,
and the results of each of their operations, the changes in each of their net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL INCOME TAX INFORMATION (UNAUDITED):

At October 31, 1997 Rice, Hall, James Small Cap Portfolio hereby designates
$974,976 as long-term capital gains dividends for the purpose of the dividend
paid deduction on their Federal income tax return.

For the period ended October 31, 1997 the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
2.6% and 13.4%, respectively, for Rice, Hall, James Small Cap Portfolio and
Rice, Hall, James Small/Mid Cap Portfolio.

24
<PAGE>

PART B

UAM FUNDS, INC.

- --------------------------------------------------------------------------------

SAMI PREFERRED STOCK INCOME PORTFOLIO

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the SAMI Preferred Stock Income Portfolio's Institutional Class Shares dated
January 22, 1998. To obtain a Prospectus, please call the UAM Funds Service
Center: 1-800-638-7983.

TABLE CONTENTS

<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES.......................................... 1

PURCHASE AND REDEMPTION OF SHARES.......................................... 8

INVESTMENT LIMITATIONS..................................................... 12

MANAGEMENT OF THE FUND..................................................... 13

INVESTMENT ADVISER......................................................... 17

PORTFOLIO TRANSACTIONS..................................................... 18

ADMINISTRATIVE SERVICES.................................................... 19

CUSTODIAN.................................................................. 22

INDEPENDENT ACCOUNTANTS.................................................... 22

DISTRIBUTOR................................................................ 22

PERFORMANCE CALCULATIONS................................................... 22

GENERAL INFORMATION........................................................ 25

FINANCIAL STATEMENTS....................................................... 27

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS........................ A-1

APPENDIX B - COMPARISONS................................................... B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following discussion supplements the discussion of the investment
objective and policies of the SAMI Preferred Stock Income Portfolio (the
"Portfolio") as set forth in the Portfolio's Prospectus.

LENDING OF SECURITIES

The Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "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). The Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of the collateral for the loan) at fair market value would
be committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed in the Prospectus.

SHORT-TERM INVESTMENTS

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are non-
negotiable deposits maintained in a banking institution for a specified period
of time at a stated interest rate. Time deposits maturing in more than seven
days will not be purchased by a Portfolio, and time
<PAGE>

deposits maturing from two business days through seven calendar days will not
exceed 10% of the total assets of a Portfolio.

Certificates of deposit are negotiable short-term obligations issued
by commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

(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, determined by the Adviser to be of comparable quality;

(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;

(6) Repurchase agreements collateralized by securities listed above.

RISKS PARTICULAR TO THE PUBLIC UTILITIES INDUSTRIES

The public utilities industries are subject to various uncertainties,
including: difficulty in obtaining adequate

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<PAGE>

returns on invested capital; frequent difficulty in obtaining approval of rate
increases by public service commissions; increased costs, delays and
restrictions as a result of environmental considerations; difficulty and delay
in securing financing of large construction projects; difficulties of the
capital markets in absorbing utility debt and equity securities; difficulties in
obtaining fuel for electric generation at reasonable prices; difficulty in
obtaining natural gas for resale; special risks associated with the construction
and operation of nuclear power generating facilities, including technical and
cost factors of such construction and operation and the possibility of
imposition of additional governmental requirements for construction and
operation; and the effects of energy conservation and the effects of regulatory
changes, such as the possible adverse effects on profits of recent increased
competition among certain utilities companies, including telecommunications
companies, and the uncertainties resulting from such companies' diversification
into new domestic and international businesses, as well as agreements by many
such companies linking future rate increases to inflation or other factors not
directly related to the actual operating profits of the enterprise.

FUTURES CONTRACTS

The Portfolio may enter into futures contracts, options and options on
futures contracts for the purposes of hedging, remaining fully invested and
reducing transactions costs. Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. Futures contracts
which are standardized as to maturity date and underlying financial instrument
are traded on national futures exchanges. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"), a U.S. Government Agency.

-3-
<PAGE>

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. Brokers
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, changes in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable 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 interest rates. The Portfolio intends to use futures contracts only for
hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, the Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed"; that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control the Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Portfolio will incur commission expenses in
both opening and closing out futures positions, these costs are lower than

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<PAGE>

transaction costs incurred in the purchase and sale of the underlying
securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

The Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. The
Portfolio's outstanding obligations to purchase securities under these contracts
may be 100% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

The Portfolio will minimize the risk that it will be unable to close
out a futures contract by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may
not be possible to close a futures position. In the event of adverse price
movements, the Portfolio would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if the Portfolio
has insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close futures positions
also could have an adverse impact on the Portfolio's ability to effectively
hedge.

The risk of loss in trading futures contracts in some strategies can
be substantial 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the 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,

-5-
<PAGE>

instead of the futures contract, it had invested in the underlying financial
instrument and sold it after the decline.

Utilization of futures transactions by the Portfolio does involve the
risk of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the portfolio securities being hedged.
It is also possible that the Portfolio could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract.

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 unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days, with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions the Portfolio has identified as hedging
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 gains or loss recognized with
respect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or losses, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are
intended to hedge against a change in the value of securities held by the
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.

-6-
<PAGE>

derived from loans of securities, and gains from the sale of securities of
foreign currencies, or other income derived with respect to its business
investing in such securities or currencies. 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.

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.

OPTIONS

The Portfolio may purchase and sell put and call options on futures
contracts for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract or securities.

WRITING COVERED OPTIONS

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<PAGE>

The Portfolio writes only covered put options, which means that so
long as the Portfolio is obligated as the writer of the option it will, through
its custodian, have deposited and maintained cash or liquid securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities. By writing a put, a Portfolio will be obligated to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of exercise for as long as the option is outstanding. The
Portfolio may engage in closing transactions in order to terminate put options
that it has written.

PURCHASING OPTIONS

The amount of any appreciation in the value of the underlying security
will be partially offset by the amount of the premium paid for the put option
and any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and profit or loss from the sale will depend
on whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out the Portfolio's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. In certain circumstances, the Portfolio may purchase call
options on securities held in its investment portfolio on which it has written
call options or on securities which it intends to purchase.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectus are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares. See "Financial
Highlights" in the Prospectus for the Portfolio's historical portfolio turnover
rates.

PURCHASE AND REDEMPTION OF SHARES

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<PAGE>

certain exceptions as may be determined from time to time by the officers of the
Fund. Other investment minimums are: initial IRA investment, $500; initial
spousal IRA investment, $250; additional investment for all accounts, $100. An
order received in proper form prior to the close of regular trading on the New
York Stock Exchange ("Exchange") (generally 4:00 p.m. Eastern Time) will be
executed at the price computed on the date of receipt; and an order received not
in proper form or after the 4:00 p.m. close of the Exchange will be executed at
the price computed on the next day the Exchange is open after proper receipt.
The Exchange will be closed on the following days: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day; New
Year's Day and Dr. Martin Luther King, Jr. Day.

The Portfolio reserves the right in its sole discretion (1) to suspend
the offering of its shares, (2) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of the Portfolio's shares.

The Portfolio may suspend redemption privileges or postpone the date
of payment (1) during any period that either the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Portfolio to dispose of securities owned by it, or to fairly determine
the value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Portfolio. If redemptions
are paid in investment securities, such securities will be valued as set forth
in the Prospectus under "Valuation of Shares," and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.

-9-
<PAGE>

No charge is made by the Portfolio for redemptions. Any redemption
may be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase
Global Funds Services Company ("CGFSC") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required for (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) and/or
registered address, or (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.

VALUATION OF SHARES

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<PAGE>

Securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, using methods approved by the Board of Directors.

SHAREHOLDER SERVICES

The following supplements the information set forth under "Shareholder
Services" in the SAMI Preferred Stock Income Portfolio Prospectus.

EXCHANGE PRIVILEGE

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<PAGE>

prior to the close of regular trading on the Exchange (generally 4:00 p.m.
Eastern Time) will be processed as of the close of business on the same day.
Requests received after the close of regular trading on the Exchange will be
processed on the next business day. Neither the Fund nor CGFSC will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.

TRANSFER OF SHARES

INVESTMENT LIMITATIONS

The SAMI Preferred Stock Income Portfolio is subject to the following
restrictions, which are non-fundamental, and which may be changed by the Fund's
Board of Directors upon reasonable notice to investors. Investment limitation
(3) is classified as fundamental. The Portfolio's fundamental investment
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 objective and policies set forth in the Portfolio's
Prospectus. Whenever an investment limitation sets forth a percentage
limitation on investment or utilization of assets, such limitation shall be
determined immediately after and as a result of a Portfolio's acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a

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<PAGE>

change in values, net assets or other circumstances will not be considered when
determining whether the investment complies with a Portfolio's investment
limitations. The Portfolio will not:

(1) invest in commodities, except for hedging, liquidity and related
purposes as provided in the Prospectus and herein;

(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;

(3) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit the Portfolio
from (i) making any permitted borrowings, mortgages or pledges,
or (ii) entering into options, futures or repurchase
transactions;

(4) purchase on margin or sell short;

(5) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;

(6) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the total assets of the Portfolio, determined
at the time of investment, in securities subject to legal or
contractual restrictions on resale and for which there are no
readily available markets, including repurchase agreements having
maturities of more than seven days;

(7) invest for the purpose of exercising control over management of
any company;

(8) acquire any securities of companies within one industry, other
than the utilities industry, if, as a result of such acquisition,
more than 25% of the value of the Portfolio's total assets would
be invested in securities of companies within such industry;
provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a

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<PAGE>

temporary defensive position; and write or acquire options or
interests in oil, gas or other mineral exploration or development
programs.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

Nancy J. Dunn Director of the Fund; Vice President
10 Garden Street for Finance and Administration and
Cambridge, MA 02138 Treasurer of Radcliffe College since
8/14/51 1991.

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<PAGE>

<TABLE>
<S> <C>
Charles H. Salisbury, Jr.* Director of the Fund; Executive Vice
One International Place President of United Asset Management
Boston, MA 02110 Corporation; formerly an executive
8/24/40 officer and Director of T. Rowe Price
and President and Chief Investment
Officer of T. Rowe Price Trust
Company.

William H. Park Vice President of the Fund; Executive
One International Place Vice President and Chief Financial
Boston, MA 02110 Officer of United Asset Management
9/19/47 Corporation.

Gary L. French Treasurer of the Fund; President of
211 Congress Street UAM Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc.; Vice President of
7/4/51 Operations, Development and Control of
Fidelity Investments in 1995;
Treasurer of the Fidelity Group of
Mutual Funds from 1991 to 1995.

Gordon M. Shone Assistant Treasurer of the Fund; Vice
73 Tremont Street President of Fund Administration and
Boston, MA 02108 Compliance of Chase Global Funds
7/30/56 Services Company; formerly Senior
Audit Manager of Coopers & Lybrand LLP
from 1983 to 1993.

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<PAGE>

<TABLE>
<S> <C>
Karl O. Hartmann Assistant Secretary of the Fund;
73 Tremont Street Senior Vice President and General
Boston, MA 02108 Counsel of Chase Global Funds Services
3/7/55 Company.
</TABLE>

- -------------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation
Name of Person, Compensation Accrued as Part of Benefits Upon from Registrant and
Position From Registrant Fund Expenses Retirement Fund Complex
- ------------------------ --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr........ $ 26,791 0 0 $ 32,750
Director
Nancy J. Dunn.............. $ 6,774 0 0 $ 8,300
Director
Philip D. English.......... $ 26,791 0 0 $ 32,750
Director
William A. Humenuk......... $ 26,791 0 0 $ 32,750
Director
</TABLE>

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<PAGE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997 the following persons or organizations owned
of record or beneficially 5% or more of the shares of the Portfolio:

Kansas City Power & Light Company, Kansas City, MO, 34.8%; Intercoast
Capital Company, 370 W. Anchor Drive, Suite 300, Dakota Dunes, SD, 20.1%;
Intercoast Capital Company, 370 W. Anchor Drive, Suite 300, Dakota Dunes, SD,
14.7%; Bank of America Illinois, FBO Sisters of St. Francis Health Svc. Inc.,
Retirement Trust dated 01/01/76, Los Angeles, CA, 10.8% and KLT Investments
Inc., 1201 Walnut 21st Fl., Kansas City, MO, 5.9%.

* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

The persons or organizations owning 25% or more of the outstanding
shares of the Portfolio may be presumed to control (as that term is defined in
the 1940 Act) the Portfolio. As a result, those persons or organizations could
have the ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of the Portfolio.

INVESTMENT ADVISER

CONTROL OF ADVISER

Spectrum Asset Management, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 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.

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<PAGE>

SERVICES PERFORMED BY ADVISER

Pursuant to an Investment Advisory Agreement ("Agreement") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolio's assets, to continuously review, supervise and
administer the Portfolio's investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolio's assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreement, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreement, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, for any error of judgment, mistake of law or any other act or omission in
the course of, or connected with, rendering services under the Agreement.

Unless sooner terminated, the Agreement shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolio. The Agreement
may be terminated at any time by the Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of the Portfolio on
60 days' written notice to the Adviser. The Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days' written
notice to the Fund. The Agreement will automatically and immediately terminate
in the event of its assignment.

PHILOSOPHY AND STYLE

The Adviser has been managing diversified hedged preferred stock
portfolios for major institutional investors since 1987. Focused exclusively on
preferred stocks, Spectrum's three senior executives have a total of nearly 50
years of experience in this specialized market. The firm uses sophisticated,
proprietary pricing and hedging models, in addition to the expertise of its
investment professionals, to develop strategies which take advantage of market
inefficiencies and opportunities while mitigating the effect of interest rate
movements on the capital value of the Portfolio.

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<PAGE>

ADVISORY FEES

As compensation for the services rendered by the Adviser under the
Agreement, the Portfolio pays the Adviser an annual fee, in monthly
installments, calculated by applying the following annual percentage rate to the
Portfolio's average daily net assets for the month: 0.70%.

For the fiscal years ended October 31, 1995, 1996 and 1997, the
Portfolio paid advisory fees of $385,000, $173,576 and $166,174, respectively.
During the fiscal years ended October 31, 1996 and 1997, the Advisor voluntarily
waived advisory fees of approximately $60,615 and $56,371, respectively.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio 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, 1995, 1996 and 1997 the Portfolio paid brokerage
commissions of approximately $83,331, $28,892 and $31,180, respectively.

The Portfolio may place a portion of its portfolio transactions with
the Adviser, which is a registered broker. Transactions placed with the Adviser
are subject to procedures adopted and supervised by the Board of Directors. For
the fiscal years ended October 31, 1995, 1996 and 1997, the entire Fund paid
commissions of approximately $ 58,000, $21,000 and $27,000, respectively, to the
Adviser for transactions placed through its brokerage facilities.

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<PAGE>

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

The Board of Directors of the Fund approved a Fund Administration
Agreement effective April 15, 1996 ("Fund Administration Agreement") between UAM
Fund Services, Inc., a wholly owned subsidiary of UAM, and the Fund. Pursuant
to the terms of the Fund Administration Agreement, UAMFSI manages, administers
and conducts the general business activities of the Fund other than those which
have been contracted to other third parties by the Fund. Additionally, UAMFSI
has agreed to provide transfer agency services to the portfolios pursuant to the
terms of the Fund Administration Agreement.

Pursuant to the terms of the Agreements, the Portfolio pays UAMFSI a
two-part monthly fee: a Portfolio-specific fee which is retained by UAMFSI and a
sub-administration fee which UAMFSI in turn pays to CGFSC. The Portfolio-
specific fee for the Portfolio is 0.06% of aggregate net assets.

CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:

0.19 of 1% of the first $200 million of combined UAM Fund net assets;

0.11 of 1% of the next $800 million of combined UAM Fund net assets;

0.07 of 1% of combined UAM Fund net assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined UAM Fund net assets in excess of $3 billion.

Fees are allocated among the Portfolios on the basis of their relative
assets and are subject to a graduated minimum fee

-20-
<PAGE>

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.

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 periods
prior 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.

During the fiscal years ended October 31, 1995, 1996 and 1997,
administrative services fees paid to the Administrator by the SAMI Preferred
Stock Income Portfolio totaled $78,000, $85,405 and $93,115, respectively. Of
the fees paid during the year ended October 31, 1996 and 1997, the Portfolio
paid $74,344 and $74,045 to CGFSC and $11,061 and $19,070 to UAMFSI,
respectively.

-21-
<PAGE>

Unless sooner terminated as provided herein, the Agreement shall
continue in effect from year to year provided such continuance is specifically
approved at least annually by the Board. The Fund Administration Agreement is
terminable, without penalty, by the Board or by UAMFSI, on not less than ninety
(90) days' written notice. The Fund Administration Agreement shall
automatically terminate upon its assignment by UAMFSI without the prior written
consent of the Fund.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the Portfolio paid no
fees pursuant to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase Metro Tech Center, Brooklyn, NY
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, serves as
independent accountants for the Fund.

DISTRIBUTOR

-22-
<PAGE>

The Distributor received no compensation for its services directly or
indirectly from the Preferred Stock Income Portfolio during the fiscal year
ended October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolio may from time to time quote various performance figures
to illustrate past performance.

Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized performance
quotations or, alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance
information computed as required by the Commission. Current yield and average
annual compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used to compute or express performance
follows.

TOTAL RETURN

The average annual total return of the Portfolio is determined by
finding the average annual compounded rates of return over 1, 5, and 10 year
periods that would equate an initial hypothetical $1,000 investment to its
ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each 1, 5 and 10 year period and the deduction
of all applicable Fund expenses on an annual basis. The average annual total
rates of return for the SAMI Preferred Stock Income Portfolio from inception and
for the one and five year periods ended on the date of the Financial Statements
included herein, are as follows:

-23-
<PAGE>

<TABLE>
<CAPTION>
Since
Inception
Through
One Year Five Years Year
Ended Ended Ended
October October 31, October 31, Inception
31, 1997 1997 1997 Date
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
SAMI Preferred
Stock Income
Portfolio....... 7.73% 5.32% 5.28% 6/23/92
</TABLE>

These figures were calculated according to the following formula:

P(1 + T)/n/ = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year periods at
the end of the 1, 5, or 10 year periods (or fractional portion
thereof).
YIELD

Current yield reflects the income per share earned by the Portfolio's
investment.

The current yield of the Portfolio is determined by dividing the net
investment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the base period. The yield for the SAMI Preferred Stock
Income Portfolio for the 30-day period ended October 31, 1997 was 5.28%.

-24-
<PAGE>

This figure was obtained using the following formula:

Yield = 2[(a - b + 1)/6/-1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.

TAXABLE EQUIVALENT YIELD

In addition to its standardized performance quotations, the SAMI
Preferred Stock Income Portfolio may from time to time quote a non-standardized
performance figure for taxable equivalent yield. Taxable equivalent yield
represents the return that a corporate tax-paying investor qualifying for the
70% dividends received deduction would need to earn on a fully taxable
investment in order to achieve an equivalent after-tax yield during a specified
time period. For the twelve months ended October 31, 1997, the SAMI Preferred
Stock Income Portfolio's taxable equivalent yield was 10.44%. This figure was
calculated using the following formula:

<TABLE>
<S> <C>
A Given Quarter = [(DI x (1 - CT x DRD)/(1 CT + (IE) + Net Realized and Unrealized Capital Gains ]
---------------------------------------------------------------------------------
Average Net Assets During Quarter
</TABLE>

Taxable Equivalent Yield = [(Q1 + 1) x (Q2 + 1) x (Q3 + 1) x (Q4 + 1)] -- 1

where:
DI = dividend income from domestic equity securities subject to
the dividends received deduction for qualifying investors,
CT = corporate income tax rate,
DRD = dividends received deduction,
I = interest and dividend income not subject to the dividends
received deduction,
E = expenses and fees incurred during the period,
Q1 = 1st Quarter,
Q2 = 2nd Quarter,
Q3 = 3rd Quarter, and
Q4 = 4th Quarter.

The formula used to derive taxable equivalent yield is in accordance
with the acceptable methods set forth by the Association of Investment
Management and Research ("AIMR").

-25-
<PAGE>

COMPARISONS

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation 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 located
at One International Place, Boston, MA 02110; however, all investor
correspondence should be addressed to the Fund at UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series (Portfolios) or classes of common
stock and to classify or reclassify any unissued shares with respect to such
Portfolios, without further action by shareholders. The Board of Directors has
classified additional classes of shares in the Portfolio, known as Institutional
Service Shares and Advisor shares. As of the date of this Statement of
Additional Information, no Institutional Service Shares or Advisor shares of
this Portfolio have been offered by the Fund.

The shares of the Portfolio of the Fund, when issued and paid for as
provided for in its Prospectus, will be fully paid and nonassessable, have no
preference as to conversion,

-26-
<PAGE>

exchange, dividends, retirement or other features and have no preemptive rights.
The shares of the Fund have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so. A shareholder is entitled
to one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his or her name on the books of the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of a Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the federal excise tax on undistributed
income and capital gains (see discussion under "Dividends, Capital Gains
Distributions and Taxes" in each Prospectus). The amounts of any income
dividends or capital gains distributions cannot be predicted.

As set forth in the Prospectus, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of the Portfolio at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholder in writing at least three days
prior to the record date that either the Income Option (income dividends in cash
and capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash) has
been elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.

-27-
<PAGE>

FEDERAL TAXES

The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes. Shareholders
will be advised on the nature of the payments.

CODE OF ETHICS

The Fund has adopted a Code of Ethics which restricts to a certain
extent personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including notes thereto) of the SAMI
Preferred Stock Income Portfolio for the fiscal period ended October 31, 1997,
which appear in the Portfolio's 1997 Annual Report to Shareholders, and the
report thereon of Price Waterhouse LLP, independent accountants, also appearing
therein, are attached to this Statement of Additional Information.

-28-
<PAGE>

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF CORPORATE BOND RATINGS

Moody's Investors Service, Inc. Corporate Bond Ratings:

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal

A-1
<PAGE>

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
shortcomings.

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 indicates
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 Ratings Services 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
principal 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-2
<PAGE>

are outweighed by large uncertainties or major risk exposures to adverse
conditions.

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 categories
except in the AAA, CC, C, CI and D categories.

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
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
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the U.S. Treasury, if needed, to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under government supervision, but their

A-3
<PAGE>

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
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.

III. DESCRIPTION OF COMMERCIAL PAPER

The Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash flow
and other liquidity ratios of the issuer, and the borrower's ability to pay
principal and interest on demand.

A-4
<PAGE>

of the issuer's products in relation to completion and customer acceptance; (4)
liquidity; (5) amount and quality of long term debt; (6) trend of earnings over
a issuer; (7) financial strength of a parent company and the relationships which
exist with the issuer; and (8) recognition by the management of obligations
which may be present or may arise as a result of public interest questions and
preparations to meet such obligations.

IV. DESCRIPTION OF BANK OBLIGATIONS

Time deposits are non-negotiable deposits maintained in a banking
institution 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 reasonably orderly market conditions. The Portfolio is also able to
sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.

A-5
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividend.

(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.

(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the performance of
over 900 securities listed on the stock exchanges of countries in Europe.
Australia and the Far East, and over 1,400 securities listed on the stock
exchanges of these continents, including North America.

(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.

(i) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index,

B-1
<PAGE>

including approximately 800 issues with maturities of 12 years or greater.

(k) Salomon 1-3 Year Treasury Index -- The Salomon 1-3 Year Treasury Index
includes only U.S. Treasury Notes and Bonds with maturities one year or greater
and less than three years.

(l) Lehman Brothers Long-Term Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of 10 years
or greater.

(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only and does
not include income.

(n) Value Line -- composed of over 1,600 stocks in the Value Line
Investment 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. publicly-traded
companies.

(p) Composite indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65% Salomon
Brothers High Grade Bond Index; all stocks on the NASDAQ system exclusive of
those traded on an exchange, and 65% Standard & Poor's 500 Stock Index and 35%
Salomon Brothers High Grade Bond Index.

(q) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
- -- analyzes price, current yield, risk, total return and average rate of return
(average compounded growth rate) over specified time periods for the mutual fund
industry.

(r) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.

(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Wall Street Journal and Weisenberger Investment 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

B-2
<PAGE>

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 Associates
- -- 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.

B-3
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- ----------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (98.8%)
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES (15.0%)
Federal Home Loan Mortgage Corp., 6.14%...................... 20,000 $ 1,052,500
Fleet Financial Group, Inc., Series VI, 6.75%................ 20,000 1,097,500
Morgan Stanley Group, Inc., 7.75%............................ 12,000 660,756
Republic New York Corp., 5.715%.............................. 20,000 1,025,000
Travelers Group, Inc., 6.365%................................ 20,000 1,051,260
-----------
4,887,016
- ----------------------------------------------------------------------------------
INDUSTRIAL (3.4%)
El Paso Tennessee Pipeline Co., Series A, 8.25%................20,000 1,102,500
- ----------------------------------------------------------------------------------
TELECOMMUNICATIONS (3.4%)
GTE Florida, Inc., Series A, $1.25........................... 50,316 1,097,191
- ----------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (77.0%)
Alabama Power Co., 4.52%..................................... 5,388 426,218
Atlantic City Electric Co., 4.75%............................ 8,800 667,216
Baltimore Gas & Electric Co., Series 1993, 6.97%............. 5,000 558,750
Central Illinois Light Co., 5.85%............................ 10,000 1,020,000
Duke Power Co., Series X, 6.75%.............................. 10,000 1,025,000
Empire District Electric Co., 8.125%......................... 118,265 1,248,878
Florida Power & Light Co., Series U, 6.75%................... 11,000 1,225,125
Georgia Power Co., $4.92..................................... 6,580 559,596
Gulf Power Co., 5.16%........................................ 1,638 144,218
Hawaiian Electric Co., Series R, 8.75%....................... 5,437 560,011
Indiana Michigan Power Co., 6.875%........................... 5,000 536,250
Indianapolis Power & Light Co., 8.20%........................ 7,310 738,310
Jersey Central Power & Light Co., 8.65%...................... 2,500 255,000
Kentucky Utility Co., 6.53%.................................. 12,330 1,362,465
Montana Power Co., $6.875.................................... 10,000 1,092,500
NICOR, Inc., 4.48%........................................... 28,000 1,120,000
Pacific Enterprises, Inc., $4.36............................. 21,930 1,679,509
Pacific Gas & Electric Co., Series U, 7.04%.................. 20,360 565,112
Potomac Electric Power Co., Series 1958, $2.46............... 22,019 941,863
Public Service Electric & Gas Co., 4.08%..................... 20,155 1,419,315
Public Service Electric & Gas Co., Series E, 5.28%........... 4,160 370,947
San Diego Gas & Electric Co., $1.70.......................... 47,000 1,284,275
South Carolina Electric & Gas Co., 6.52%..................... 12,500 1,372,500
Southern California Edison Co., 4.24%........................ 76,300 1,420,477
Southern California Edison Co., 6.05%........................ 5,000 520,000
</TABLE>

The accompanying notes are an integral part of the financial statements.

3
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (CONTINUED)
Union Electric Co., $4.56.............................. 15,800 $ 1,279,563
Virginia Electric & Power Co., $7.05................... 7,500 838,500
WPS Resources Corp., 6.88%............................. 7,500 839,437
-----------
25,071,035
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $29,277,704)............... 32,157,742
- -------------------------------------------------------------------------------
<CAPTION>
NO. OF
CONTRACTS
- -------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED PUT OPTIONS (0.0%)
- -------------------------------------------------------------------------------
*U.S. Treasury Bond expiring 12/97, strike price $112... 39 610
*U.S. Treasury Bond expiring 3/98, strike price $114.... 12 12,750
- -------------------------------------------------------------------------------
TOTAL PURCHASED PUT OPTIONS (COST $57,097).............. 13,360
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.8%) (COST $29,334,801) (A)........ 32,171,102
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.2%)..................... 380,585
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $32,551,687
===============================================================================
</TABLE>

+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $29,334,801. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$2,836,301. This consisted of aggregate gross unrealized appreciation for
all securities of $2,913,340 and aggregate gross unrealized depreciation
for all securities of $77,039.

The accompanying notes are an integral part of the financial statements.

4
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Cost............................................. $29,334,801
===========
Investments, at Value............................................ $32,171,102
Margin Deposit on Futures Contracts.............................. 400,000
Receivable for Investments Sold.................................. 308,092
Dividends Receivable............................................. 129,485
Other Assets..................................................... 762
- -------------------------------------------------------------------------------
Total Assets.................................................... 33,009,441
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased................................ 190,684
Due to Custodian Bank--Note D.................................... 148,637
Payable for Daily Variation Margin on Futures.................... 55,000
Payable for Investment Advisory Fees--Note B..................... 29,325
Payable for Administrative Fees--Note C.......................... 7,690
Payable for Custodian Fees--Note D............................... 2,564
Payable for Directors' Fees--Note F.............................. 677
Other Liabilities................................................ 23,177
- -------------------------------------------------------------------------------
Total Liabilities............................................... 457,754
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $32,551,687
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital.................................................. $38,630,449
Undistributed Net Investment Income.............................. 107,949
Accumulated Net Realized Loss.................................... (7,949,606)
Unrealized Appreciation.......................................... 1,762,895
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $32,551,687
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Shares Issued and Outstanding ($0.001 par value) (Authorized
25,000,000)..................................................... 3,438,579
Net Asset Value, Offering and Redemption Price Per Share......... $ 9.47
===============================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

5
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997

<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................................ $2,106,350
Interest......................................................... 60,190
- -------------------------------------------------------------------------------------------
Total Income.................................................... 2,166,540
- -------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees...................................................... $222,545
Less: Fees Waived............................................... (56,371) 166,174
---------
Administrative Fees--Note C...................................... 93,115
Custodian Fees--Note D........................................... 4,011
Directors' Fees--Note F.......................................... 2,396
Other Expenses................................................... 49,849
- -------------------------------------------------------------------------------------------
Total Expenses.................................................. 315,545
Expense Offset--Note A........................................... (832)
- -------------------------------------------------------------------------------------------
Net Expenses.................................................... 314,713
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................. 1,851,827
- -------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments...................................................... 341,398
Futures.......................................................... (821,438)
- -------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS).................................... (480,040)
- -------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments...................................................... 1,422,281
Futures.......................................................... (435,470)
- -------------------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION.......... 986,811
- -------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS.............. 506,771
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $2,358,598
===========================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

6
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 1,851,827 $ 2,105,461
Net Realized Gain (Loss)............................. (480,040) 579,737
Net Change in Unrealized Appreciation/Depreciation... 986,811 (79,896)
- ----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions.............................................. 2,358,598 2,605,302
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (1,899,856) (2,176,090)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued............................................... 6,379,043 4,747,638
--In Lieu of Cash Distributions.................... 1,322,317 1,740,608
Redeemed............................................. (3,136,377) (13,178,408)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions.............................................. 4,564,983 (6,690,162)
- ----------------------------------------------------------------------------------
Total Increase (Decrease)............................ 5,023,725 (6,260,950)
Net Assets:
Beginning of Period.................................. 27,527,962 33,788,912
- ----------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $107,949 and $155,978, respectively)...... $32,551,687 $ 27,527,962
==================================================================================
(1) Shares Issued and Redeemed:
Shares Issued..................................... 683,108 515,084
In Lieu of Cash Distributions..................... 140,998 191,511
Shares Redeemed................................... (332,524) (1,428,353)
- ----------------------------------------------------------------------------------
491,582 (721,758)
==================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 9.34 $ 9.21 $ 9.29 $ 9.98 $ 10.09
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income........ 0.55 0.58 0.67 0.60 0.60
Net Realized and Unrealized
Gain (Loss)................. 0.15 0.14 (0.08) (0.71) (0.07)
- --------------------------------------------------------------------------------
Total from Investment Opera-
tions...................... 0.70 0.72 0.59 (0.11) 0.53
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........ (0.57) (0.59) (0.67) (0.58) (0.61)
In Excess of Net Realized
Gain........................ -- -- -- -- (0.03)
- --------------------------------------------------------------------------------
Total Distributions......... (0.57) (0.59) (0.67) (0.58) (0.64)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERI-
OD........................... $ 9.47 $ 9.34 $ 9.21 $ 9.29 $ 9.98
================================================================================
TOTAL RETURN.................. 7.73%+ 8.17%+ 6.67% (1.15)% 5.47%+
================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................. $32,552 $27,528 $33,789 $91,221 $49,671
Ratio of Expenses to Average
Net Assets................... 0.99% 0.99% 0.98% 0.89% 0.82%
Ratio of Net Investment Income
to Average Net Assets........ 5.83% 6.26% 7.03% 6.45% 6.10%
Portfolio Turnover Rate....... 59% 77% 44% 65% 144%
Average Commission Rate #..... $0.0339 $0.0302 N/A N/A N/A
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and
Expenses Assumed by the
Adviser Per Share............ $ 0.02 $ 0.02 N/A N/A $ 0.01
Ratio of Expenses to Average
Net Assets Including Expense
Offsets...................... 0.99% 0.99% 0.98% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
+ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Adviser during the periods indicated.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The SAMI
Preferred Stock Income Portfolio (the "Portfolio"), a portfolio of UAM Funds,
Inc., is a diversified, open-end management investment company. At October 31,
1997, the UAM Funds were comprised of forty-two active portfolios. The
financial statements of the remaining portfolios are presented separately. The
objective of the Portfolio is to provide a high level of dividend income
consistent with capital preservation.

1. SECURITY VALUATION: Preferred securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day at the bid price on such day.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Under procedures approved by the Board of
Directors, fixed income securities and most fixed-dividend preferred
securities are valued according to the broadest and most representative
market which will ordinarily be the over-the-counter market or if there is
no actively quoted market price, the securities may be valued based on a
matrix system which considers such factors as security prices, yields and
maturities. Short-term investments that have remaining maturities of sixty
days or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available is determined in good faith at
fair value using methods determined by the Board of Directors.

At October 31, 1997, the Portfolio had available a capital loss carryover
for Federal income tax purposes of $9,066,746 of which $8,119,031 and
$947,715 will expire on October 31, 2003 and 2005, respectively.

9
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. FUTURES AND OPTIONS CONTRACTS: The Portfolio may use futures and options
contracts to hedge against changes in the values of securities the
Portfolio owns or expects to purchase. The Portfolio may also write covered
options on securities it owns or in which it may invest to increase its
current returns.

The Portfolio had the following futures contracts open at October 31, 1997:

<TABLE>
<CAPTION>
NET
NUMBER OF AGGREGATE UNREALIZED
CONTRACTS CONTRACTS FACE VALUE EXPIRATION DATE DEPRECIATION
--------- --------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury Long Bond.. 174 $20,613,563 December 1997 $ (992,156)
U.S. Treasury 10 Year
Note.................... 25 2,793,750 December 1997 (81,250)
-----------
$(1,073,406)
===========
</TABLE>

5. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income monthly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.

6. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Most expenses of the
UAM Funds can be directly attributed to a particular portfolio. Expenses
which cannot be directly attributed are apportioned among the portfolios of
the UAM Funds based on their relative net assets. Custodian fees for the
Portfolio have been increased to include expense offsets, if any, for
custodian balance credits.

10
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Spectrum Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at a monthly fee calculated at an annual rate of
0.70% of average daily net assets for the month. The Adviser has voluntarily
agreed to waive a portion of its advisory fees and to assume expenses, if
necessary, in order to keep the Portfolio's total annual operating expenses,
after the effect of expense offset arrangements, from exceeding 0.99% of
average daily net assets.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 at an annual rate
of 0.06% of average daily net assets of the Portfolio. The Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, under which CGFSC
agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing and transfer agent
services. Pursuant to the Mutual Funds Service Agreement, the Administrator
pays CGFSC a monthly fee. For the year ended October 31, 1997, UAM Fund
Services, Inc. earned $93,115 from the Portfolio as Administrator of which
$74,045 was paid to CGFSC for its services as sub-Administrator.

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolio's assets held in accordance with the custodian
agreement. As part of the custodian agreement, the custodian bank has a lien
on the securities of the Portfolio to cover any advances made by the custodian
to the Portfolio. At October 31, 1997, the payable to the custodian bank
represents the amount due for cash advanced for the settlement of investment
transactions.

G. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases of $21,013,987 and sales of $17,698,447 of investment
securities other than long-term U.S. Government and short-term securities.
There were no purchases or sales of long-term U.S. Government Securities.

11
<PAGE>

SAMI PREFERRED STOCK INCOME PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

H. CONCENTRATION OF CREDIT: The Portfolio invests primarily in preferred and
fixed income securities in the utilities industry. The Portfolio is more
susceptible to economic factors adversely affecting the utilities industry
than portfolios that are not concentrated in this industry to the same extent.

I. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
Capital shares. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% 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, 1997, the Portfolio had no borrowings under the agreement.

J. OTHER: At October 31, 1997, 76.3% of total shares outstanding were held by
five record shareholders owning 10% or greater of the aggregate total shares
outstanding.

The Portfolio placed a portion of its portfolio transactions with the Adviser,
which is a registered broker/dealer. The commissions paid to the Adviser for
the year ended October 31, 1997, amounted to $26,949.

12
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
SAMI Preferred Stock Income Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of SAMI Preferred
Stock Income Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc.,
at October 31, 1997, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)

For the year ended October 31, 1997, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
100.0%.

13
<PAGE>

PART B

UAM FUNDS, INC.

SIRACH PORTFOLIOS
-----------------

STATEMENT OF ADDITIONAL INFORMATION - January 22, 1998

This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for
the Sirach Portfolios' Institutional Class Shares dated January 22, 1998 and the
Prospectus relating to the Sirach Strategic Balanced, Growth, Special Equity,
Equity and Bond Portfolios' Institutional Service Class Shares (the "Service
Class Shares") dated January 22, 1998. To obtain a Prospectus, please call the
UAM Funds Service Center at: 1-800-638-7983.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES............................................ 2

PURCHASE AND REDEMPTION OF SHARES............................................. 8

VALUATION OF SHARES........................................................... 9

SHAREHOLDER SERVICES..........................................................10

INVESTMENT LIMITATIONS........................................................11

MANAGEMENT OF THE FUND........................................................14

INVESTMENT ADVISER............................................................18

SERVICE AND DISTRIBUTION PLANS................................................20

PORTFOLIO TRANSACTIONS........................................................24

ADMINISTRATIVE SERVICES.......................................................25

CUSTODIAN.....................................................................28

INDEPENDENT ACCOUNTANTS.......................................................28

DISTRIBUTOR...................................................................28

PERFORMANCE CALCULATIONS......................................................29

GENERAL INFORMATION...........................................................32

FINANCIAL STATEMENTS..........................................................34

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS...........................A-1

APPENDIX B - COMPARISONS.....................................................B-1
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and
policies of the Sirach Strategic Balanced, Growth, Special Equity, Equity and
Bond Portfolios (the "Portfolios") as set forth in the Sirach Portfolios'
Prospectuses.

LENDING OF SECURITIES

The Portfolios may lend their investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with a Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities issued
or guaranteed by the United States Government having a value at all times not
less than 100% of the value of the securities loaned, (b) the borrower add to
such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by a 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). A Portfolio will
not loan securities to the extent that greater than one-third of its assets
(including the value of the collateral for the loan) at fair market value would
be committed to loans. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. These risks are similar to the
ones involved with repurchase agreements as discussed above.

SHORT-TERM INVESTMENTS

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are non-
negotiable deposits maintained in a banking institution for a specified period
of time at a stated interest rate. Time deposits maturing in more than seven
days will not be purchased by a Portfolio, and time

-2-
<PAGE>

deposits maturing from two business days through seven calendar days will not
exceed 10% (15% of the Bond Portfolio) of the total assets of a Portfolio.

Certificates of deposit are negotiable short-term obligations issued
by commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

(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, determined by the Adviser to be of comparable quality;

(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;

(6) Repurchase agreements collateralized by securities listed above.

-3-
<PAGE>

FUTURES CONTRACTS

The Sirach Bond and Strategic Balanced Portfolios may enter into
futures contracts, options, and interest rate futures contracts for the purposes
of remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government agency.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.

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, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Portfolios
expect to earn interest income on their margin deposits.

Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures

-4-
<PAGE>

markets primarily to offset unfavorable 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 interest rates. The Portfolios intend to
use futures contracts only for hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed 5% of the liquidation value of a
Portfolio. The Portfolios will only sell futures contracts to protect
securities they own against price declines or purchase contracts to protect
against an increase in the price of securities they intend to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed"; that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control each Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a Portfolio will incur commission expenses in both
opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

The Sirach Bond and Strategic Balanced Portfolios each will not enter
into futures contract transactions to the extent that, immediately thereafter,
the sum of its initial margin deposits on open contracts exceeds 5% of the
market value of its total assets. In addition, neither Portfolio will enter
into futures contracts to the extent that its outstanding obligations to
purchase securities under these contracts would exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

The Portfolios will minimize the risk that they will be unable to
close out a futures contract by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market

-5-
<PAGE>

will exist for any particular futures contract at any specific time. Thus, it
may not be possible to close a futures position. In the event of adverse price
movements, a Portfolio would continue to be required to make daily cash payments
to maintain its required margin. In such situations, if a Portfolio has
insufficient cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Portfolio may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on a Portfolio's ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can
be substantial, 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of a Portfolio is engaged in only for hedging purposes, the Adviser
does not believe that such Portfolio is subject to the risks of loss frequently
associated with futures transactions. A Portfolio would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying financial instrument and sold it after the decline.

Utilization of futures transactions by a Portfolio does involve the
risk of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the Portfolio securities being hedged.
It is also possible that a Portfolio could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss by a Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option.

-6-
<PAGE>

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 unfavorable
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 each Portfolio has identified as hedging
transactions, each 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 recognized with
respect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are
intended to hedge against a change in the value of securities held by a
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company, 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. 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.

Each Portfolio will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year) on
futures transactions. Such distributions will be combined with distributions of
capital gains realized on the Portfolio's other investments, and shareholders
will be advised on the nature of the payments.

PORTFOLIO TURNOVER

-7-
<PAGE>

The portfolio turnover rates described in the Prospectuses are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares. See "Financial
Highlights" in the Prospectus for the historical portfolio turnover rates with
respect to the Sirach Strategic Balanced, Sirach Growth, Sirach Special Equity
and Sirach Equity Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Both classes of shares of the Portfolios may be purchased without a
sales commission at the net asset value per share next determined after an order
is received in proper form by the Fund and payment is received by the Fund's
custodian. The minimum initial investment required is $2,500 with certain
exceptions as may be determined from time to time by officers of the Fund.
Other investment minimums are: initial IRA investment, $500; initial spousal IRA
investment, $250; minimum additional investment for all accounts, $100. An
order received in proper form prior to the close of regular trading on the New
York Stock Exchange ("Exchange") (generally 4:00 p.m. Eastern Time) will be
executed at the price computed on the date of receipt; and an order received not
in proper form or after the close of the Exchange will be executed at the price
computed on the next day the Exchange is open after proper receipt. The
Exchange will be closed on the following days: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day; New
Year's Day and Dr. Martin Luther King, Jr. Day.

Each Portfolio reserves the right in its sole discretion (1) to
suspend the offering of its shares, (2) to reject purchase and exchange orders
when in the judgment of management such rejection is in the best interest of the
Fund, and (3) to reduce or waive the minimum for initial and subsequent
investment for certain fiduciary accounts such as employee benefit plans or
under circumstances where certain economies can be achieved in sales of a
Portfolio's shares.

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
Commission, (2)

-8-
<PAGE>

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 permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares," and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.

No charge is made by the Portfolios for redemptions. Any redemption
may be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolios.

Signature Guarantees -- To protect your account, the Fund and Chase
Global Funds Services Company ("CGFSC") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required for (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) and/or
registered address, or (2) share transfer requests.

Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker dealers guaranteeing
signatures must be a number of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.

-9-
<PAGE>

VALUATION OF SHARES

Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the over-the-
counter market. Bonds and other fixed income securities may be valued on the
basis of prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities. Securities purchased with
remaining maturities of 60 days or less are valued at amortized cost when the
Board of Directors determines that amortized cost reflects fair value.

SHAREHOLDER SERVICES

The following supplements the shareholder services information set
forth in the Portfolios' Prospectuses.

EXCHANGE PRIVILEGE

Institutional Class Shares of each Sirach Portfolio may be exchanged
for Institutional Class Shares of the other Sirach Portfolios and Service Class
Shares of each Sirach Portfolio may be exchanged for Service Class Shares of the
other Sirach Portfolios. In addition, Institutional Class Shares of each Sirach
Portfolio may be exchanged for any other Institutional Class Shares of a
Portfolio included in the UAM Funds which is

-10-
<PAGE>

comprised of the Fund and UAM Funds Trust. (See the list of Portfolios of the
UAM Funds -- Institutional Class Shares at the end of the Sirach Portfolios --
Institutional Class Shares Prospectus.) Service Class Shares of each Sirach
Portfolio may be exchanged for any other Service Class Shares of a Portfolio
included in the UAM Funds which is comprised of the Fund and UAM Funds Trust.
(For those Portfolios currently offering Service Class Shares, please call the
UAM Funds Service Center.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to UAM Funds, UAM Funds Service Center, c/o Chase
Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
exchange privilege is only available with respect to Portfolios that are
qualified for sale in a shareholder's state of residence.

Any such exchange will be based on the respective net asset values of
the shares involved. There is no sales commission or charge of any kind.
Before making an exchange into a Portfolio, a shareholder should read its
Prospectus and consider the investment objectives and policies 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
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder, and if the registration of
the two accounts will be identical. Requests for exchanges received prior to
the close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time)
will be processed as of the close of business on the same day. Requests
received after the close of regular trading on the Exchange will be processed on
the next business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges are
subject to limitations as to amounts and frequency and to other restrictions
established by the Fund's Board of Directors to assure that such exchanges do
not disadvantage the Fund and its shareholders.

For federal income tax purposes, an exchange between Funds is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information in
this regard. The exchange privilege may be modified or terminated at any time.

-11-
<PAGE>

TRANSFER OF SHARES

INVESTMENT LIMITATIONS

The following limitations supplement those set forth in the
Prospectuses. Whenever an investment limitation sets forth a percentage
limitation on investment or utilization of assets, such limitation shall be
determined immediately after and as a result of a Portfolio's acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with the Portfolio's
investment limitations.

Each Portfolio is subject to the following limitations which are
fundamental policies and may not be changed without the approval by a "majority
of the outstanding shares" (as defined in the 1940 Act) of the Portfolio. Each
Portfolio will not:

(1) invest in physical commodities or contracts on physical
commodities;

(2) purchase or sell real estate or real estate limited
partnerships, although it may purchase or sell securities of
companies which deal in real estate and may purchase and sell
securities which are secured by interests in real estate;

(3) with respect to 75% of its assets, purchase more than 10% of
any class of the outstanding voting securities of any issuer;

(4) with respect to 75% of its assets, invest more than 5% of its
total assets at the time of purchase in securities of any
single issuer (other than obligations issued or guaranteed as
to principal and interest by the government of the U.S. or any
agency or instrumentality thereof);

-12-
<PAGE>

(5) borrow money, except (i) from banks and as a temporary measure
for extraordinary or emergency purposes or (ii) except in
connection with reverse repurchase agreements provided that (i)
and (ii) in combination do not exceed 33-1/3% of the
Portfolios' total assets (10% for the Sirach Special Equity
Portfolio) (including the amount borrowed) less liabilities
(exclusive of borrowings);

(6) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of a
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities or instruments issued by U.S. banks when a
Portfolio adopts a temporary defensive position;

(7) make loans except (i) by purchasing debt securities in
accordance with its investment objectives and policies, or
entering into repurchase agreements, subject to the limitation
described in (d) below and (ii) by lending its portfolio
securities to banks, brokers, dealers and other financial
institutions so long as such loans are not inconsistent with
the 1940 Act or the rules and regulations or interpretations of
the Commission thereunder;

(8) underwrite the securities of other issuers; and

(9) issue senior securities, as defined in the 1940 Act, except
that this restriction shall not be deemed to prohibit a
Portfolio from (i) making any permitted borrowings, mortgages
or pledges, or (ii) entering repurchase transactions;

The following limitations are fundamental policies of the Sirach Special
Equity Portfolio and non-fundamental policies of the Sirach Strategic Balanced,
Sirach Growth, Sirach Equity and Sirach Bond Portfolios. Each of the Portfolios
will not:

(a) purchase on margin or sell short;

(b) purchase or retain securities of an issuer if those
officers and Directors of the Fund or its investment
advisor owning more than 1/2 of

-13-
<PAGE>

1% of such securities together own more than 5% of such
securities;

(c) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair
market value;

(d) invest more than an aggregate of 10% of the net assets of
the Portfolio (15% for the Sirach Strategic Balanced,
Sirach Growth, Sirach Equity and Sirach Bond Portfolios),
determined at the time of investment, in securities
subject to legal or contractual restrictions on resale or
securities for which there are no readily available
markets, including repurchase agreements having
maturities of more than seven days; and

(e) invest for the purpose of exercising control over
management of any company.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

The officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Directors. The Directors set broad policies
for the Fund and elect its officers. The following is a list of the Directors
and officers of the Fund, their addresses and dates of birth, and a brief
statement of their present positions and principal occupations during the past
five years.

<TABLE>
<C> <S>
John T. Bennett, Jr. Director of the Fund; President of Squam Investment
College Road -- RFD 3 Management Company, Inc. and Great Island Investment
Meredith, NH 03253 Company, Inc.; President of Bennett Management Company
1/26/29 from 1988 to 1993.

Nancy J. Dunn Director of the Fund; Vice President for Finance and
10 Garden Street Administration and Treasurer of Radcliffe College
Cambridge, MA 02138 since 1991.
8/14/51

-14-
<PAGE>

<TABLE>
<S> <C>
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
4/21/42

Charles H. Salisbury, Director; Executive Vice President of United Asset
Jr.* Management Corporation; formerly an Executive Officer
One International Place and Director of T. Rowe Price and President and Chief
Boston, MA 02111 Investment Officer of T. Rowe Price Trust Company.
8/24/40

William H. Park Vice President of the Fund; Executive Vice President
One International Place and Chief Financial Officer of United Asset Management
Boston, MA 02110 Corporation.
9/19/47

Gordon M. Shone Assistant Treasurer of the Fund; Vice President of
73 Tremont Street Fund Administration and Compliance of Chase Global
Boston, MA 02108 Funds Services Company; formerly Senior Audit Manager
7/30/56 of Coopers & Lybrand LLP from 1983 to 1993.
</TABLE>

-15-
<PAGE>

<TABLE>
<S> <C>
Michael DeFao Secretary of the Fund, Vice President and General
211 Congress Street Counsel of UAM Fund Services, Inc. and UAM Fund
Boston, MA 02110 Distributors, Inc., Associate Attorney of Ropes & Gray
2/28/68 (a law firm) from 1993 to 1995.

Karl O. Hartmann Assistant Secretary of the Fund; Senior Vice President
73 Tremont Street and General Counsel of Chase Global Funds Services
Boston, MA 02108 Company.
3/7/55
</TABLE>
- ------------------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $6,300 per quarter. In addition, each unaffiliated Director receives
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
remuneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"), the
Administrator or CGFSC and receive no compensation from the Fund. The following
table shows aggregate compensation paid to each of the Fund's unaffiliated
Directors by the Fund and total compensation paid by the Fund and UAM Funds
Trust (collectively the "Fund Complex") in the fiscal year ended October 31,
1997.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued Annual from
Compensation as Part of Benefits Registrant
Name of Person, From Fund Upon and
Position Registrant Expenses Retirement Fund Complex
- --------------------------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. $26,791 0 0 $32,750
Director
Nancy J. Dunn $ 6,774 0 0 $ 8,300
Director
Philip D. English $26,791 0 0 $32,750
Director
William A. Humenuk $26,791 0 0 $32,750
Director
</TABLE>

-16-
<PAGE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of a Portfolio, as noted.

Sirach Strategic Balanced Portfolio Institutional Class Shares: South
Bay Hotel Employees & Restaurant Employees Pension Plan, c/o United
Administrative Services, P.O. Box 5057, San Jose, CA, 8.9%; Alaska Bricklayers
Retirement Plan, 407 Denali Street, Anchorage, AK, 8.4%; Hartnat & Co., VECO,
P.O. Box 92800, Rochester, NY, 8.0%*; National Bank of Alaska, FBO Flight Crew
Members Employed by Markair Retirement Plan, P.O. Box 100600, Anchorage, AK,
5.7%* and Montgomery Purdue Blankinship & Austin Money Purchase Pension Plan,
701 Fifth Avenue, Seattle, WA, 5.1%.

Sirach Strategic Balanced Portfolio Institutional Service Class
Shares: Fleet National Bank, FBO Crystal Tissue, 401k Profit Sharing Plan, P.O.
Box 92800, Rochester, NY, 86%.

Sirach Growth Portfolio Institutional Class Shares: Hartnat & Co.,
VECO, P.O. Box 92800, Rochester, NY, 13.0%*; BOB & Co., c/o Bank of Boston, P.O.
Box 1809, Boston, MA, 9.7%; Foundation of the University of Medicine & Dentistry
of New Jersey, University Heights, 30 Bergan Street, Newark, NJ, 8.8%; So.
Alaska Defined Contribution Pension Plan, P.O. Box 241266, Anchorage, AK, 8.2%;
Setru & Co./Tractor & Equipment 401K Savings Plan, P.O. Box 30918, Billings, MT,
7.5%; H.D. Bader & Co., No. S, c/o Foley & Lardner, 777 East Wisconsin Avenue,
#3500, Milwaukee, WI, 5.8% and H.D. Bader & Co., No. E, c/o Foley & Lardner, 777
East Wisconsin Avenue, #3500, Milwaukee, WI, 5.2%.

Sirach Growth Portfolio Institutional Service Class Shares: Hartnat &
Co., HOAG Memorial Hospital, P.O. Box 92800, Rochester, NY, 30%; Fleet National
Bank, TTEE, HOAG Memorial, Conservative Collective, P.O. Box 92800, Rochester,
NY, 15%; Fleet National Bank, FBO Laidlaw Allied, P.O. Box 92800, Rochester, NY,
15% and Hartnat & Co., HOAG Memorial Hospital, Aggressive Collective, P.O. Box
92800, Rochester, NY, 13%.

Sirach Special Equity Portfolio Institutional Class Shares: Pitt &
Co/Northrup Grummam, Attn: Russ Stamey, BT Services Tennessee, Inc., 648
Grassmere Park Rd., Nashville, TN, 9.0%; Bank of New York, Two Union Square,
Automotive Machinists AC 01133665, 601 Union Street, Suite 520, Seattle, WA,
5.6% and Northern Trust Company, FBO Alabama Pact-Sirach Capital Management 191,
P.O. Box 92956, Chicago, IL, 5.4%.

Sirach Special Equity Portfolio Institutional Service Class Shares:
Fleet National Bank TRSTE, FBO Cherokee Nation, P.O. Box 92800, Rochester, NY,
85% and Fleet National Bank TTEE, FBO Crystal Tissue Sirach Special Equity, P.O.
Box 92800, Rochester, NY, 14%.

Sirach Equity Portfolio Institutional Class Shares: UMBSC & Co., FBO
Interstate Brands Conservative Growth, P.O. Box 419260, Kansas City, MO, 20.7%;
U.S. Bank of Washington NA, Trustee, FBO Lane Powell Spears Lubersky, c/o Trust
Mutual Funds, P.O. Box 3168, Seattle, WA, 16.5%; Lutsey Family Foundation Inc.,
P.O. Box 22074, Green Bay, WI, 12.5%; UMBSC & Co., FBO Interstate Brands
Aggressive Growth, P.O. Box 419260, Kansas City, MO, 11.0%; US National Bank of
Oregon TTEE, Icicle Seafoods Inc. ESOP, Attn: Trust Mutual Funds PL 6, P.O. Box
3168, Portland, OR, 10.7% and UMBSC & Co., FBO Interstate Brands Moderate
Growth, P.O. Box 419260, Kansas City, MO 9.9%.

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<PAGE>

Sirach Fixed Income Portfolio Institutional Class Shares: Charles
Schwab & Co., Inc., Reinvestment Account, Attn: Mutual Funds, 101 Montgomery
Street, San Francisco, CA, 100%.

Sirach Bond Portfolio Institutional Class Shares: UMBSC & Co, FBO
Interstate Bonds Conservative Growth, P.O. Box 419260, Kansas City, MO 45.6%;
BNY Western Trust Company, Seattle Here Health Trust, 601 Union Street, Seattle,
WA, 8.1%; UMBSC & Co., FBO Interstate Brands Moderate Growth, P.O. Box 419260,
Kansas City, MO, 6.5% and Hartnet & Co., VECO, P.O. Box 92800, Rochester, NY,
5.3%.

Sirach Bond Portfolio Institutional Service Class: Wilmington Trust
Co. TTEE, FBO Catholic Healthcare West Med, ATTN: Mutual Funds, 1100 North
Market Street, Wilmington, DE, 100.0%.

- ------------------

* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

INVESTMENT ADVISER

CONTROL OF ADVISER

Sirach Capital Management, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their own
firm name, with their own leadership and individual investment philosophies and
approaches. Each UAM

-18-
<PAGE>

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.

SERVICES PERFORMED BY ADVISER

Pursuant to Investment Advisory Agreements ("Agreements") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreements, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreements, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error of judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services under the Agreements.

Unless sooner terminated, the Agreements shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreements or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolios. The Agreements
may be terminated at any time by a Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of a Portfolio on 60
days' written notice to the Adviser. The Agreements may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days' written
notice to the Fund. The Agreements will automatically and immediately terminate
in the event of their assignment.

PHILOSOPHY AND STYLE

The Adviser specializes in identifying and investing in growth-
oriented securities which have demonstrated strong earnings acceleration and
what the Adviser judges to be strong relative price strength and value. The
Adviser emphasizes

-19-
<PAGE>

disciplined security selection in all asset classes. As equity analysts, the
Adviser monitors a large list of companies which have passed an initial
screening process. The Adviser's investment objective is to identify the point
at which a good company is becoming a good investment, purchase the stock at a
fair value, and then to identify when that good investment period is coming to
an end. To achieve the objective of identifying good investments, the Adviser
uses a disciplined equity selection process that is built on a number of buying
tests. To identify when a good investment period is changing, the Adviser uses
disciplined selling tests. Capital protection is an integral part of the
Adviser's investment management objective.

In managing fixed income portfolios, the Adviser regularly assesses
monetary policy, inflation expectations, economic trends and capital market
flows and then establishes a duration target and maturity structure. Sector
weightings are determined by business cycle analysis, relative valuation and
expected interest rate volatility. The Adviser also screens for mispriced
securities emphasizing both incremental yield and potential price performance.
Before any security is purchased, a thorough credit and fundamental analysis is
done.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included Boeing, Honda of America
and United Technologies.

ADVISORY FEES

As compensation for services rendered by the Adviser under the
Portfolios' Investment Advisory Agreements, each Portfolio pays the Adviser an
annual fee, in monthly installments, calculated by applying the following annual
percentage rates to the Portfolios' average daily net assets for the month:
<TABLE>
<CAPTION>
Rate
<S> <C>
Sirach Strategic Balanced Portfolio ............. 0.65%
Sirach Growth Portfolio ......................... 0.65%
Sirach Special Equity Portfolio ................. 0.70%
Sirach Equity Portfolio ......................... 0.65%
Sirach Bond Portfolio ........................... 0.35%
</TABLE>

-20-
<PAGE>

For the years ended October 31, 1995, 1996 and 1997, the Sirach
Special Equity Portfolio paid advisory fees of approximately $3,571,000,
$3,404,812 and $2,768,336, respectively, to the Adviser. For the years ended
October 31, 1995, 1996 and 1997, the Sirach Strategic Balanced Portfolio paid
advisory fees of approximately $617,000, $578,683 and $550,068, respectively.
For the years ended October 31, 1995, 1996 and 1997, the Sirach Growth Portfolio
paid advisory fees of approximately $595,000, $793,566 and $981,338,
respectively. During the period from July 1, 1996 (initial offering) to October
31, 1996 and for the fiscal year ended October 31, 1997, the Sirach Equity
Portfolio paid advisory fees of $0 and $18,699, respectively. During the period
from July 1, 1996 to October 31, 1996 and during the year ended October 31,
1997, the Adviser voluntarily waived advisory fees of approximately $4,898 and
$82,349, respectively, for the Sirach Equity Portfolio.

SERVICE AND DISTRIBUTION PLANS

As stated in the Portfolios' Service Class Shares Prospectus, UAM Fund
Distributors, Inc. (the "Distributor") may enter into agreements with broker-
dealers and other financial institutions ("Service Agents"), pursuant to which
they will provide administrative support services to Service Class shareholders
who are their customers ("Customers") in consideration of the Fund's payment of
0.25 of 1% (on an annualized basis) of the average daily net asset value of the
Service Class Shares held by the Service Agent for the benefit of its Customers.
Such services include:

(a) acting as the sole shareholder of record and nominee for
beneficial owners;

(b) maintaining account record for such beneficial owners of the
Fund's shares;

(d) answering questions and handling correspondence from
shareholders about their accounts;

(e) processing shareholder orders to purchase, redeem and exchange
shares;

(f) handling the transmission of funds representing the purchase
price or redemption proceeds;

(g) issuing confirmations for transactions in the Fund's shares by
shareholders;

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<PAGE>

(h) distributing current copies of prospectuses, statements of
additional information and shareholder reports;

(i) assisting customers in completing application forms, selecting
dividend and other account options and opening any necessary
custody accounts;

(j) providing account maintenance and accounting support for all
transactions; and

(k) performing such additional shareholder services as may be agreed
upon by the Fund and the Service Agent, provided that any such
additional shareholder service must constitute a permissible non-
banking activity in accordance with the then current regulations
of, and interpretations thereof by, the Board of Governors of the
Federal Reserve System, if applicable.

-22-
<PAGE>

Directors who are not "interested persons" (as defined in the 1940 Act) of the
Company will be committed to the discretion of such non-interested Directors.

During the fiscal year ended October 31, 1997, the Sirach Portfolios'
Service Classes paid Service Agents fees for services provided pursuant to the
Service Plan on behalf of the Sirach Strategic Balanced Portfolio, Sirach
Growth Portfolio and Sirach Special Equity Portfolio in the amounts of $605,
$56,537 and $4,984, respectively.

The Distribution Plan permits the Service Class Shares, pursuant to
the Distribution Agreement, to pay a monthly fee to the Distributor for its
services and expenses in distributing and promoting sales of the Service Class
Shares. These expenses include, among other things, advertising the availability
of services and products; designing materials to send to customers and
developing methods of making such materials accessible to customers; providing
information about the product needs of customers; providing facilities to
solicit Fund sales and to answer questions from prospective and existing
investors about the Fund; receiving and answering correspondence from
prospective investors, including requests for sales literature, prospectuses and
statements of additional information; displaying and making sales literature and
prospectuses available; acting as liaison between shareholders and the Fund,
including obtaining information from the Fund and providing performance and
other information about the Fund. In addition, the Service Class Shares may make
payments directly to other unaffiliated parties, who either aid in the
distribution of their shares or provide services to the Class.

The maximum annual aggregate fee payable by the Fund under the Service
and Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares'
average daily net assets for the year. The Fund's Board of Directors may reduce
this amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such Class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares,
currently cannot exceed 0.50% of the average daily net assets represented the
Service Class. While the current fee which will be payable under the Service
Plan has been set at 0.25%, the Plan permits a full 0.75%

-23-
<PAGE>

on all assets to be paid at any time following appropriate Board approval.

Each year the Directors must determine whether continuation of the
Plans is in the best interest of the shareholders of Service Class Shares and
that there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those Directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
Class. Any amendment materially increasing the maximum percentage payable under
the Plans must likewise be approved by a majority vote of the relevant Class'
outstanding voting securities, as well as by a majority vote of those Directors
who are not "interested persons." Also, any other material amendment to the
Plans must be approved by a majority vote of the Directors including a majority
of the Directors of the Fund having no interest in the Plans. In addition, in
order for the Plans to remain effective, the selection and nomination of
Directors who are not "interested persons" of the Fund must be effected by the
Directors who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plans. Persons authorized to make payments
under the Plans must provide written reports at least quarterly to the Board of
Directors for their review. The NASD has adopted amendments to its Rules of
Fair Practice

-24-
<PAGE>

relating to investment company sales charges. The Fund and the Distributor
intend to operate in compliance with these rules.

PORTFOLIO TRANSACTIONS

Sirach Equity N/A $ 2,786 $ 41,994
Sirach Growth $224,521 $329,607 $377,150
Sirach Special
Equity $816,198 $651,694 $489,884
Sirach Strategic
Balanced $135,748 $128,066 $120,042
</TABLE>

Some securities considered for investment by the Portfolios may also
be appropriate for other clients served by the Adviser. If purchases or sales
of securities consistent with the investment policies of the Portfolios and one
or more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolios and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Directors.

-25-
<PAGE>

ADMINISTRATIVE SERVICES

The Board of Directors of the Fund approved a Fund Administration
Agreement effective April 15, 1996 ("Fund Administration Agreement") between UAM
Fund Services, Inc., a wholly owned subsidiary of UAM, and the Fund. Pursuant
to the terms of the Fund Administration Agreement, UAMFSI manages, adminsiters
and conducts the general business activities of the Fund other than those which
have been contracted to other third parties by the Fund. Additionally, UAMFSI
has agreed to provide transfer agency services to the Portfolios pursuant to the
terms of the Agreement.

Annual Rate
<S> <C>
Strategic Balanced Portfolio 0.06%
Growth Portfolio 0.04%
Special Equity Portfolio 0.04%
Equity Portfolio 0.04%
Bond 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 UAM Fund net assets;

0.11 of 1% of the next $800 million of combined UAM Fund net assets;

.07 of 1% of combined UAM net Fund assets in excess of $1 billion but
less than $3 billion;

0.05 of 1% of combined UAM Fund assets in excess of $3 billion.

-26-
<PAGE>

During the fiscal years ended October 31, 1995, 1996 and 1997,
Administrative Services paid by Sirach Equity Growth, Special Equity and
Strategic Balanced were as follows:
<TABLE>
<CAPTION>

1995 1996 1997
---------- ----------------- -----------------

Paid to Paid to Paid to Paid to
Total Paid CGFSC UAMFSI Total Paid CGFSC UAMFSI Total Paid
---------- ----- ------ --------- ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sirach Equity -- $ 9,168 $ 286 $ 9,454* $ 47,783 $ 6,234 $ 54,017

Sirach Growth $111,000 $131,653 $ 27,651 $159,304 $149,705 $ 60,383 $210,088

Sirach Special $605,000 $511,951 $105,982 $617,933 $386,035 $158,197 $544,232
Equity

Sirach Strategic $120,000 $106,742 $ 27,143 $133,885 $104,773 $ 50,769 $155,542
Balanced
</TABLE>

* For the period 7/1/96 to 10/31/96.

-27-
<PAGE>

fees, EDGAR filing fees, processing services and related fees, advisory and
administration fees, charges and expenses of pricing and data services,
independent public accountants and custodians, insurance premiums including
fidelity bond premiums, outside legal expenses, costs of maintenance of
corporate existence, typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund, printing and
production costs of shareholders' reports and corporate meetings, cost and
expenses of Fund stationery and forms, costs of special telephone and data lines
and devices, trade association dues and expenses, and any extraordinary expenses
and other customary Fund expenses.

UAMFSI will from time to time employ or associate with such person or
persons as may be fit to assist them in the performance of the Fund
Administration Agreement. Such person or persons may be officers and employees
who are employed by both UAMFSI and the Fund. The compensation of such person or
persons for such employment shall be paid by UAMFSI and no obligation will be
incurred by or on behalf of the Fund in such respect.

Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services. During the fiscal year ended October 31, 1997, the Sirach Strategic
Balanced, Growth, Special Equity and Equity Portfolios, paid the Service
Provider $17,597, $45,314, $18,000, $0 and $1,874, respectively, in fees
pursuant to the Services Agreement.

CUSTODIAN

The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's

-28-
<PAGE>

assets pursuant to the terms of a custodian agreement with the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.

DISTRIBUTOR

The Distributor received no compensation for its services directly or
indirectly from each of the Sirach Portfolios during the fiscal year ended
October 31, 1997.

PERFORMANCE CALCULATIONS

PERFORMANCE

The Fund may from time to time quote various performance figures to
illustrate past performance of each class of the Fund's Portfolios.

Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized performance
quotations or, alternatively, that every non-standardized performance quotation
furnished by each class of the Fund be accompanied by certain standardized
performance information computed as required by the Commission. Total return
quotations used by each class of the Fund are based on the standardized methods
of computing performance mandated by the Commission. An explanation of those
and other methods used by each class of the Fund to compute or express
performance follows.

TOTAL RETURN

-29-
<PAGE>

and the deduction of all applicable Fund expenses on an annual basis. Since
Service Class Shares of the Sirach Strategic Balanced, Growth, Special Equity,
Equity and Bond Portfolios bear additional service and distribution expenses,
the average annual total return of the Service Class Shares of a Portfolio will
generally be lower than that of the Institutional Class Shares of the same
Portfolio.

The average annual total rates of return of the Institutional and
Service Classes of the Portfolios are as follows:
<TABLE>
<CAPTION>
Since
Inception
Through
One Year Five Years Year
Ended Ended Ended
October 31, October 31, October 31, Inception
1997 1997 1997 Date
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sirach Special Equity
Portfolio Institutional 8.11% 16.04% 15.68% 10/2/89
Class Shares
Sirach Growth Portfolio
Institutional Class Shares 30.86% -- 17.70% 12/1/93
Sirach Strategic Balanced
Portfolio Institutional
Class Shares 20.78% -- 12.50% 12/1/93
Sirach Equity Portfolio
Institutional Class Shares 28.34% -- 29.25% 7/1/96
Sirach Special Equity
Portfolio Service Class 7.91% -- 10.36% 3/22/96
Shares
Sirach Growth Portfolio
Service Class Shares 30.53% N/A 25.04% 3/22/96
Sirach Strategic Balanced
Service Class Shares -- -- 12.57% 3/7/97
</TABLE>

These figures are calculated according to the following formula:

P(1 + T)/n/= ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
- ---------------
1, 5, or 10 year periods at the end of the
- ---------------
1, 5, or 10 year periods (or fractional portion
- ---------------
thereof).
- ---------------
-30-
<PAGE>

Service Class Shares of the Sirach Equity and Bond Portfolios were not
offered as of October 31, 1997. Accordingly, no total return figures are
available.

YIELD

Current yield reflects the income per share earned by a Portfolio's
investments. The current yield is determined by dividing the net investment
income per share earned during a 30-day base period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the base period. Since Service Class Shares of the Portfolio bear
additional service and distribution expenses, the Service Class Shares of the
Portfolio bear additional service and distribution expenses, the yield of the
Service Class Shares of the Portfolio will generally be lower than that of the
Institutional Class Shares of the Portfolio.

Yield 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.

Shares of the Sirach Bond Portfolio were not offered as of October 31,
1997. Accordingly, no yield figures are available.

COMPARISONS

In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical

-31-
<PAGE>

to the composition of investments in the Fund's Portfolios, that the averages
are generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation 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 located at
One International Place, Boston, MA 02110; however, all investor correspondence
should be directed to the Fund at the UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's
Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of 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. The Directors of the Fund
may create additional Portfolios and classes of shares at a future date.

Each class of shares of a Portfolio, when issued and paid for as
provided for in the Prospectuses, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held), then standing in his or her
name on the books of the Fund. Both Institutional Class and Service Class
Shares represent interests in the same assets of a Portfolio and are identical
in all respects except that the Service Class Shares bear certain expenses
related to shareholder servicing and the distribution of such shares, and have
exclusive voting rights with respect to matters relating to such distribution
expenditures. The Board of Directors has authorized a third class of shares,
Advisor Class Shares, which are not currently being offered by these Portfolios.

-32-
<PAGE>

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of a Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the federal excise tax on undistributed
income and capital gains (see discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectuses). The amounts of any income
dividends or capital gains distributions cannot be predicted.

As set forth in the Prospectuses, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of a Portfolio at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholder in writing at least three days
prior to the record date that either the Income Option (income dividends in cash
and capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash) has
been elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.

FEDERAL TAXES

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended, 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.

-33-
<PAGE>

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
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements (including the notes thereto) of the Sirach
Strategic Balanced, Sirach Growth, Sirach Special Equity and Sirach Equity
Portfolios, which appear in the Portfolios' 1997 Annual Report to Shareholders,
and the report thereon of Price Waterhouse LLP, independent accountants, also
appearing therein, are attached to this SAI.

-34-
<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF RATINGS FOR CORPORATE BOND AND PREFERRED SECURITIES

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.

A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security 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.

A-1
<PAGE>

and bad times over the future. Uncertainty of position 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
shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Standard & Poor's Ratings Services 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 principal
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.

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
conditions.

A-2
<PAGE>

C - The rating C is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES

The term "U.S. Government Securities" refers to a variety of
securities which are issued or guaranteed by the United States Government and by
various instrumentalities which have been established or sponsored by the United
States Government.

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
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association, are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed, to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.

Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing

A-3
<PAGE>

Administration, Maritime Administration, Small Business Administration, and The
Tennessee Valley Authority.

III. DESCRIPTION OF COMMERCIAL PAPER

Each Portfolio may invest in commercial paper (including variable
amount master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or
by S&P. Commercial paper refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually 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
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding 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) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating assignment by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation of
the management of the issuer; (2) economic evaluation of the issuer's industry
or industries and the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of issuer of obligations which

A-4
<PAGE>

may be present or may arise as a result of public interest questions and
preparations to meet such obligations.

IV. DESCRIPTION OF BANK OBLIGATIONS

V. DESCRIPTION OF FOREIGN INVESTMENTS

A-5
<PAGE>

companies. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the U.S. In addition, with
respect to certain foreign countries, there is the possibility of expropriation
or confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.

A-6
<PAGE>

APPENDIX B - COMPARISONS

(a) Dow Jones Composite Average or its component averages -- an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -- an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividend.

(c) Standard & Poor's Midcap 400 Index -- consists of 400 domestic stocks
chosen for market size (medium market capitalization of $993 million as of
February 1995), liquidity and industry group representation. It is a
market-weighted index with each stock affecting the index in proportion to
its market value.

(d) The New York Stock Exchange composite or component indices -- unmanaged
indices of all industrial, utilities, transportation and finance stocks
listed on the New York Stock Exchange.

(e) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.

(f) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income Fund
Performance Analysis -- measures total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions,
exclusive of any applicable sales charges.

(g) Morgan Stanley Capital International EAFE Index and World Index--
respectively, arithmetic, market value-weighted averages of the performance
of over 900 securities listed on the stock exchanges of countries in
Europe, Australia and the Far East, and over 1,400 securities listed on the
stock exchanges of these continents, including North America.

(h) Goldman Sachs 100 Convertible Bond Index -- currently includes 67 bonds and
33 preferred. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The
index is priced monthly.

B-1
<PAGE>

(i) Salomon Brothers GNMA Index -- includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.

(j) Salomon Brothers High Grade Corporate Bond Index -- consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a value-
weighted, total return index, including approximately 800 issues with
maturities of 12 years or greater.

(k) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted index
that contains approximately 4,700 individually priced investment grade
corporate bonds rated BBB or better, U.S. Treasury/agency issues and
mortgage passthrough securities.

(l) Salomon Brothers 3-Month Treasury Bill Index -- is a return equivalent of
yield averages of the last three 3-Month Treasury Bill issues.

(m) Lehman Brothers Government/Corporate Index -- is an unmanaged index
composed of a combination of the Government and Corporate Bond Indices. The
Government Index includes public obligations of the U.S. Treasury, issues
of Government agencies, and corporate debt backed by the U.S. Government.
The Corporate Bond Index includes fixed-rate nonconvertible corporate debt.
Also included are Yankee Bonds and nonconvertible debt issued by or
guaranteed by foreign or international governments and agencies. All
issues are investment grade (BBB) or higher, with maturities of at least
one year and outstanding par value of at least $100 million for U.S.
Government issues and $25 million for others. Any security downgraded
during the month is held in the index until month-end and then removed.
All returns are market value weighted inclusive of accrued income.

(n) Lehman Brothers Long-Term Treasury Bond -- is composed of all bonds covered
by the Lehman Brothers Treasury Bond Index with maturities of 10 years or
greater.

(o) Lehman Brothers Intermediate Government/Corporate Index -- is an unmanaged
index composed of a combination of the Government and Corporate Bond
Indices. All issues are investment grade (BBB) or higher, with maturities
of one to ten years and an outstanding par value of at least $100 million
for U.S. Government issues and $25 million for others. The Government
Index includes public obligations of the U.S. Treasury, issues of
Government agencies, and corporate debt backed by the U.S. Government. The
Corporate Bond Index includes fixed-rate nonconvertible corporate debt.
Also included are Yankee Bonds and nonconvertible debt

B-2
<PAGE>

issued by or guaranteed by foreign or international governments and
agencies. Any security downgraded during the month is held in the index
until month-end and then removed. All returns are market value weighted
inclusive of accrued income .

(p) Lehman Brothers Aggregate Bond Index -- is a fixed income market value-
weighted index that combines the Lehman Brothers Government/Corporate Index
and the Lehman Brothers Mortgage-Backed Securities Index. It includes
fixed rate issues of investment grade (BBB) or higher, with maturities of
at least one year and outstanding par values of at least $100 million for
U.S. Government issues and $25 million for others.

(q) 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.

(r) Value Line -- composed of over 1,600 stocks in the Value Line Investment
Survey.

(s) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30% NASDAQ
Industrial Index; 35% Standard & Poor's 500 Stock Index and 65% Salomon
Brothers High Grade Bond Index; all stocks on the NASDAQ system exclusive
of those traded on an exchange; 65% Standard & Poor's 500 Stock Index and
35% Salomon Brothers High Grade Bond Index; 50% Standard & Poor's Stock
Index and 50% Lehman Brothers Aggregate Bond Index; 50% Standard & Poor's
500 Stock Index and 50% Lehman Brothers Government/Corporate Index; 45%
Standard and Poor's 500 Stock Index, 45% Lehman Brothers Aggregate Bond
Index and 10% Salomon Brothers 3-Month Treasury Bill Index; and 45%
Standard and Poor's 500 Stock Index, 45% Lehman Brothers
Government/Corporate Index and 10% Salomon Brothers 3-Month Treasury Bill
Index.

(t) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. --
analyzes price, current yield, risk, total return and average rate of
return (average annual compounded growth rate) over specified time periods
for the mutual fund industry.

(u) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes price,
yield, risk and total return for equity funds.

(v) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper Analytical Services, Inc.,

B-3
<PAGE>

Morningstar, Inc., New York Times, Personal Investor, Wall Street Journal
and Weisenberger Investment Companies Service-- publications that rate fund
performance over specified time periods.

(w) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change, over time in
the price of goods and services in major expenditure groups.

(x) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates --
historical measure of yield, price and total return for common and small
company stock, long-term government bonds, U.S. Treasury bills and
inflation.

(y) Savings and Loan Historical Interest Rates -- as published in the U.S.
Savings & Loan League Fact Book.

(z) 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.

(aa) Russell 1000 Index - consists of the 1,000 largest securities in the
Russell 3000 Index. This large capitalization (market-oriented) index
represents the universe of stocks from which most active money managers
typically select. The Russell 1000 is highly correlated with the S&P 500
Index.

(bb) Russell 1000 Growth Index - contains those Russell 1000 securities with a
greater-than-average growth orientation. Securities in this index tend to
exhibit higher price-to-book and price-earnings ratios, lower dividends and
higher forecasted growth values than the Value universe.

(cc) Russell 1000 Value Index - contains those Russell 1000 securities with a
less-than-average growth orientation. It represents the universe of stocks
from which value managers typically select. Securities in this index tend
to exhibit low price-to-book and price-earnings ratios, higher dividend
yields and lower forecasted growth values than the Growth universe.

(dd) 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. publicly-traded
companies.

(ee) Russell 2000 Growth Index - contains those Russell 2000 securities with a
greater-than-average growth orientation. Securities in this index tend to
exhibit higher price-to-

B-4
<PAGE>

book and price-earnings ratios, lower dividend yields and higher forecasted
growth values than the Value universe.

(ff) Russell 2000 Value Index - contains those Russell 2000 securities with a
less-than-average growth orientation. Securities in this index tend to
exhibit lower price-to-book and price-earnings ratios, higher dividend
yields and lower forecasted growth values than the Growth universe.

(gg) Russell 2500 Index - consists of the bottom 500 securities in the Russell
1000 Index and all 2,000 securities in the Russell 2000 Index, representing
approximately 23% of the Russell 3000 total market capitalization. This
index is a good measure of small to medium-small stock performance.

(hh) Russell 2500 Growth Index - contains those Russell 2500 securities with a
greater-than-average growth orientation. Securities in this index tend to
exhibit higher price-to-book and price-earnings ratios, lower dividends and
higher forecasted growth values than the Value universe.

(ii) Russell 2500 Value Index - contains those Russell 2500 securities with a
less-than-average growth orientation. It represents the universe of stocks
from which value managers typically select. Securities in this index tend
to exhibit low price-to-book and price-earnings ratios, higher dividend
yields and lower forecasted growth values than the Growth universe.

(jj) Russell 3000 Index - composed of 3,000 large U.S. securities, as determined
by total market capitalization. This index represents approximately 98% of
the investable U.S. equity market. The largest security has a market
capitalization of approximately $85 billion; the smallest is approximately
$90 million.

B-5
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (95.9%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.0%)
AAR Corp. ............................................... 99,600 $ 3,566,925
- -------------------------------------------------------------------------------
BANKS (2.5%)
City National Corp. ..................................... 126,550 3,804,410
*Ocwen Financial Corp. .................................. 39,500 2,170,031
Provident Financial Group, Inc. ......................... 71,280 3,256,605
------------
9,231,046
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (0.8%)
800-JR CIGAR, Inc. ...................................... 90,800 2,814,800
- -------------------------------------------------------------------------------
CHEMICALS (0.9%)
Crompton & Knowles Corp. ................................ 134,850 3,404,962
- -------------------------------------------------------------------------------
COMPUTERS (2.1%)
*Saville Systems Ireland plc............................. 95,350 5,661,406
*SpeedFam International, Inc. ........................... 55,000 2,038,438
------------
7,699,844
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE (16.7%)
*CBT Group plc ADR....................................... 64,350 4,954,950
*Ciber, Inc. ............................................ 121,100 5,358,675
*Compuware Corp. ........................................ 140,350 9,263,100
*Electronics Arts, Inc. ................................. 132,950 4,503,681
*HNC Software, Inc. ..................................... 65,000 2,388,750
*Hyperion Software Corp. ................................ 233,600 8,876,800
*Platinum Technology, Inc. .............................. 236,200 5,705,706
*Structural Dynamics Research Corp. ..................... 251,850 4,800,891
*Symantec Corp. ......................................... 248,100 5,411,681
*Veritas Software Corp. ................................. 117,176 4,877,451
*Viasoft, Inc. .......................................... 141,500 5,774,969
------------
61,916,654
- -------------------------------------------------------------------------------
CONSTRUCTION (1.3%)
Comfort Systems USA, Inc. ............................... 153,850 2,615,450
TJ International, Inc. .................................. 94,500 2,155,781
------------
4,771,231
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ELECTRONICS (1.5%)
*ADFlex Solutions, Inc. ................................. 101,350 $ 2,267,706
*Gemstar International Group Ltd. ....................... 129,350 2,837,616
*Uniphase, Corp. ........................................ 9,150 608,475
------------
5,713,797
- -------------------------------------------------------------------------------
ENERGY (4.2%)
*Global Marine, Inc. .................................... 89,800 2,795,025
*Marine Drilling Companies, Inc. ........................ 128,050 3,789,480
*Newpark Resources, Inc. ................................ 104,650 4,342,975
*Smith International, Inc. .............................. 26,350 2,009,187
*Varco International, Inc. .............................. 43,700 2,662,969
------------
15,599,636
- -------------------------------------------------------------------------------
ENVIRONMENTAL (2.0%)
*Allied Waste Industries, Inc. .......................... 114,750 2,330,859
*Superior Services, Inc. ................................ 134,200 3,564,688
Waste Industries, Inc. .................................. 72,350 1,528,394
------------
7,423,941
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (7.7%)
*Amresco, Inc. .......................................... 174,200 5,454,637
*E*TRADE Group, Inc. .................................... 119,150 3,671,309
*FIRSTPLUS Financial Group, Inc. ........................ 129,450 7,111,660
*Imperial Credit Industries, Inc. ....................... 252,350 6,324,522
Long Beach Financial Corp. .............................. 138,750 1,751,719
The Money Store, Inc. ................................... 148,700 4,224,009
------------
28,537,856
- -------------------------------------------------------------------------------
HEALTH CARE (8.1%)
*ATL Ultrasound, Inc. ................................... 93,500 3,985,437
Capital Senior Living Corp. ............................. 115,250 1,930,437
*Concentra Managed Care, Inc. ........................... 69,050 2,248,441
*Coventry Corp. ......................................... 186,800 2,609,363
*Curative Health Services, Inc. ......................... 112,650 3,379,500
*IDX Systems Corp. ...................................... 117,500 3,995,000
*Renal Treatment Centers, Inc. .......................... 184,600 6,126,413
*Total Renal Care Holdings, Inc. ........................ 180,699 5,567,793
------------
29,842,384
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INSURANCE (2.4%)
American Bankers Insurance Group, Inc. ................... 131,500 $ 4,914,813
HCC Insurance Holdings, Inc. ............................. 164,950 3,855,706
------------
8,770,519
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (3.2%)
Apple South, Inc. ........................................ 180,150 3,344,034
CKE Restaurants, Inc. .................................... 131,500 5,251,781
*Showbiz Pizza Time, Inc. ................................ 160,350 3,377,372
------------
11,973,187
- --------------------------------------------------------------------------------
MEDIA (2.0%)
*CKS Group, Inc. ......................................... 4,650 170,306
*Outdoor Systems, Inc. ................................... 98,850 3,039,638
*Universal Outdoor Holdings, Inc. ........................ 99,600 4,195,650
------------
7,405,594
- --------------------------------------------------------------------------------
METALS (0.8%)
*Titanium Metals Corp. ................................... 92,250 2,859,750
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (2.0%)
*Comverse Technology, Inc. ............................... 113,650 4,673,856
*Splash Technology Holdings, Inc. ........................ 68,800 2,863,800
------------
7,537,656
- --------------------------------------------------------------------------------
PHARMACEUTICALS (3.4%)
*Centocor, Inc. .......................................... 72,250 3,174,484
*Dura Pharmaceuticals, Inc. .............................. 59,800 2,896,562
*Medicis Pharmaceutical Corp., Class A.................... 115,900 5,541,469
*Theragenics Corp. ....................................... 20,900 907,844
------------
12,520,359
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST (1.2%)
Imperial Credit Commercial Mortgage Investment Corp. ..... 188,400 3,108,600
Sunstone Hotel Investors, Inc. ........................... 82,900 1,455,931
------------
4,564,531
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL (11.2%)
*CDW Computer Centers, Inc. ............................. 35,600 $ 2,198,300
Danka Business Systems ADR............................... 115,550 4,275,350
*Dollar Tree Stores, Inc. ............................... 64,250 2,610,156
*General Nutrition Cos., Inc. ........................... 161,850 5,078,044
*Genesco, Inc. .......................................... 200,250 2,540,672
*Just For Feet, Inc. .................................... 71,150 1,051,686
*Pacific SunWear of California, Inc. .................... 231,225 6,344,236
Ross Stores, Inc. ....................................... 126,200 4,732,500
*The Men's Wearhouse, Inc. .............................. 192,600 7,439,175
*Whole Foods Market, Inc. ............................... 133,000 5,187,000
------------
41,457,119
- -------------------------------------------------------------------------------
SEMICONDUCTOR (2.3%)
*Alliance Semiconductor Corp. ........................... 118,500 903,562
*Integrated Process Equipment Corp. ..................... 44,100 974,334
*Level One Communications, Inc. ......................... 82,250 3,680,688
*Vitesse Semiconductor Corp. ............................ 68,300 2,966,781
------------
8,525,365
- -------------------------------------------------------------------------------
SERVICES (6.7%)
*Abacus Direct Corp. .................................... 23,000 839,500
*Accustaff, Inc. ........................................ 358,600 10,242,512
*Apollo Group Inc., Class A.............................. 8,400 351,750
*Keane, Inc. ............................................ 35,100 1,039,837
*Registry, Inc. ......................................... 83,700 3,473,550
*Robert Half International, Inc. ........................ 140,200 5,739,438
*Romac International, Inc. .............................. 131,700 2,683,387
*SOS Staffing Services, Inc. ............................ 23,850 494,888
------------
24,864,862
- -------------------------------------------------------------------------------
TECHNOLOGY (3.6%)
*Creative Technology Ltd. ............................... 209,500 5,329,156
*Integrated Device Technology, Inc. ..................... 93,950 1,083,361
*McAfee Associates, Inc. ................................ 43,100 2,141,531
*Security Dynamics Technologies, Inc. ................... 144,950 4,887,533
------------
13,441,581
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (3.0%)
*Advanced Fibre Communications........................... 176,900 $ 5,141,156
STAR Telecommunications, Inc. ........................... 91,650 2,102,222
*Teledata Communications Ltd. ........................... 125,950 3,880,834
------------
11,124,212
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (3.5%)
*Abercrombie & Fitch Co., Class A........................ 291,900 7,589,400
*Nautica Enterprises, Inc. .............................. 202,350 5,381,245
------------
12,970,645
- -------------------------------------------------------------------------------
TRANSPORTATION (1.8%)
Roadway Express, Inc. ................................... 57,350 1,605,800
*US Xpress Enterprises, Inc. ............................ 117,250 2,601,484
*Yellow Corp. ........................................... 83,200 2,277,600
------------
6,484,884
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $290,645,660)................... 355,023,340
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.3%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $12,256,717,
collateralized by $11,745,927 of various U.S.
Treasury Notes, 5.50%-8.75%, due from 5/15/00-
6/30/02, valued at $12,257,911 (COST $12,251,000)... $12,251,000 12,251,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.2%) (COST $302,896,660)(A)...... 367,274,340
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (0.8%)............. 3,132,596
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................... $370,406,936
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
ADR--American Depositary Receipt
(a) The cost for federal income tax purposes was $303,541,105. At October 31,
1997, net unrealized appreciation for all securities based on tax cost
was $63,733,235. This consisted of aggregate gross unrealized
appreciation for all securities of $74,936,762 and aggregate gross
unrealized depreciation for all securities of $11,203,527.

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (90.7%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.4%)
United Technologies Corp. ............................... 32,000 $ 2,240,000
- -------------------------------------------------------------------------------
BANKS (6.8%)
BankAmerica Corp. ....................................... 35,300 2,523,950
Chase Manhattan Corp. ................................... 11,800 1,361,425
Citicorp................................................. 14,699 1,838,294
First American Corp. (Tennessee)......................... 28,800 1,369,800
U.S. Bancorp............................................. 16,400 1,667,675
Washington Federal, Inc. ................................ 64,832 1,928,752
------------
10,689,896
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.9%)
ConAgra, Inc. ........................................... 52,100 1,569,513
CPC International, Inc. ................................. 13,900 1,376,100
------------
2,945,613
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (2.3%)
AlliedSignal, Inc. ...................................... 65,700 2,365,200
Caterpillar Inc. ........................................ 25,000 1,281,250
------------
3,646,450
- -------------------------------------------------------------------------------
COMPUTERS (1.3%)
HBO & Co. ............................................... 47,500 2,063,281
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE (3.5%)
Computer Associates International, Inc. ................. 24,000 1,789,500
*Microsoft Corp. ........................................ 8,700 1,130,456
*Visio Corp. ............................................ 72,100 2,681,219
------------
5,601,175
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL (1.2%)
*HFS, Inc. .............................................. 25,800 1,818,900
- -------------------------------------------------------------------------------
CONSUMER STAPLES (6.6%)
American Stores Co. ..................................... 80,500 2,067,844
Clorox Co. .............................................. 19,000 1,330,000
*Fred Meyer, Inc. ....................................... 113,500 3,241,844
Procter & Gamble Co. .................................... 10,000 680,000
*Safeway, Inc. .......................................... 53,200 3,092,250
------------
10,411,938
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>

SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ELECTRICAL GOODS (1.9%)
General Electric Co. .................................... 46,200 $ 2,982,787
- -------------------------------------------------------------------------------
ELECTRONICS (5.7%)
*Adaptec, Inc. .......................................... 43,000 2,086,844
*Airtouch Communications, Inc. .......................... 87,000 3,360,375
Hewlett-Packard Co. ..................................... 19,700 1,215,244
Intel Corp. ............................................. 30,500 2,349,453
------------
9,011,916
- -------------------------------------------------------------------------------
ENERGY (6.3%)
Columbia Gas System, Inc. ............................... 23,000 1,661,750
Halliburton Co. ......................................... 30,200 1,800,675
Mobil Corp. ............................................. 19,900 1,448,969
Schlumberger Ltd. ....................................... 17,500 1,531,250
Tidewater, Inc. ......................................... 36,000 2,364,750
Williams Cos., Inc. ..................................... 22,150 1,128,265
------------
9,935,659
- -------------------------------------------------------------------------------
ENVIRONMENTAL (3.6%)
*U.S. Filter Corp. ...................................... 67,500 2,708,437
*U.S.A. Waste Services, Inc. ............................ 81,767 3,025,379
------------
5,733,816
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (5.3%)
Equifax, Inc. ........................................... 47,200 1,466,150
Merrill Lynch & Co., Inc. ............................... 22,700 1,535,087
SunAmerica, Inc. ........................................ 76,100 2,734,844
Travelers Group, Inc. ................................... 37,166 2,601,620
------------
8,337,701
- -------------------------------------------------------------------------------
HEALTH CARE (4.4%)
Cardinal Health, Inc. ................................... 17,750 1,317,938
*HEALTHSOUTH Corp. ...................................... 152,900 3,908,506
*Tenet Healthcare Corp. ................................. 56,100 1,714,556
------------
6,941,000
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

17
<PAGE>

SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (3.3%)
*Corrections Corporation of America...................... 126,000 $ 3,843,000
Johnson Controls, Inc. .................................. 30,100 1,350,738
------------
5,193,738
- -------------------------------------------------------------------------------
INSURANCE (6.7%)
American International Group, Inc. ...................... 19,700 2,010,631
Conseco, Inc. ........................................... 71,500 3,119,188
Equitable Cos., Inc. .................................... 52,900 2,178,819
MGIC Investment Corp. ................................... 40,600 2,448,687
UNUM Corp. .............................................. 18,200 887,250
------------
10,644,575
- -------------------------------------------------------------------------------
MISCELLANEOUS (2.0%)
Tyco International Ltd. ................................. 85,200 3,216,300
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (5.8%)
Cognizant Corp. ......................................... 53,500 2,096,531
*Republic Industries, Inc. .............................. 131,000 3,864,500
*Thermo Electron Corp. .................................. 86,700 3,234,994
------------
9,196,025
- -------------------------------------------------------------------------------
PHARMACEUTICALS (5.1%)
Abbott Laboratories...................................... 32,351 1,983,521
Merck & Co., Inc. ....................................... 22,500 2,008,125
Pfizer, Inc. ............................................ 18,800 1,330,100
Schering-Plough Corp. ................................... 48,800 2,735,850
------------
8,057,596
- -------------------------------------------------------------------------------
RETAIL (10.1%)
*Costco Cos., Inc. ...................................... 125,100 4,800,712
Home Depot, Inc. ........................................ 66,700 3,710,188
Nordstrom, Inc. ......................................... 34,500 2,108,812
*Staples, Inc. .......................................... 80,000 2,095,000
*Starbucks Corp. ........................................ 99,500 3,289,719
------------
16,004,431
- -------------------------------------------------------------------------------
SERVICES (0.8%)
Service Corp. International.............................. 41,000 1,247,937
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

18
<PAGE>

SIRACH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TECHNOLOGY (0.7%)
*Cisco Systems, Inc. .................................... 13,400 $ 1,099,219
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.1%)
Lucent Technologies, Inc. ............................... 20,300 1,673,481
- -------------------------------------------------------------------------------
TRANSPORTATION (1.2%)
Illinois Central Corp. .................................. 55,050 1,961,156
- -------------------------------------------------------------------------------
UTILITIES (1.7%)
*WorldCom, Inc. ......................................... 81,500 2,737,891
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $121,730,105)................... 143,392,481
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (9.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (9.8%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $15,420,193,
collateralized by $14,777,567 of various U.S.
Treasury Notes, 5.50%-8.75% due from 5/15/00-
6/30/02, valued at $15,421,695 (COST $15,413,000).. $15,413,000 15,413,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%) (COST $137,143,105)(A).... 158,805,481
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-0.5%)........... (747,143)
- -------------------------------------------------------------------------------
NET ASSETS (100%).................................... $158,058,338
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $137,190,317. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$21,615,164. This consisted of aggregate gross unrealized appreciation for
all securities of $23,504,810 and aggregate gross unrealized depreciation
for all securities of $1,889,646.

The accompanying notes are an integral part of the financial statements.

19
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (52.5%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.9%)
United Technologies Corp. ............................. 11,500 $ 805,000
- -------------------------------------------------------------------------------
BANKS (4.2%)
BankAmerica Corp. ..................................... 12,500 893,750
Chase Manhattan Corp. ................................. 4,000 461,500
Citicorp............................................... 5,051 631,691
First American Corp. (Tennessee)....................... 7,300 347,206
U.S. Bancorp........................................... 6,000 610,125
Washington Federal, Inc. .............................. 23,705 705,224
-----------
3,649,496
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.2%)
ConAgra, Inc. ......................................... 17,000 512,125
CPC International, Inc. ............................... 5,500 544,500
-----------
1,056,625
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (1.4%)
AlliedSignal, Inc. .................................... 24,300 874,800
Caterpillar, Inc. ..................................... 7,200 369,000
-----------
1,243,800
- -------------------------------------------------------------------------------
COMPUTERS (1.6%)
HBO & Co. ............................................. 14,500 629,844
*Visio Corp. .......................................... 19,700 732,594
-----------
1,362,438
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE (1.1%)
Computer Associates International, Inc. ............... 6,300 469,744
*Microsoft Corp. ...................................... 3,500 454,781
-----------
924,525
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL (0.7%)
*HFS, Inc. ............................................ 8,000 564,000
- -------------------------------------------------------------------------------
CONSUMER STAPLES (3.8%)
American Stores Co. ................................... 27,000 693,562
Clorox Co. ............................................ 6,500 455,000
*Fred Meyer, Inc. ..................................... 31,200 891,150
*Safeway, Inc. ........................................ 17,500 1,017,188
Procter & Gamble Co. .................................. 3,600 244,800
-----------
3,301,700
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

20
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ELECTRICAL GOODS (1.2%)
General Electric Co. .................................. 16,000 $ 1,033,000
- -------------------------------------------------------------------------------
ELECTRONICS (3.3%)
*Adaptec, Inc. ........................................ 13,000 630,906
*Airtouch Communications, Inc. ........................ 28,000 1,081,500
Hewlett-Packard Co. ................................... 7,800 481,162
Intel Corp. ........................................... 8,500 654,766
-----------
2,848,334
- -------------------------------------------------------------------------------
ENERGY (3.7%)
Columbia Gas System, Inc. ............................. 8,000 578,000
Halliburton Co. ....................................... 8,000 477,000
Mobil Corp. ........................................... 8,500 618,906
Schlumberger Ltd. ..................................... 6,200 542,500
Tidewater, Inc. ....................................... 8,500 558,344
Williams Cos., Inc. ................................... 8,850 450,797
-----------
3,225,547
- -------------------------------------------------------------------------------
ENVIRONMENTAL (2.3%)
*U.S. Filter Corp. .................................... 22,500 902,813
*U.S.A. Waste Services, Inc. .......................... 29,927 1,107,299
-----------
2,010,112
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (3.0%)
Equifax, Inc. ......................................... 13,600 422,450
Merrill Lynch & Co., Inc. ............................. 9,500 642,438
SunAmerica, Inc. ...................................... 25,450 914,609
Travelers Group, Inc. ................................. 9,333 653,310
-----------
2,632,807
- -------------------------------------------------------------------------------
HEALTH CARE (2.4%)
Cardinal Health, Inc. ................................. 4,450 330,412
*HEALTHSOUTH Corp. .................................... 44,000 1,124,750
*Tenet Healthcare Corp. ............................... 20,000 611,250
-----------
2,066,412
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

21
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (2.0%)
Johnson Controls, Inc. ................................ 8,700 $ 390,412
*Corrections Corporation of America.................... 45,300 1,381,650
-----------
1,772,062
- -------------------------------------------------------------------------------
INSURANCE (3.9%)
American International Group, Inc. .................... 6,500 663,406
Conseco, Inc. ......................................... 23,500 1,025,188
Equitable Cos., Inc. .................................. 15,000 617,812
MGIC Investment Corp. ................................. 11,000 663,437
UNUM Corp. ............................................ 7,500 365,625
-----------
3,335,468
- -------------------------------------------------------------------------------
MISCELLANEOUS (1.1%)
Tyco International Ltd. ............................... 26,000 981,500
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (3.1%)
Cognizant Corp. ....................................... 15,000 587,812
*Republic Industries, Inc. ............................ 38,000 1,121,000
*Thermo Electron Corp. ................................ 26,700 996,244
-----------
2,705,056
- -------------------------------------------------------------------------------
PHARMACEUTICALS (3.2%)
Abbott Laboratories.................................... 12,549 769,411
Merck & Co., Inc. ..................................... 7,450 664,912
Pfizer, Inc. .......................................... 5,700 403,275
Schering-Plough Corp. ................................. 16,000 897,000
-----------
2,734,598
- -------------------------------------------------------------------------------
RETAIL (5.2%)
*Costco Cos., Inc. .................................... 33,600 1,289,400
Home Depot, Inc. ...................................... 16,500 917,813
Nordstrom, Inc. ....................................... 10,500 641,812
*Staples, Inc. ........................................ 27,000 707,062
*Starbucks Corp. ...................................... 27,500 909,219
-----------
4,465,306
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

22
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- ------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- ------------------------------------------------------------------------------
SERVICES (0.5%)
Service Corp. International........................... 13,000 $ 395,688
- ------------------------------------------------------------------------------
TECHNOLOGY (0.4%)
*Cisco Systems, Inc. ................................. 4,000 328,125
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.6%)
Lucent Technologies, Inc. ............................ 6,500 535,844
- ------------------------------------------------------------------------------
TRANSPORTATION (0.6%)
Illinois Central Corp. ............................... 15,500 552,188
- ------------------------------------------------------------------------------
UTILITIES (1.1%)
*WorldCom, Inc. ...................................... 28,500 957,422
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $38,380,063)................. 45,487,053
- ------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (16.5%)
- ------------------------------------------------------------------------------
BANKS (0.9%)
++Merita Bank Ltd., 6.073%, 12/1/05................... $ 750,000 750,272
- ------------------------------------------------------------------------------
ENERGY (2.1%)
Detroit Edison, Series S, Class A3, 6.40%, 10/1/98.... 1,000,000 1,000,000
Occidential Petroleum Corp. 11.125%, 6/1/19........... 750,000 837,188
-----------
1,837,188
- ------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.7%)
Time Warner Entertainment Co. 8.375%, 3/15/23......... 1,375,000 1,519,375
- ------------------------------------------------------------------------------
FINANCIAL SERVICES (7.5%)
American General Finance Corp. 7.45%, 7/1/02.......... 1,000,000 1,047,500
++Bear Stearns Co., Inc., Series B, Medium Term Note,
6.063%, 10/27/04................................... 1,100,000 1,100,539
++Beneficial Corp., Series F, Medium Term Note, 5.81%,
3/15/99............................................ 700,000 698,218
#Jefferson-Pilot Capital Trust 8.14%, 1/15/46......... 750,000 770,625
Lehman Brothers Holdings Inc. 6.90%, 3/30/01.......... 1,200,000 1,224,000
Paine Webber Group, Inc., Medium Term Note, 7.02%,
2/14/03.............................................. 900,000 913,500
Salomon Inc. 7.20%, 2/1/04............................ 700,000 724,500
-----------
6,478,882
- ------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

23
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL (3.6%)
Northwest Airlines Corp., Series 1997-1, Class 1A,
7.068%, 7/2/17....................................... $1,000,000 $ 1,022,280
+++Bell Cablemedia Plc, Step Bond, 0.00/11.95%,
7/15/04............................................... 1,200,000 1,113,000
News America Holdings Inc. 7.75%, 12/1/45............. 950,000 942,875
-----------
3,078,155
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.7%)
Tele-Communications Inc. 9.80%, 2/1/12................ 475,000 589,000
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $13,858,049)..... 14,252,872
- -------------------------------------------------------------------------------
ASSET BACKED SECURITIES (8.5%)
- -------------------------------------------------------------------------------
Airplanes Pass Through Trust, Series 1, Class A4
6.276% 3/15/19....................................... 925,000 930,781
Capita Equipment Receivables Trust, Series 1996-1,
Class B 6.57%, 3/15/01............................... 850,000 858,760
Citibank Credit Card Master Trust I, Series 1997-6,
Class A PO,
zero coupon, 8/15/06................................. 1,675,000 1,092,877
Metris Master Trust, Series 1996-1, Class A 6.45%,
2/20/02.............................................. 1,300,000 1,316,440
Metris Master Trust, Series 1997-1, Class A 6.87%,
10/20/05............................................. 600,000 619,306
Provident Bank Home Equity Loan Trust, Series 1997-1,
Class A1 7.18%, 4/25/13.............................. 701,953 718,447
The Money Store Home Equity Trust, Series 1995-B,
Class A3 6.65%, 1/15/16.............................. 423,184 429,096
Union Acceptance Corp., Series 1997-C, Class A2,
6.29%, 1/8/01........................................ 1,400,000 1,404,315
- -------------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES (COST $7,288,478)........ 7,370,022
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (7.3%)
- -------------------------------------------------------------------------------
Federal National Mortgage Association, Series 1997-41,
Class D 7.25%, 1/18/19............................... 1,000,000 1,018,981
Federal National Mortgage Association, Series 1996-28,
Class A, Structured Collateral 7.00%, 9/25/23........ 1,125,000 1,149,604
GE Capital Mortgage Services, Inc., Series 1997-2,
Class 1A2 PAC-1 (11) 6.75%, 3/25/27.................. 800,000 804,162
ICI Funding Corp., Secured Assets Corp., Series 1997-
2,
Class 2A 8.00%, 7/25/28.............................. 773,800 802,601
Morgan Stanley Capital Corp. I, Series C,
Class 4 9.00%, 5/1/16................................ 700,683 748,348
</TABLE>

The accompanying notes are an integral part of the financial statements.

24
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- ------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED)
- ------------------------------------------------------------------------------
Prudential Home Mortgage Securities Co., Series 1994-
1,
Class A6 PAC-2 (22) 6.00%, 2/25/09................... $1,000,000 $ 973,199
Salomon Brothers Mortgage Securities VII, Series 1996-
2,
Class A2 7.50%, 5/25/26.............................. 88,226 88,634
Salomon Brothers Mortgage Securities VII, Series 1997-
LB2
Class A1 6.95%, 4/25/27 716,427 717,767
- ------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $6,119,719)..................................... 6,303,296
- ------------------------------------------------------------------------------
AGENCY SECURITIES (4.4%)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.5%)
6.50%, 1/1/26 Pool #D67614............................ 1,350,174 1,328,656
- ------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.9%)
7.00%, 5/15/24 Pool #376510........................... 2,522,346 2,535,746
- ------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $3,670,610).............. 3,864,402
- ------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (3.4%)
- ------------------------------------------------------------------------------
U.S. TREASURY BOND (1.3%)
7.125%, 2/15/23....................................... 1,000,000 1,111,060
- ------------------------------------------------------------------------------
U.S. TREASURY NOTES (2.1%)
7.875%, 11/15/04...................................... 800,000 890,808
7.00%, 7/15/06........................................ 850,000 910,486
-----------
1,801,294
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $2,821,857)..... 2,912,354
- ------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (2.1%)
- ------------------------------------------------------------------------------
Hydro-Quebec 7.50%, 4/1/16............................ 950,000 1,007,000
Province de Quebec 11.00%, 6/15/15.................... 750,000 855,938
- ------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $1,828,680)....... 1,862,938
- ------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

25
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (5.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.3%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/03/97, to be repurchased at $4,551,123,
collateralized by $4,361,458 of various U.S. Treasury
Notes, 5.50%-8.75% due 5/15/00-6/30/02, valued at
$4,551,566 (COST $4,549,000)......................... $4,549,000 $ 4,549,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100%) (COST $78,516,456) (A)........ 86,601,937
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%).................... (19,750)
- -------------------------------------------------------------------------------
NET ASSETS (100%)...................................... $86,582,187
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/floating rate security-rate disclosed is as of October 31, 1997.
+++ Step Bond-Coupon Rate is low or zero for an initial period and then
increases to a higher coupon rate thereafter. Maturity date disclosed is
the ultimate maturity date.
* Non-Income Producing Security
# 144A Security; certain conditions for public resale may exist.
PAC--Planned Amortization Class
PO--Principal Only
(a) The cost for federal income tax purposes was $78,537,374. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$8,064,563. This consisted of aggregate gross unrealized appreciation for
all securities of $8,773,601 and aggregate gross unrealized depreciation
for all securities of $709,038.

The accompanying notes are an integral part of the financial statements.

26
<PAGE>

SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (46.7%)
- --------------------------------------------------------------------------------
U.S. TREASURY BOND (10.5%)
7.125%, 2/15/23........................................ $4,500,000 $ 4,999,770
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (36.2%)
5.875%, 2/15/00........................................ 3,000,000 3,010,140
6.625%, 6/30/01........................................ 8,100,000 8,319,266
7.875%, 11/15/04....................................... 5,400,000 6,012,953
-----------
17,342,359
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $22,055,395)..... 22,342,129
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (17.7%)
- --------------------------------------------------------------------------------
BANKS (3.1%)
++Anchor Savings 5.265%, 8/15/08....................... 400,000 399,540
St. Paul Bancorp 7.125%, 2/15/04....................... 1,050,000 1,067,062
-----------
1,466,602
- --------------------------------------------------------------------------------
ENERGY (0.6%)
Occidential Petroleum Corp. 11.125%, 6/1/19............ 250,000 279,063
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.8%)
#Hutchison Whampoa 7.45%, 8/1/17....................... 1,500,000 1,363,125
- --------------------------------------------------------------------------------
INDUSTRIAL (4.2%)
+++Bell Cablemedia Plc, Step Bond 0.00/11.95%, 7/15/04.. 1,100,000 1,020,250
News America Holdings 7.75%, 12/1/45................... 1,000,000 992,500
-----------
2,012,750
- --------------------------------------------------------------------------------
INSURANCE (5.7%)
#Jefferson-Pilot Capital Trust Corp. 8.14%, 1/15/46.... 900,000 924,750
W.R. Berkley Capital Trust Corp. 8.197%, 12/15/45...... 900,000 939,375
#Zurich Capital Trust I 8.376%, 6/1/37................. 800,000 878,000
-----------
2,742,125
- --------------------------------------------------------------------------------
UTILITIES (1.3%)
System Energy Resources 7.28%, 8/1/99.................. 400,000 405,500
United Illuminating Co. 6.20%, 1/15/99................. 225,000 224,719
-----------
630,219
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $8,310,307)....... 8,493,884
- --------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

27
<PAGE>

SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (11.3%)
- -------------------------------------------------------------------------------
Federal National Mortgage Association, Series 1996-28,
Class A, Structured Collateral 7.00%, 9/25/23......... $ 600,000 $ 613,122
GE Capital Mortgage Services, Inc., Series 97-2 1A2
6.75%, 3/25/27........................................ 750,000 753,902
Independent National Mortgage Corp., Series 1995-R A1
7.25%, 11/25/10....................................... 796,538 808,980
Prudential Home Mortgage Securities Co., Series 1993-
15,
Class A6 PAC (11) 6.75%, 5/25/08...................... 1,000,000 994,636
Prudential Home Mortgage Securities Co., Series 1994-1,
Class A6 PAC-2 (22) 6.00%, 2/25/09.................... 1,000,000 973,199
Residential Funding Mortgage Securities, Series 1997-
S9,
Class A19 7.10%, 7/25/27.............................. 1,200,000 1,230,540
Salomon Brothers Mortgage Securities VII, Series 1996-
2,
Class A2 7.50%, 5/25/26............................... 37,429 37,602
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $5,286,335)...................................... 5,411,981
- -------------------------------------------------------------------------------
ASSET BACKED SECURITIES (9.4%)
- -------------------------------------------------------------------------------
Americredit Automobile Receivables Trust, Series 1997-
B,
Class A2 6.36%, 9/12/00............................... 1,000,000 1,005,410
Capita Equipment Receivables Trust, Series 1996-1,
Class B 6.57%, 3/15/01................................ 275,000 277,834
CIT Group Home Equity Loan Trust, Series 1997-1,
Class A2 6.17%, 10/15/08.............................. 1,000,000 1,001,430
Metris Master Trust, Series 1997-1, Class A 6.87%,
10/20/05.............................................. 795,000 820,581
Union Acceptance Corp., Series 1997-C, Class A2 6.29%,
1/8/01................................................ 1,400,000 1,404,315
- -------------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES (COST $4,477,295)......... 4,509,570
- -------------------------------------------------------------------------------
AGENCY SECURITIES (3.1%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (3.1%)
7.36%, 7/1/04 (COST $1,469,800)........................ 1,400,000 1,498,994
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

28
<PAGE>

SIRACH FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (10.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (10.3%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/01/97, to be repurchased at $4,936,303,
collateralized by $4,730,585 of various U.S. Treasury
Notes 5.50%-8.75% due from 5/15/00-6/30/02 valued at
$4,936,783 (COST $4,934,000).......................... $4,934,000 $ 4,934,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%) (COST $46,533,132)(A)......... 47,190,558
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (1.5%)............... 706,695
- -------------------------------------------------------------------------------
NET ASSETS (100%)....................................... $47,897,253
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/Floating rate security--rate disclosed is as of October 31,
1997.
+++ Step Bond--Coupon rate is low or zero for an initial period and then
increases to a higher coupon rate thereafter. Maturity date disclosed is
the ultimate maturity date.
# 144A Security; certain conditions for public sale may exist.
PAC--Planned Amortization Class
(a) The cost for federal income tax purposes was $46,537,252. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$653,306. This consisted of aggregate gross unrealized appreciation for
all securities of $803,138 and aggregate gross unrealized depreciation for
all securities of $149,832.

The accompanying notes are an integral part of the financial statements.

29
<PAGE>

SIRACH EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS (98.9%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.6%)
United Technologies Corp. ............................... 2,100 $ 147,000
- -------------------------------------------------------------------------------
BANKS (6.8%)
BankAmerica Corp. ....................................... 7,500 536,250
Chase Manhattan Corp. ................................... 3,850 444,194
Citicorp................................................. 2,750 343,922
U.S. Bancorp............................................. 3,950 401,666
Washington Federal, Inc. ................................ 1,870 55,632
-----------
1,781,664
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.7%)
ConAgra, Inc. ........................................... 11,400 343,425
CPC International, Inc. ................................. 3,650 361,350
-----------
704,775
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (2.7%)
AlliedSignal, Inc. ...................................... 13,000 468,000
Caterpillar Inc. ........................................ 4,400 225,500
-----------
693,500
- -------------------------------------------------------------------------------
COMPUTERS (2.8%)
HBO & Co. ............................................... 11,450 497,359
*Visio Corp. ............................................ 6,050 224,984
-----------
722,343
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE (4.3%)
*BMC Software, Inc. ..................................... 4,850 292,212
Computer Associates International, Inc. ................. 6,650 495,841
*Microsoft Corp. ........................................ 2,550 331,341
-----------
1,119,394
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL (1.7%)
*HFS, Inc. .............................................. 6,250 440,625
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

30
<PAGE>

SIRACH EQUITY FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER STAPLES (7.4%)
American Stores Co. ..................................... 18,950 $ 486,778
Clorox Co. .............................................. 5,350 374,500
*Fred Meyer, Inc. ....................................... 12,800 365,600
Procter & Gamble Co. .................................... 3,200 217,600
*Safeway, Inc. .......................................... 8,700 505,688
-----------
1,950,166
- -------------------------------------------------------------------------------
ELECTRICAL GOODS (1.8%)
General Electric Co. .................................... 7,350 474,534
- -------------------------------------------------------------------------------
ELECTRONICS (3.0%)
*Adaptec, Inc. .......................................... 9,400 456,194
Hewlett-Packard Co. ..................................... 5,450 336,197
-----------
792,391
- -------------------------------------------------------------------------------
ENERGY (9.8%)
Columbia Gas System, Inc. ............................... 6,850 494,912
Halliburton Co. ......................................... 6,300 375,637
Mobil Corp. ............................................. 5,650 411,391
Schlumberger Ltd. ....................................... 4,650 406,875
Tidewater, Inc. ......................................... 5,050 331,722
Williams Cos., Inc. ..................................... 10,575 538,664
-----------
2,559,201
- -------------------------------------------------------------------------------
ENVIRONMENTAL (4.6%)
*U.S.A. Waste Services, Inc. ............................ 16,552 612,424
*U.S. Filter Corp. ...................................... 14,950 599,869
-----------
1,212,293
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (4.7%)
Equifax, Inc. ........................................... 6,150 191,034
Merrill Lynch & Co., Inc. ............................... 4,350 294,169
SunAmerica, Inc. ........................................ 7,700 276,719
Travelers Group, Inc. ................................... 6,633 464,310
-----------
1,226,232
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

31
<PAGE>

SIRACH EQUITY FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

The accompanying notes are an integral part of the financial statements.

32
<PAGE>

SIRACH EQUITY FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
SHARES VALUE+
<S> <C> <C>

The accompanying notes are an integral part of the financial statements.

33
<PAGE>

SIRACH EQUITY FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
October 31, 1997

<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
<S> <C> <C>

- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.4%)
Chase Securities, Inc. 5.60%, dated 10/31/97, due
11/3/97, to be repurchased at $359,168, collateralized
by $344,199 of various U.S. Treasury Notes, 5.50%-8.75%
due from 5/15/00-6/30/02, valued at $359,203 (COST
$359,000).............................................. $359,000 $ 359,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%) (COST $22,944,635)(A)......... $26,251,221
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) (-0.3%)............... (81,865)
- -------------------------------------------------------------------------------
NET ASSETS (100%)........................................ $26,169,356
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security
(a) The cost for federal income tax purposes was $22,980,694. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$3,270,527. This consisted of aggregate gross unrealized appreciation for
all securities of $3,582,073 and aggregate gross unrealized depreciation
for all securities of $311,546.

The accompanying notes are an integral part of the financial statements.

34
<PAGE>

SIRACH PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
<CAPTION>
SIRACH SIRACH
SPECIAL SIRACH STRATEGIC
EQUITY GROWTH BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments and Repurchase Agreements at
Cost................................... $302,896,660 $137,143,105 $78,516,456
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investments, at Value (excluding Repur-
chase Agreements)...................... $355,023,340 $143,392,481 $82,052,937
Repurchase Agreements, at value......... 12,251,000 15,413,000 4,549,000
Cash.................................... 791,359 -- --
Receivable for Investments Sold......... 2,752,332 4,474,299 1,379,447
Dividends Receivable.................... 48,423 56,637 19,879
Receivable for Portfolio Shares Sold.... 10,170,933 49,749 29,664
Interest Receivable..................... 1,906 2,398 399,337
Other Assets............................ 10,017 3,843 1,957
- -------------------------------------------------------------------------------
Total Assets........................... 381,049,310 163,392,407 88,432,221
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased....... 8,938,969 4,964,441 1,569,997
Payable for Portfolio Shares Redeemed .. 1,357,070 215,307 93,502
Payable for Investment Advisory Fees--
Note B................................. 231,500 89,675 48,433
Payable for Administrative Fees--Note
C...................................... 46,024 18,037 13,214
Payable for Custodian Fees--Note D...... 24,526 8,668 16,927
Payable for Distribution Fees--Note E... 496 5,976 71
Payable for Account Services Fees--Note
F...................................... 2,286 5,954 3,058
Payable for Directors' Fees--Note G..... 1,541 970 814
Payable to Custodian Bank--Note D....... -- 138 82,338
Other Liabilities....................... 39,962 24,903 21,680
- -------------------------------------------------------------------------------
Total Liabilities...................... 10,642,374 5,334,069 1,850,034
- -------------------------------------------------------------------------------
NET ASSETS............................... $370,406,936 $158,058,338 $86,582,187
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital......................... $247,121,990 $104,064,415 $66,055,325
Undistributed Net Investment Income..... -- 155,688 318,361
Accumulated Net Realized Gain........... 58,907,266 32,175,859 12,123,020
Unrealized Appreciation................. 64,377,680 21,662,376 8,085,481
- -------------------------------------------------------------------------------
NET ASSETS............................... $370,406,936 $158,058,338 $86,582,187
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
NET ASSETS............................... $368,430,104 $132,530,136 $86,204,464
Shares Issued and Outstanding ($0.001
par value)+............................ 24,635,929 8,582,505 6,928,658
Net Asset Value, Offering, and Redemp-
tion Price Per Share................... $ 14.95 $ 15.44 $ 12.44
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
NET ASSETS............................... $ 1,976,832 $ 25,528,202 $ 377,723
Shares Issued and Outstanding ($0.001
par value) (Authorized 10,000,000)..... 132,618 1,654,087 30,367
Net Asset Value, Offering, and Redemp-
tion Price Per Share................... $ 14.91 $ 15.43 $ 12.44
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
+ Authorized Institutional Class Shares
</TABLE>

The accompanying notes are an integral part of the financial statements.

35
<PAGE>

SIRACH PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997

<TABLE>
<CAPTION>
SIRACH
FIXED SIRACH
INCOME EQUITY
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments and Repurchase Agreements at Cost......... $46,533,132 $22,944,635
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investments, at Value (excluding Repurchase Agree-
ments)............................................... $42,256,558 $25,892,221
Repurchase Agreements, at value....................... 4,934,000 359,000
Cash.................................................. -- 228
Receivable for Investments Sold....................... 8,556 201,661
Dividends Receivable.................................. -- 12,154
Receivable for Portfolio Shares Sold.................. 4,496 2,704
Interest Receivable................................... 754,183 56
Other Assets.......................................... 1,077 532
- -------------------------------------------------------------------------------
Total Assets......................................... 47,958,870 26,468,556
- -------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased..................... -- 253,781
Payable for Portfolio Shares Redeemed................. 17,729 1,256
Payable for Investment Advisory Fees--Note B.......... 3,390 11,878
Payable for Administrative Fees--Note C............... 8,580 6,166
Payable for Custodian Fees--Note D.................... 5,545 3,709
Payable for Directors' Fees--Note G................... 700 647
Payable to Custodian Bank--Note D..................... 745 --
Other Liabilities..................................... 24,928 21,763
- -------------------------------------------------------------------------------
Total Liabilities.................................... 61,617 299,200
- -------------------------------------------------------------------------------
NET ASSETS............................................. $47,897,253 $26,169,356
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital....................................... $46,571,304 $22,050,143
Undistributed Net Investment Income................... 308,127 10,946
Accumulated Net Realized Gain......................... 360,396 801,681
Unrealized Appreciation............................... 657,426 3,306,586
- -------------------------------------------------------------------------------
NET ASSETS............................................. $47,897,253 $26,169,356
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
NET ASSETS............................................. $47,897,253 $26,169,356
Shares Issued and Outstanding ($0.001 par value)+..... 4,777,816 1,871,255
Net Asset Value, Offering, and Redemption Price Per
Share................................................ $ 10.02 $ 13.98
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
NET ASSETS............................................. -- --
Shares Issued and Outstanding ($0.001 par value) (Au-
thorized 10,000,000)................................. -- --
Net Asset Value, Offering, and Redemption Price Per
Share................................................ -- --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
+ Authorized Institutional Class Shares
</TABLE>

The accompanying notes are an integral part of the financial statements.

36
<PAGE>

SIRACH PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended Ended October 31, 1997

<TABLE>
<CAPTION>
SIRACH SIRACH
SPECIAL SIRACH STRATEGIC
EQUITY GROWTH BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................ $ 427,379 $ 1,314,979 $ 435,032
Interest................. 994,179 1,295,727 2,964,844
- ------------------------------------------------------------------------------------------------
Total Income............ 1,421,558 2,610,706 3,399,876
- ------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory
Fees--Note B
Basic Fees.............. $2,768,336 $981,338 $550,068
Less: Fees Waived....... -- 2,768,336 -- 981,338 -- 550,068
---------- -------- --------
Administrative Fees--Note
C....................... 544,232 210,088 155,542
Custodian Fees--Note D... 42,649 18,919 14,786
Distribution Fees--Note
E....................... 4,984 56,537 605
Account Services Fee--
Note F.................. 18,000 45,314 17,597
Directors' Fees--Note G.. 7,074 3,977 3,275
Audit Fees............... 26,159 15,846 14,827
Legal Fees............... 24,678 10,537 5,980
Printing Fees............ 15,252 16,616 15,919
Registration and Filing
Fees.................... 38,410 24,848 20,155
Other Expenses........... 64,695 20,313 18,193
- ------------------------------------------------------------------------------------------------
Total Expenses.......... 3,554,469 1,404,333 816,947
- ------------------------------------------------------------------------------------------------
Expense Offset--Note A... (6,104) (658) (1,354)
- ------------------------------------------------------------------------------------------------
Net Expenses............ 3,548,365 1,403,675 815,593
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
(LOSS)................... (2,126,807) 1,207,031 2,584,283
- ------------------------------------------------------------------------------------------------
NET REALIZED GAIN ON IN-
VESTMENTS................ 59,936,569 32,422,800 12,346,754
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON INVESTMENTS........... (22,635,983) 6,913,248 1,157,105
- ------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS.............. 37,300,586 39,336,048 13,503,859
- ------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............... $ 35,173,779 $40,543,079 $16,088,142
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

37
<PAGE>

SIRACH PORTFOLIOS
STATEMENTS OF OPERATIONS--(CONTINUED)
Year Ended October 31, 1997

<TABLE>
<CAPTION>
SIRACH
FIXED SIRACH
INCOME EQUITY
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends......................... $ -- $ 131,351
Interest.......................... 2,251,403 54,556
- ---------------------------------------------------------------------------------
Total Income..................... 2,251,403 185,907
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees....................... $ 212,895 $101,048
Less: Fees Waived................ (145,703) 67,192 (82,349) 18,699
--------- --------
Administrative Fees--Note C....... 97,629 54,017
Custodian Fees--Note D............ 6,259 10,175
Distribution Fees--Note E......... -- --
Account Services Fee--Note F...... 4,043 1,874
Directors' Fees--Note G........... 2,440 1,984
Audit Fees........................ 13,205 7,500
Legal Fees........................ 1,875 782
Printing Fees..................... 13,752 --
Registration and Filing Fees...... 21,167 23,279
Other Expenses.................... 21,963 21,909
- ---------------------------------------------------------------------------------
Total Expenses................... 249,525 140,219
- ---------------------------------------------------------------------------------
Expense Offset--Note A............ (4,200) (335)
- ---------------------------------------------------------------------------------
Net Expenses..................... 245,325 139,884
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS)....... 2,006,078 46,023
- ---------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS... 814,795 802,110
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON
INVESTMENTS....................... 468,543 3,216,213
- ---------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS..... 1,283,338 4,018,323
- ---------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS.. $3,289,416 $4,064,346
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

38
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment (Loss)............................. $ (2,126,807) $ (1,418,991)
Net Realized Gain................................. 59,936,569 103,695,546
Net Change in Unrealized
Appreciation/Depreciation........................ (22,635,983) 3,942,509
- ---------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Opera-
tions........................................... 35,173,779 106,219,064
- ---------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class.............................. -- (736,639)
Net Realized Gain:
Institutional Class.............................. (94,454,824) (104,062,768)
Institutional Service Class...................... (230,305) --
- ---------------------------------------------------------------------------------
Total Distributions............................. (94,685,129) (104,799,407)
- ---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE K):
Institutional Class:
Issued........................................... 518,941,786 49,166,742
--In Lieu of Cash Distributions............ 92,086,326 102,741,800
Redeemed......................................... (624,309,111) (210,082,635)
- ---------------------------------------------------------------------------------
Net Decrease from Institutional Class Shares.... (13,280,999) (58,174,093)
- ---------------------------------------------------------------------------------
Institutional Service Class*:
Issued........................................... 2,413,514 1,760,960
--In Lieu of Cash Distributions............ 230,305 --
Redeemed......................................... (1,777,851) (699,549)
- ---------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares......................................... 865,968 1,061,411
- ---------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions................................... (12,415,031) (57,112,682)
- ---------------------------------------------------------------------------------
Total Decrease.................................... (71,926,381) (55,693,025)
Net Assets:
Beginning of Year................................. 442,333,317 498,026,342
- ---------------------------------------------------------------------------------
End of Year (including undistributed net invest-
ment income of $0 and $0, respectively).......... $ 370,406,936 $ 442,333,317
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on March 22,
1996.

The accompanying notes are an integral part of the financial statements.

39
<PAGE>

SIRACH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................. $ 1,207,031 $ 1,180,493
Net Realized Gain................................. 32,422,800 22,211,165
Net Change in Unrealized Appreciation............. 6,913,248 2,947,210
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Opera-
tions........................................... 40,543,079 26,338,868
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class.............................. (1,170,706) (1,064,254)
Institutional Service Class...................... (131,548) (3,552)
Realized Net Gain:
Institutional Class.............................. (18,774,806) --
Institutional Service Class...................... (2,206,978) --
- --------------------------------------------------------------------------------
Total Distributions............................. (22,284,038) (1,067,806)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE K):
Institutional Class:
Issued........................................... 27,280,256 32,367,362
--In Lieu of Cash Distributions................ 19,113,553 985,751
Redeemed......................................... (57,746,105) (44,372,083)
- --------------------------------------------------------------------------------
Net Decrease from Institutional Class Shares.... (11,352,296) (11,018,970)
- --------------------------------------------------------------------------------
Institutional Service Class*:
Issued........................................... 13,498,163 14,445,297
--In Lieu of Cash Distributions................ 2,338,526 3,552
Redeemed......................................... (8,103,907) (68,952)
- --------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares......................................... 7,732,782 14,379,897
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share
Transactions................................... (3,619,514) 3,360,927
- --------------------------------------------------------------------------------
Total Increase.................................... 14,639,527 28,631,989
Net Assets:
Beginning of Year................................. 143,418,811 114,786,822
- --------------------------------------------------------------------------------
End of Year (including undistributed net
investment income of $155,688 and $250,911,
respectively).................................... $158,058,338 $143,418,811
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
*Initial offering of Institutional Service Class Shares began on March 22,
1996.

The accompanying notes are an integral part of the financial statements.

40
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 2,584,283 $ 2,710,370
Net Realized Gain................................... 12,346,754 11,567,491
Net Change in Unrealized Appreciation/Depreciation.. 1,157,105 (1,526,919)
- ---------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Opera-
tions............................................. 16,088,142 12,750,942
- ---------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class................................ (2,609,834) (2,789,994)
Institutional Service Class*....................... (7,305) --
Net Realized Gain:
Institutional Class................................ (9,238,271) --
- ---------------------------------------------------------------------------------
Total Distributions............................... (11,855,410) (2,789,994)
- ---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE K):
Institutional Class:
Issued............................................. 16,651,416 12,209,599
--In Lieu of Cash Distributions.............. 11,748,811 2,784,689
Redeemed........................................... (29,827,011) (37,359,268)
- ---------------------------------------------------------------------------------
Net Decrease from Institutional Class Shares...... (1,426,784) (22,364,980)
- ---------------------------------------------------------------------------------
Institutional Service Class*:
Issued............................................. 686,936 --
--In Lieu of Cash Distributions.............. 7,305 --
Redeemed........................................... (348,012) --
- ---------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares........................................... 346,229 --
- ---------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions...... (1,080,555) (22,364,980)
- ---------------------------------------------------------------------------------
Total Increase (Decrease).......................... 3,152,177 (12,404,032)
Net Assets:
Beginning of Year................................... 83,430,010 95,834,042
- ---------------------------------------------------------------------------------
End of Year (including undistributed net investment
income of $318,361 and $336,195 respectively)...... $ 86,582,187 $ 83,430,010
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
*Initial offering of Institutional Service Class Shares began on March 7,
1997.

The accompanying notes are an integral part of the financial statements.

41
<PAGE>

SIRACH FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

The accompanying notes are an integral part of the financial statements.

42
<PAGE>

SIRACH EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED JULY 1, 1996**
OCTOBER 31, TO OCTOBER 31,
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 46,023 $ 2,924
Net Realized Gain (Loss)........................... 802,110 25,685
Net Change in Unrealized
Appreciation/Depreciation......................... 3,216,213 90,373
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 4,064,346 118,982
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (24,915) (1,215)
Net Realized Gain.................................. (37,985) --
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS............................... (62,900) (1,215)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE K):
Issued............................................. 20,525,559 6,424,415
--In Lieu of Cash Distributions.................... 62,900 1,215
Redeemed........................................... (4,830,582) (133,364)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 15,757,877 6,292,266
- --------------------------------------------------------------------------------
Total Increase..................................... 19,759,323 6,410,033
Net Assets:
Beginning of Period................................ 6,410,033 --
- --------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of $10,946 and $1,709,
respectively)..................................... $26,169,356 $6,410,033
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations

The accompanying notes are an integral part of the financial statements.

43
<PAGE>

SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL CLASS SERVICE CLASS
--------------------------------------------------- ---------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
MARCH 22,
1996+ TO
OCTOBER 31,
1997 1996 1995 1994 1993 1997 1996
- ------------------------------------------------------------------------------------------------------
------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 17.98 $ 18.80 $ 16.10 $ 19.10 $ 15.03 $ 17.97 $ 16.54
- ------------------------------------------------------------------------------------------------------
------------------------
INCOME FROM INVESTMENT
OPERATIONS.............
Net Investment Income
(Loss)................ (0.09) (0.06) 0.11 0.04 (0.01) (0.11) (0.01)
Net Realized and
Unrealized Gain
(Loss)................ 0.98 3.51 3.65 (0.90) 4.68 0.97 1.44
- ------------------------------------------------------------------------------------------------------
------------------------
Total from Investment
Operations............ 0.89 3.45 3.76 (0.86) 4.67 0.86 1.43
- ------------------------------------------------------------------------------------------------------
------------------------
DISTRIBUTIONS
Net Investment Income.. -- (0.03) (0.11) (0.02) (0.01) -- --
Net Realized Gain...... (3.92) (4.24) (0.95) (2.12) (0.59) (3.92) --
- ------------------------------------------------------------------------------------------------------
------------------------
Total Distributions.... (3.92) (4.27) (1.06) (2.14) (0.60) (3.92) --
- ------------------------------------------------------------------------------------------------------
------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 14.95 $ 17.98 $ 18.80 $ 16.10 $ 19.10 $ 14.91 $ 17.97
- ------------------------------------------------------------------------------------------------------
------------------------
- ------------------------------------------------------------------------------------------------------
------------------------
TOTAL RETURN............ 8.11% 23.62% 25.31% (4.68)% 31.81% 7.91% 8.65%**
- ------------------------------------------------------------------------------------------------------
------------------------
- ------------------------------------------------------------------------------------------------------
------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Pe-
riod (Thousands)...... $368,430 $441,326 $498,026 $513,468 $528,078 $ 1,977 $ 1,007
Ratio of Expenses to
Average Net Assets.... 0.89% 0.87% 0.85% 0.88% 0.89% 1.14% 1.12%*
Ratio of Net Investment
Income (Loss) to
Average Net Assets.... (0.53)% (0.29)% 0.64% 0.27% (0.03)% (0.78)% (0.64)%*
Portfolio Turnover
Rate.................. 114% 129% 137% 107% 102% 114% 129%
Average Commission
Rate#................. $ 0.0571 $ 0.0590 N/A N/A N/A $0.0571 $0.0590
- ------------------------------------------------------------------------------------------------------
------------------------
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... 0.89% 0.87% 0.85% N/A N/A 1.14% 1.12%*
- ------------------------------------------------------------------------------------------------------
------------------------
</TABLE>
* Annualized
** Not Annualized
+ Initial offering of Institutional Service Class Shares
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged, during the period.

The accompanying notes are an integral part of the financial statements.

44
<PAGE>

SIRACH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INSTITUTIONAL CLASS INSTITUTIONAL SERVICE CLASS
----------------------------------------- ------------------------------
YEARS ENDED DECEMBER 1, YEAR MARCH 22,
OCTOBER 31, 1993+ TO ENDED 1996++ TO
---------------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994 1997 1996
- -----------------------------------------------------------------------------------------------------
----------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 14.01 $ 11.35 $ 9.66 $ 10.00 $ 14.00 $ 12.80
- -----------------------------------------------------------------------------------------------------
----------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.12 0.12 0.15 0.10 0.07 0.07
Net Realized and
Unrealized Gain
(Loss)................. 3.55 2.65 1.70 (0.36) 3.56 1.19
- -----------------------------------------------------------------------------------------------------
----------------------------
Total from Investment
Operations............. 3.67 2.77 1.85 (0.26) 3.63 1.26
- -----------------------------------------------------------------------------------------------------
----------------------------
DISTRIBUTIONS
Net Investment Income... (0.13) (0.11) (0.16) (0.08) (0.09) (0.06)
Realized Net Gain....... (2.11) -- -- -- (2.11) --
- -----------------------------------------------------------------------------------------------------
----------------------------
Total Distributions..... (2.24) (0.11) (0.16) (0.08) (2.20) (0.06)
- -----------------------------------------------------------------------------------------------------
----------------------------
NET ASSET VALUE, END OF
PERIOD.................. $ 15.44 $ 14.01 $ 11.35 $ 9.66 $ 15.43 $ 14.00
- -----------------------------------------------------------------------------------------------------
----------------------------
- -----------------------------------------------------------------------------------------------------
----------------------------
TOTAL RETURN............. 30.86% 24.52% 19.33% (2.58)%** 30.53% 9.87%**
- -----------------------------------------------------------------------------------------------------
----------------------------
- -----------------------------------------------------------------------------------------------------
----------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Pe-
riod (Thousands)....... $132,530 $128,982 $114,787 $80,944 $ 25,528 $ 14,437
Ratio of Expenses to Av-
erage Net Assets....... 0.90% 0.87% 0.86% 0.92%* 1.15% 1.12%*
Ratio of Net Investment
Income to Average Net
Assets................. 0.84% 0.97% 1.48% 1.13%* 0.57% 0.72%*
Portfolio Turnover
Rate................... 138% 151% 119% 141% 138% 151%
Average Commission
Rate#.................. $ 0.0600 $ 0.0600 N/A N/A $ 0.0600 $ 0.0600
- -----------------------------------------------------------------------------------------------------
----------------------------
Ratio of Expenses to Av-
erage Net Assets In-
cluding Expense Off-
sets................... 0.90% 0.86% 0.84% N/A 1.15% 1.11%*
- -----------------------------------------------------------------------------------------------------
----------------------------
</TABLE>
* Annualized
** Not Annualized
+ Commencement of Operations
++ Initial offering of Institutional Service Class Shares
# Beginning with the fiscal year 1996, a portfolio is required to disclose
the average commission rate per share it paid for portfolio trades on which
commissions were charged during the period.

The accompanying notes are an integral part of the financial statements.

45
<PAGE>

SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL CLASS SERVICE CLASS
-------------------------------------- -------------
YEAR ENDED DECEMBER 1, MARCH 7,
OCTOBER 31 1993+ TO 1997++ TO
------------------------- OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994 1997
- --------------------------------------------------------------------------------
-----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 11.99 $ 10.75 $ 9.35 $ 10.00 $ 11.26
- --------------------------------------------------------------------------------
-----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.37 0.36 0.36 0.27 0.19
Net Realized and
Unrealized Gain
(Loss)................ 1.81 1.24 1.39 (0.69) 1.21
- --------------------------------------------------------------------------------
-----------
Total From Investment
Operations............ 2.18 1.60 1.75 (0.42) 1.40
- --------------------------------------------------------------------------------
-----------
DISTRIBUTIONS
Net Investment Income.. (0.37) (0.36) (0.35) (0.23) (0.22)
Net Realized Gain...... (1.36) -- -- -- --
- --------------------------------------------------------------------------------
-----------
Total Distributions.... (1.73) (0.36) (0.35) (0.23) (0.22)
- --------------------------------------------------------------------------------
-----------
NET ASSET VALUE, END OF
PERIOD................. $ 12.44 $ 11.99 $ 10.75 $ 9.35 $ 12.44
- --------------------------------------------------------------------------------
-----------
- --------------------------------------------------------------------------------
-----------
TOTAL RETURN............ 20.78% 15.13% 19.10% (4.19)%** 12.57%**
- --------------------------------------------------------------------------------
-----------
- --------------------------------------------------------------------------------
-----------
RATIOS AND SUPPLEMENTAL
DATA...................
Net Assets, End of Pe-
riod (Thousands)...... $86,204 $83,430 $95,834 $99,564 $ 378
Ratio of Expenses to
Average Net Assets.... 0.97% 0.93% 0.87% 0.90%* 1.22%*
Ratio of Net Investment
Income to Average Net
Assets................ 3.06% 3.04% 3.49% 3.05%* 2.71%*
Portfolio Turnover
Rate.................. 128% 172% 158% 158% 128%
Average Commission
Rate#................. $0.0598 $0.0600 N/A N/A $0.0598
- --------------------------------------------------------------------------------
-----------
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets............... 0.97% 0.92% 0.86% N/A 1.22%*
- --------------------------------------------------------------------------------
-----------
- --------------------------------------------------------------------------------
-----------
</TABLE>
* Annualized
** Not Annualized
+ Commencement of Operations
++ Initial Offering of Institutional Service Class Shares
# Beginning with fiscal year 1996, a portfolio is required to disclose the
average commission rate per share it paid for portfolio trades on which
commissions were charged, during the period.

The accompanying notes are an integral part of the financial statements.

46
<PAGE>

The accompanying notes are an integral part of the financial statements.
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
DECEMBER 1,
YEAR ENDED OCTOBER 31, 1993+ TO
------------------------- OCTOBER 31,
1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $ 9.74 $ 9.88 $ 9.16 $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.51 0.55 0.58 0.48
Net Realized and Unrealized Gain
(Loss).............................. 0.29 (0.15) 0.73 (0.91)
- --------------------------------------------------------------------------------
Total From Investment Operations..... 0.80 0.40 1.31 (0.43)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ (0.52) (0.54) (0.59) (0.41)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........ $ 10.02 $ 9.74 $ 9.88 $ 9.16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN++........................ 8.46% 4.21% 14.75% (4.33)%**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands).............................. $47,897 $18,803 $15,439 $12,178
Ratio of Expenses to Average Net
Assets.............................. 0.76% 0.76% 0.76% 0.75%*
Ratio of Net Investment Income to Av-
erage Net Assets.................... 6.13% 5.84% 6.13% 5.37%*
Portfolio Turnover Rate.............. 197% 260% 165% 230%
- --------------------------------------------------------------------------------
Voluntarily Waived Fees and Expenses
Assumed by the
Adviser Per Share................... $ 0.04 $ 0.07 $ 0.06 $ 0.08
Ratio of Expenses to Average Net
Assets Including Expense Offsets.... 0.75% 0.75% 0.75% N/A
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
+ Commencement of Operations
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated during the
periods.

47
<PAGE>

SIRACH EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
YEAR ENDED JULY 1, 1996+
OCTOBER 31, TO OCTOBER 31,
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 10.97 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............................. 0.03 0.01
Net Realized and Unrealized Gain................... 3.06 0.97
- -------------------------------------------------------------------------------
Total From Investment Operations.................. 3.09 0.98
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.............................. (0.02) (0.01)
Net Realized Gain.................................. (0.06) --
- -------------------------------------------------------------------------------
Total Distributions............................... (0.08) (0.01)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...................... $ 13.98 $ 10.97
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN++...................................... 28.34% 9.80%**
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).............. $26,169 $ 6,410
Ratio of Expenses to Average Net Assets............ 0.90% 1.03%*
Ratio of Net Investment Income to Average Net As-
sets.............................................. 0.30% 0.39%*
Portfolio Turnover Rate............................ 89% 34%
Average Commission Rate............................ $0.0599 $0.0600
- -------------------------------------------------------------------------------
Voluntarily Waived Fees and Expenses Assumed by the
Adviser Per Share................................. $ 0.05 $ 0.14
Ratio of Expenses to Average Net Assets Including
Expense Offsets................................... 0.90% 0.90%*
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
+ Commencement of Operations
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.

The accompanying notes are an integral part of the financial statements.

48
<PAGE>

SIRACH PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS

UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The Sirach
Special Equity Portfolio, Sirach Growth Portfolio, Sirach Strategic Balanced
Portfolio, Sirach Fixed Income Portfolio, and Sirach Equity Portfolio (the
"Portfolios"), portfolios of UAM Funds, Inc., are diversified, open-end
management investment companies. At October 31, 1997, the UAM Funds were
comprised of forty-two active portfolios. The financial statements of the
remaining portfolios are presented separately. The Portfolios are authorized
to offer two separate classes of shares--Institutional Class Shares and
Institutional Service Class Shares. As of October 31, 1997, the Sirach Special
Equity Portfolio, Sirach Growth Portfolio, and the Sirach Strategic Balanced
Portfolio have issued Institutional Service Class Shares. Both classes of
shares have identical voting rights (except Institutional Service Class
shareholders have exclusive voting rights with respect to matters relating to
distribution and shareholder servicing of such shares), dividend, liquidation
and other rights. The objective of the Portfolios are as follows:

SIRACH SPECIAL EQUITY PORTFOLIO seeks to provide maximum long-term growth
of capital consistent with reasonable risk to principal, by investing in
small to medium capitalized companies with particularly attractive
financial characteristics.

SIRACH GROWTH PORTFOLIO seeks to provide long-term capital growth
consistent with reasonable risk to principal by investing in a diversified
portfolio of common stocks.

SIRACH STRATEGIC BALANCED PORTFOLIO seeks to provide long-term growth of
capital consistent with reasonable risk to principal by investing in a
diversified portfolio of common stocks and fixed income securities.

SIRACH FIXED INCOME PORTFOLIO seeks to provide above-average total return
with reasonable risk to principal by investing primarily in investment
grade fixed income securities.

SIRACH EQUITY PORTFOLIO seeks to provide long-term capital growth
consistent with reasonable risk to principal by investing, under normal
circumstances, up to 90% of its total assets in common stocks of companies
that offer long-term growth potential.

A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by each of the Portfolios in the
preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results may differ from those estimates.

1. SECURITY VALUATION: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the mean of the bid and
asked prices. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and
unlisted equity securities are valued at the mean between bid and ask.
Fixed income securities are stated on the basis of valuations provided by
brokers and/or a pricing service which uses information with respect to
transactions in fixed income securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments that have remaining
maturities of sixty days or less at time of purchase are valued at
amortized cost, if it approximates market value. The value of other assets
and securities for which no quotations are

49
<PAGE>

SIRACH PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
readily available is determined in good faith at fair value using methods
determined by the Board of Directors.

2. FEDERAL INCOME TAXES: It is each Portfolios' intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no provision
for Federal income taxes is required in the financial statements.

3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, the Portfolios' custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.

Permanent book and tax basis difference relating to shareholder
distributions resulted in reclassification as follows:

<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID IN
SIRACH PORTFOLIO INCOME GAIN/(LOSS) CAPITAL
---------------- -------------- ------------ ---------
<S> <C> <C> <C>
Sirach Special Equity................ $2,126,807 $(1,418,992) $(707,815)
Sirach Strategic Balanced............ 15,022 (15,022) --
Sirach Fixed Income.................. (6,299) 6,299 --
Sirach Equity........................ (11,871) 11,871 --
</TABLE>

Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.

50
<PAGE>

SIRACH PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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. Income, expenses (other than class specific expenses) and
realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Custodian fees for the
Portfolios have been increased to include expense offsets for custodian
balance credits, if any.

B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Sirach Capital Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at monthly fees calculated at an annual rate of
average daily net assets for the month as follows:

<TABLE>
<CAPTION>
SIRACH PORTFOLIOS RATE
- ----------------- -----
<S> <C>
Special Equity............................................................ 0.70%
Growth.................................................................... 0.65%
Strategic Balanced........................................................ 0.65%
Fixed Income.............................................................. 0.65%
Equity.................................................................... 0.65%
</TABLE>

The Adviser has voluntarily agreed to waive a portion of its advisory fees and
to assume expenses, if necessary, in order to keep the Sirach Fixed Income,
and the Sirach Equity Portfolio's total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 0.75%, and 0.90% of
average daily net assets, respectively.

C. ADMINISTRATION SERVICES: UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing and transfer agent services to the UAM Funds
under a Fund Administration Agreement (the "Agreement"). Pursuant to the
Agreement, the Administrator is entitled to receive annual fees, 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 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 annual fee payable monthly of
0.04%, 0.04%, 0.06%, 0.04%, and 0.04% of average daily net assets for the
Sirach Special Equity Portfolio, Sirach Growth Portfolio, Sirach Strategic
Balanced Portfolio, Sirach Fixed Income Portfolio, and Sirach Equity
Portfolio. The Administrator has entered into a Mutual Funds Service Agreement
with Chase Global Funds Services Company ("CGFSC"), an affiliate of The Chase
Manhattan Bank, under which CGFSC agrees to provide certain services,
including but not limited to, administration, fund accounting, dividend
disbursing and transfer agent services. Pursuant to the Mutual Funds Service
Agreement, the Administrator pays CGFSC a monthly fee. For the year ended
October 31, 1997, UAM

51
<PAGE>

SIRACH PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Fund Services, Inc. earned the following amounts from the Portfolios as
Administrator and paid the following portion to CGFSC.

<TABLE>
<CAPTION>
PORTION
ADMINISTRATION PAID TO
SIRACH PORTFOLIOS FEES CGFSC
- ----------------- -------------- --------
<S> <C> <C>
Special Equity.......................................... $544,232 $386,035
Growth.................................................. 210,088 149,705
Strategic Balanced...................................... 155,542 104,773
Fixed Income............................................ 97,629 84,535
Equity.................................................. 54,017 47,783
</TABLE>

D. CUSTODIAN: The Chase Manhattan Bank ("the Bank"), an affiliate of CGFSC, is
custodian for the Portfolios' assets held in accordance with the custodian
agreement. As part of the Custodian agreement, the Custodian bank has a lien
on the securities of the Portfolio to cover any advances made by the Custodian
to the Portfolio. At October 31, 1997 the payable to the Custodian bank
represents the amount due for cash advanced for the settlement of securities
purchased.

E. DISTRIBUTION AND SERVICE PLANS: UAM Fund Distributors, Inc. ("The
Distributor"), a wholly-owned subsidiary of UAM, distributes the shares of the
Portfolios. The Sirach Special Equity Portfolio, the Sirach Growth Portfolio
and the Sirach Strategic Balanced Portfolio have adopted Distribution and
Service Plans (the "Plans") on behalf of the Institutional Service Class
Shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the Plans, the Portfolios may not incur distribution and service fees which
exceed an annual rate of 0.75% of their Portfolio's net assets, however, the
Board has currently limited aggregate payments under the Plans to 0.50% per
annum of the Sirach Special Equity Portfolio, the Sirach Growth Portfolio, and
the Sirach Strategic Balanced Portfolio's net assets. The Sirach Special
Portfolio, the Sirach Growth Portfolio and the Sirach Strategic Balanced
Portfolio's Institutional Service Class Shares are not currently making
payments for distribution fees.

In addition, the Sirach Special Equity Portfolio, the Sirach Growth Portfolio,
and the Sirach Strategic Balanced Portfolios' Institutional Service Class
Shares pay service fees at an annual rate of 0.25% of the average daily value
of Institutional Service Class Shares owned by clients of the Service Agents.

F. ACCOUNT SERVICES: Effective February 28, 1997, the UAM Funds entered into
an Account Services Agreement (the "Services Agreement") with UAM Retirement
Plan Services, Inc. (the "Service Provider"), a wholly-owned subsidiary of
UAM. Under the Services Agreement, the Service Provider agrees to perform
certain services for participants in a self-directed, defined contribution
plan, and for whom the Service Provider provides participant recordkeeping.
Pursuant to the Services Agreement, the Service Provider is entitled to
receive, after the end of each month, a fee at the annual rate of 0.15% of the
average aggregate daily net asset value of shares of the UAM Funds in the
accounts for which they provide services.

G. DIRECTORS' FEES: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds and reimbursement of expenses incurred in
attending Board meetings.

52
<PAGE>

SIRACH PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
H. PURCHASES AND SALES: For the year ended October 31, 1997, the Portfolio
made purchases and sales of investment securities other than long-term U.S.
Government and short-term securities of:

<TABLE>
<CAPTION>
SIRACH PORTFOLIOS PURCHASES SALES
- ----------------- ------------ ------------
<S> <C> <C>
Special Equity........................................ $428,108,939 $545,466,621
Growth................................................ 175,961,307 193,788,579
Strategic Balanced.................................... 84,599,158 86,922,990
Fixed Income.......................................... 39,674,026 31,879,256
Equity................................................ 28,639,285 13,024,992
</TABLE>

Purchases and sales of long-term U.S. Government securities were $19,073,044
and $21,954,587 respectively, for Sirach Strategic Balanced Portfolio,
$43,165,139 and $25,014,807, respectively, for Sirach Fixed Income Portfolio.
There were no purchases or sales of long-term U.S. Government securities for
Sirach Special Equity Portfolio, Sirach Growth Portfolio and Sirach Equity
Portfolio.

J. OTHER: At October 31, 1997 the percentage of total shares outstanding held
by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:

<TABLE>
<CAPTION>
NO. OF %
SIRACH PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ----------------- ------------ ---------
<S> <C> <C>
Special Equity-Institutional Service Class............... 2 98.6%
Growth-Institutional Class............................... 1 12.9
Growth-Institutional Service Class....................... 4 72.6
Strategic Balanced-Institutional Service Class........... 2 100.0
Fixed Income............................................. 2 53.2
Equity................................................... 5 82.8
</TABLE>

53
<PAGE>

SIRACH PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

K. CAPITAL SHARE TRANSACTIONS: Transactions in capital shares for the
Portfolios, by class, were as follows:

<TABLE>
<CAPTION>
INSTITUTIONAL CLASS INSTITUTIONAL SERVICE
SHARES CLASS SHARES
------------------------ -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SIRACH SPECIAL EQUITY PORTFOLIO:
Shares Issued................... 38,540,490 2,744,916 180,282 93,038
In Lieu of Cash Distributions... 7,051,021 7,041,933 17,661 --
Shares Redeemed................. (45,506,302) (11,728,227) (121,360) (37,003)
----------- ----------- --------- ---------
Net Increase (Decrease) from
Capital Share Transactions..... 85,209 (1,941,378) 76,583 56,035
=========== =========== ========= =========
SIRACH GROWTH PORTFOLIO:
Shares Issued................... 2,011,431 2,516,616 1,003,962 1,035,866
In Lieu of Cash Distributions... 1,589,675 78,516 194,309 269
Shares Redeemed................. (4,223,292) (3,499,650) (575,122) (5,197)
----------- ----------- --------- ---------
Net Increase (Decrease) from
Capital Share Transactions..... (622,186) (904,518) 623,149 1,030,938
=========== =========== ========= =========
SIRACH STRATEGIC BALANCED PORT-
FOLIO:
Shares Issued................... 1,431,717 1,081,826 60,218 --
In Lieu of Cash Distributions... 1,093,136 246,974 634 --
Shares Redeemed................. (2,556,375) (3,281,799) (30,485) --
----------- ----------- --------- ---------
Net Increase (Decrease) from
Capital Share Transactions..... (31,522) (1,952,999) 30,367 --
=========== =========== ========= =========
SIRACH FIXED INCOME PORTFOLIO:
Shares Issued................... 3,555,587 1,045,131 -- --
In Lieu of Cash Distributions... 186,431 92,899 -- --
Shares Redeemed................. (895,194) (768,942) -- --
----------- ----------- --------- ---------
Net Increase from Capital Share
Transactions................... 2,846,824 369,088 -- --
=========== =========== ========= =========
SIRACH EQUITY PORTFOLIO:
Shares Issued................... 1,654,446 596,664 -- --
In Lieu of Cash Distributions... 5,312 111 -- --
Shares Redeemed................. (372,849) (12,429) -- --
----------- ----------- --------- ---------
Net Increase from Capital Share
Transactions................... 1,286,909 584,346 -- --
=========== =========== ========= =========
- -----------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations

L. SUBSEQUENT EVENT: At a special shareholder meeting held on December 3, 1997,
the shareholders of the Sirach Fixed Income Portfolio approved a plan of
Liquidation and Dissolution for the Portfolio. The Portfolio distributed its
net assets and ceased operations by December 9, 1997.

54
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Sirach Special Equity Portfolio
Sirach Growth Portfolio
Sirach Strategic Balanced Portfolio
Sirach Fixed Income Portfolio
Sirach Equity Portfolio

In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Sirach Special
Equity Portfolio, Sirach Growth Portfolio, Sirach Strategic Balanced
Portfolio, Sirach Fixed Income Portfolio, and Sirach Equity Portfolio (the
"Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 1997, and the
results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.

As discussed in Note L, in accordance with the plan of Liquidation and
Dissolution, the Sirach Fixed Income Portfolio terminated its operations and
made distributions of its net assets by December 9, 1997.

Price Waterhouse LLP

Boston, Massachusetts
December 11, 1997

- -------------------------------------------------------------------------------

FEDERAL TAX INFORMATION (UNAUDITED):

Sirach Special Equity, Sirach Growth and Sirach Strategic Balanced Portfolios
each hereby designate $65,651,431, $13,037,900 and $7,878,702 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return. For the period ended October 31, 1997, the
percentage of dividends paid that qualify for the 70% dividend received
deduction for corporate shareholders is 1.9% for Sirach Special Equity
Portfolio, 12.3% for Sirach Growth Portfolio, 7.7% for Sirach Strategic
Balanced Portfolio and 48.5% for Sirach Equity Portfolio.

REPORT ON SPECIAL MEETING (UNAUDITED):

At a special meeting of the shareholders of Sirach Fixed Income Portfolio,
held on December 3, 1997, the shareholders approved a plan of Liquidation and
Dissolution for the Portfolio. The votes on the matter are as follows:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--------- ------- ------- ----------------
<S> <C> <C> <C>
3,258,158 -0- -0- -0-
</TABLE>

55
<PAGE>

PART B

UAM FUNDS, INC.

- --------------------------------------------------------------------------------

STERLING PARTNERS' PORTFOLIOS

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION -- January 22, 1998

This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Funds" or the "Fund") for the
Sterling Partners' Portfolios' Institutional Class Shares dated January 22, 1998
and the Prospectus for the Sterling Partners' Portfolios' Institutional Service
Class Shares (the "Service Class Shares") dated January 22, 1998. To obtain a
Prospectus, please call the UAM Funds Service Center: 1-800-638-7983.

TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES....................................... 1

PURCHASE AND REDEMPTION OF SHARES........................................ 9

VALUATION OF SHARES...................................................... 11

SHAREHOLDER SERVICES..................................................... 11

INVESTMENT LIMITATIONS................................................... 13

MANAGEMENT OF THE FUND................................................... 14

INVESTMENT ADVISER....................................................... 18

SERVICE AND DISTRIBUTION PLANS........................................... 21

PORTFOLIO TRANSACTIONS................................................... 24

ADMINISTRATIVE SERVICES.................................................. 25

CUSTODIAN................................................................ 28

INDEPENDENT ACCOUNTANTS.................................................. 28

DISTRIBUTOR.............................................................. 28

PERFORMANCE CALCULATIONS................................................. 28

GENERAL INFORMATION...................................................... 30

FINANCIAL STATEMENTS..................................................... 32

APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS...................... A-1

APPENDIX B - COMPARISONS................................................. B-1
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and
policies of the Sterling Partners' Equity, Sterling Partners' Balanced and
Sterling Partners' Small Cap Value Portfolios (the "Sterling Partners'
Portfolios") as set forth in the Sterling Partners' Prospectuses.

SHORT-TERM INVESTMENTS

In order to earn a return on uninvested assets, meet anticipated
redemptions, or for temporary defensive purposes, the Portfolios may invest a
portion of their assets in the short-term investments described below:

Certificates of deposit are negotiable short-term obligations issued
by commercial banks or savings and loan associations collateralized by funds
deposited 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 import,
export, transfer or storage of goods).

(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, determined by the Adviser to be of comparable
quality;
<PAGE>

(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;

(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 Administration, Federal Farm Credit banks, Federal Intermediate Credit
Bank, Federal National Mortgage Association, Federal Financing Bank, the
Tennessee Valley Authority, and others; and

(6) Repurchase agreements collateralized by securities listed above.

FUTURES CONTRACTS

In order to remain fully invested and to reduce transactions costs the
Balanced Portfolio may invest in stock and bond futures and interest rate
futures contracts, and the Equity and the Small Cap Value Portfolios may invest
in stock futures and options. Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. Futures contracts
which are standardized as to maturity date and underlying financial instrument
are traded on national futures exchanges. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"), a U.S. Government agency.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
("buying" a contract which has previously "sold" or "selling" a contract
previously "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.

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<PAGE>

futures exchange and may be changed. Brokers 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, changes in the contract value may reduce the required margin,
resulting in a repayment of excess margin to the contract holder. Variation
margin payments are made to and from the futures broker for as long as the
contract remains open. The Fund expects to earn interest income on its margin
deposits.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of a Portfolio. A Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contract purchases will be "completed;" that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control a Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a Portfolio will incur commission expenses in both
opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

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<PAGE>

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS

A Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. In addition,
a Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS

A Portfolio will minimize the risk that it will be unable to close out
a futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Portfolio has
insufficient cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close options and futures
positions also could have an adverse impact on the Portfolio's ability to
effectively hedge.

The risk of loss in trading futures contracts in some strategies can
be substantial, 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
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the
Adviser does not believe that the Portfolios are subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had

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invested in the underlying financial instrument and sold it after the decline.

Utilization of futures transactions by a Portfolio does involve the
risk of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the Portfolio securities being hedged.
It is also possible that the Portfolio could lose money on futures contracts and
also experience a decline in value of Portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days, with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions a Portfolio has identified as hedging
transactions, the Portfolio is required for federal income tax purposes to
recognize as 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 recognized with
respect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are
intended to hedge against a change in the value of securities held by the
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.

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<PAGE>

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. 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.

Each Portfolio will distribute to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year) on
futures transactions. Such distributions will be combined with distributions of
capital gains realized on the Portfolio's other investments and shareholders
will be advised on the nature of the payments.

OPTIONS

WRITING COVERED CALL AND PUT OPTIONS AND PURCHASING CALL AND PUT OPTIONS

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the securities subject to the option as long as the option is outstanding. All
put options written by a Portfolio are covered, which means that the Portfolio
has deposited with its custodian cash or liquid securities with a value at least
equal to the exercise price of the option. Call and put options written by a
Portfolio may also be covered to the extent that the Portfolio's liabilities
under such options are offset by its rights under call or put options purchased
by a Portfolio and call options written by a Portfolio may also be covered by
depositing cash or securities with its custodian in the same manner as written
puts are covered.

Through the writing of a covered call option a Portfolio receives
premium income but obligates itself to sell to the purchaser of such an option
the particular security underlying the option at a specified price at any time
prior to the expiration of the option period, regardless of the market value of
the security during this period. Through the writing of a covered put option, a
Portfolio receives premium income but obligates itself to purchase a particular
security underlying the option at a specified price at any time prior to the
expiration of the option period, regardless of market value during the option
period.

The Portfolio may, in accordance with their investment objectives,
also write exchange-traded covered call and put options on stock indices. The
Portfolios may write such options to generate additional income or as a hedging
technique to minimize anticipated declines in the value of the Portfolios'
securities. In economic effect, a stock index call or put option is similar to
an option on a particular security, except that the value of the option depends
on the weighted value of the group of securities comprising the index, rather
than a particular security, and settlements are made in cash rather than by
delivery of a particular security.

The Portfolios may also purchase exchange-traded call and put options
with respect to securities and with respect also to stock indices that correlate
with their particular portfolio securities. The Portfolios may purchase put
options for defensive purposes in order to protect against an anticipated
decline in the value of portfolio securities. As the holder of a put option
with respect to individual securities, a Portfolio has the right to sell the
securities underlying the options and to receive a cash payment at the exercise
price at any time during the option period. As the holder of a put option on an
index, a Portfolio has the right to receive, upon exercise of the option, a cash
payment equal to a multiple of any excess of the strike price specified by the
option over the value of the index.

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<PAGE>

The Portfolios may also write and purchase unlisted covered call and
put options. Such options are not traded on an exchange and may not be as
actively traded as listed securities, making the valuation of these securities
more difficult. In addition, an unlisted option entails a risk not found in
connection with listed options -- that the party on the other side of the option
transaction will default. This may make it impossible to close out an unlisted
option position in some cases, and profits may be lost thereby. Except as
described below, such unlisted over-the-counter options will generally be
considered illiquid securities. The Portfolios will engage in such transactions
only with firms of sufficient credit to minimize these risks. Where a Portfolio
has entered into agreements with primary dealers with respect to the unlisted
options it has written, and such agreements would enable the Portfolio to have
an absolute right to repurchase, at a pre-established formula price, the over-
the-counter options written by it, the Portfolio will treat as illiquid only the
amount equal to the formula price described above less the amount by which the
option is "in the money."

In addition, the effectiveness of hedging the Portfolios through the
purchase or sale (writing)of stock index

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<PAGE>

options will depend upon the extent to which price movements in the Portfolios'
holdings being hedged correlate with price movements in the selected stock
index. Perfect correlation may not be possible because the securities held or to
be acquired by the Portfolios may not exactly match the composition of the stock
index on which options are purchased or written.

PORTFOLIO TURNOVER

The portfolio turnover rates described in the Prospectuses are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares. See "Financial
Highlights" in the Prospectuses for the historical portfolio turnover rates with
respect to each of the Portfolios.

PURCHASE AND REDEMPTION OF SHARES

Both classes of shares of the Portfolios may be purchased without a
sales commission at the net asset value per share next determined after an order
is received in proper form by the Fund and payment is received by the Fund's
custodian. The minimum initial investment required is $2,500 for the Sterling
Partners' Portfolios Institutional Class Shares and $100,000 for the Sterling
Partners' Portfolios Institutional Service Class Shares with certain exceptions
as may be determined from time to time by officers of the Fund. Other
investment minimums are: initial IRA investment, $500; initial spousal IRA
investment, $250 minimum; additional investment for all accounts, $100. An
order received in proper form prior to the close of regular trading on the New
York Stock Exchange ("Exchange") (generally 4:00 p.m. Eastern Time) will be
executed at the price computed on the date of receipt; and an order received not
in proper form or after the close of the Exchange will be executed at the price
computed on the next day the Exchange is open after proper receipt. The
Exchange will be closed on the following days: Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, New
Year's Day, and Dr. Martin Luther King, Jr. Day.

Each Portfolio reserves the right in its sole discretion (1) to
suspend the offering of its shares, (2) to reject purchase orders when in the
judgment of management such rejection is in the best interest of the Fund, and
(3) to reduce or waive the minimum for initial and subsequent investment for
certain fiduciary accounts such as employee benefit plans or

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under circumstances where certain economies can be achieved in sales of a
Portfolio's shares.

Each Portfolio may suspend redemption privileges or postpone the date
of payment (1) during any period that either the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Securities
and Exchange Commission (the "SEC" or the "Commission"), (2) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for a Portfolio to dispose of
securities owned by it, or to fairly determine the value of its assets, and (3)
for such other periods as the Commission may permit. The Fund has made an
election with the Commission to pay in cash all redemptions requested by any
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 Directors may deem advisable; however,
payment will be made wholly in cash unless the Directors believe that economic
or market conditions exist which would make such a practice detrimental to the
best interests of the Portfolio. If redemptions are paid in investment
securities, such securities will be valued as set forth in the Prospectus under
"Valuation of Shares," and a redeeming shareholder would normally incur
brokerage expenses if these securities were converted to cash.

No charge is made by any Portfolio for redemptions. Any redemption
may be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.

Signature Guarantees -- To protect your account, the Fund and Chase
Global Funds Services Company ("CGFSC") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required for (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) and/or
registered address, or (2) share transfer requests.

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and savings associations. A complete definition of eligible guarantor
institutions is available from the Fund's transfer agent. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program.

VALUATION OF SHARES

Securities purchased with remaining maturities of 60 days or less are
valued at amortized cost using methods determined by the Board of Directors.

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SHAREHOLDER SERVICES

The following supplements the information set forth under "Shareholder
Services" in the Sterling Partners' Prospectuses.

EXCHANGE PRIVILEGE

Institutional Class Shares of each Sterling Portfolio may be exchanged
for Institutional Class Shares of the other Sterling Portfolios and
Institutional Service Class Shares of each Sterling Portfolio may be exchanged
for Institutional Service Class Shares of the other Sterling Portfolios. In
addition, Institutional Class Shares of each Sterling Portfolio may be exchanged
for any other Institutional Class Shares of a Portfolio included in the UAM
Funds which is comprised of the Fund and UAM Funds Trust. (See the list of
Portfolios of the UAM Funds -- Institutional Class Shares at the end of the
Sterling Portfolios -- Institutional Class Shares Prospectus.) Service Class
Shares of each Sterling Portfolio may be exchanged for any other Service Class
Shares of a Portfolio included in the UAM Funds which is comprised of the Fund
and UAM Funds Trust. (For those Portfolios currently offering Service Class
Shares, please call the UAM Funds Service Center.) Exchange requests should be
made by calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds
Service Center, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798. The exchange privilege is only available with respect to
Portfolios that are qualified for sale in the shareholder's state of residence.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time) will
be processed as of the close of business on the same day. Requests received
after this time will be processed on the next business day. Neither the Fund
nor CGFSC will be responsible for the authenticity of the exchange instructions
received by telephone. Exchanges may also be subject to limitations as to
amounts or frequency and to

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other restrictions established by the Board of Directors to assure that such
exchanges do not disadvantage the Fund and its shareholders.

For federal income tax purposes an exchange between Portfolios is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information in
this regard. The exchange privilege may be modified or terminated at any time.

TRANSFER OF SHARES

INVESTMENT LIMITATIONS

Each Sterling Partners' Portfolio is subject to the following
restrictions which are fundamental policies and may not be changed without the
approval of the lesser of: (1) at least 67% of the voting securities of the
Portfolio present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Portfolio are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the
Portfolio. Whenever an investment limitation sets forth a percentage limitation
on investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such security
or other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered when
determining whether the investment complies with a Portfolio's investment
limitations. Each Sterling Partners' Portfolio will not:

(1) invest in commodities;

(2) purchase or sell real estate, although it may purchase and sell
securities of companies which

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deal in real estate and may purchase and sell securities which
are secured by interests in real estate;

(3) issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit a Portfolio from
(i) making any permitted borrowings, mortgages or pledges, or
(ii) entering into options, futures or repurchase transactions;

(4) purchase on margin or sell short;

(5) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;

(6) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the net assets of the Portfolio, determined
at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;

(7) invest for the purpose of exercising control over management of
any company;

(8) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, or instruments issued by U.S. banks when the
Portfolio adopts a temporary defensive position; and

(9) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.

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MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

<TABLE>
<S> <C>
John T. Bennett, Jr. Director of the Fund, President of
College Road-RFD 3 Squam Investment Management Company,
Meredith, NC 03253 Inc. and Great Island Investment
1/26/29 Company, Inc.; President of Bennett
Management Company from 1988 to 1993.

Nancy J. Dunn Director of the Fund; Vice President
10 Garden Street For Finance and Administration and
Cambridge, MA 02138 Treasurer of Radcliffe College since
8/14/51 1991.

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<PAGE>

William H. Park Vice President of the Fund; Executive
One International Place Vice President and Chief Financial
Boston, MA 02110 Officer of United Asset Management
9/19/47 Corporation.

Gordon M. Shone Assistant Treasurer of the Fund; Vice
73 Tremont Street President of Fund Administration and
Boston, MA 02108 Compliance of Chase Global Funds
7/30/56 Services Company; formerly Senior
Audit Manager of Coopers & Lybrand LLP
from 1983 to 1993.
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
Michael DeFao Secretary of the Fund; Vice President
211 Congress Street and General Counsel of UAM Fund
Boston, MA 02110 Services, Inc. and UAM Fund
2/28/68 Distributors, Inc; Associate Attorney
of Ropes & Gray (a law firm) from 1993
to 1995.

Karl O. Hartmann Assistant Secretary of the Fund;
73 Tremont Street Senior Vice President and General
Boston, MA 02108 Counsel of Chase Global Funds Services
3/7/55 Company.
</TABLE>
- ------

* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons"
of the Fund as that term is defined in the 1940 Act.

As of December 24, 1997, the Directors and Officers of the Fund owned
less than 1% of the Fund's outstanding shares.

REMUNERATION OF DIRECTORS AND OFFICERS

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<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued as Annual from
Compensation Part of Benefits Registrant
Name of Person, From Fund Upon and
Position Registrant Expenses Retirement Fund Complex
-------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr........ $26,791 0 0 $32,750
Director

Nancy J. Dunn.............. $ 6,774 0 0 $ 8,300
Director

Philip D. English.......... $26,791 0 0 $32,750
Director

William A. Humenuk......... $26,791 0 0 $32,750
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of December 24, 1997, the following persons or organizations held
of record or beneficially 5% or more of the shares of a Portfolio, as noted.

Sterling Partners' Balanced Portfolio: UMBSC & Co. FBO Interstate
Brands Conservative Growth, AC 340419134, P.O. Box 419260, Kansas City, MO,
15.8%; The Chase Manhattan Bank, N.A., and Employee Savings Plan & Trust, FBO of
Bowers Fibers, Inc., Attn: Alan L. Miller, 770 Broadway, New York, NY, 7.5%*,
The Chase Manhattan Bank, N.A., Trustee FBO J.C. Steele & Sons, Inc., Retirement
& Profit Sharing Plan 1/1/94, Attn: Alan L. Miller, 770 Broadway, New York, NY,
6.6%*; Fleet National Bank, Trustee, FBO Smith Helms, Muliss & Moore Partners,
P.O. Box 92800, Rochester, NY, 6.3%* and UMBSC & Co. FBO Interstate Brands
Moderate Growth, AC 340419142, P.O. Box 419260, Kansas City, MO, 5.1%.

Sterling Partners' Equity Portfolio: The Chase Manhattan Bank, N.A.,
Trustee FBO J.C. Steele & Sons, Inc., Retirement & Profit Sharing Plan, 770
Broadway, New York, NY, 9.0%*; H. Keith Brunnemer, Jr., Michael Peeler Fund,
P.O. Box 6024, Charlotte, NC, 7.4%; Hartnat & Co., Smith Anderson, P.O. Box
92800, Rochester, NY, 6.6% and Bank of Boston & Co., Profit Sharing, c/o
Fairfield Communities, Inc., P.O. Box 1809, Boston, MA, 5.4%.

Sterling Partners' Small Cap Value Portfolio: Charles Schwab & Co.,
Inc., Reinvest Account, Attn: Mutual Funds, 101 Montgomery Street, San
Francisco, CA, 14.6%; Fleet National Bank, Cust Sterling Cap Small Cap Value;
Attn: 0005098070, P.O.

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Box 92800, Rochester, NY, 12.3%; Wachovia Bank, Trustee FBO The UNX Chemicals,
Inc., P/S Rett Plan & Trust, Sterling Capital Management DTD 8/1/82, P.O. Box
3073, 301 N. Main Street MC NC 31075, Winston Salem, NC, 6.6%; Wachovia Bank,
Trustee FBO The Coastal Chemical Corp. P/S/P Sterling Management, Inc., DTD
7/3/72, P.O. Box 3073, 301 N. Main St. MC NC 31075, Winston Salem, NC, 6.2% and
Charles Schwab & Co., Inc., Special Custody Account, Exclusive Benefit of
Customers, Cash Account, 101 Montgomery Street, San Francisco, CA, 5.1%.

* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.

The persons or organizations owning 25% or more of the outstanding
shares of a Portfolio may be presumed to "control" (as that term is defined in
the Investment Company Act of 1940, as amended, (the "1940 Act") such Portfolio.
As a result, those persons or organizations could have the ability to vote a
majority of the shares of the Portfolio on any matter requiring the approval of
shareholders of such Portfolio.

INVESTMENT ADVISER

CONTROL OF ADVISER

Sterling Capital Management Company (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.

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<PAGE>

SERVICES PERFORMED BY ADVISER

Pursuant to Investment Advisory Agreements ("Agreements") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolios' assets, to continuously review, supervise and
administer the Portfolios' investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolios' assets to be held uninvested.

In the absence of (i) willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its obligations and
duties under the Agreements, (ii) reckless disregard by the Adviser of its
obligations and duties under the Agreements, or (iii) a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services, the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error of judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services under the Agreements.

Unless sooner terminated, the Agreements shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Directors of the
Fund who are not parties to the Agreements or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolios. The Agreements
may be terminated at any time by a Portfolio, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of a Portfolio on 60
days written notice to the Adviser. The Agreements may be terminated by the
Adviser at any time, without the payment of any penalty, upon 90 days written
notice to the Fund. The Agreements will automatically and immediately terminate
in the event of their assignment.

REPRESENTATIVE INSTITUTIONAL CLIENTS

As of the date of this Statement of Additional Information, the
Adviser's representative institutional clients included Nucor Corp., Dean
Witter, Reynolds Inc., Walter Industries, Inc., Georgia Marble Corp., Cheraw
Yarn Mills, Sanger Clinic, Adobe Systems, Inc., Paychex, Inc., Davidson College,
Lakeland Regional Medical Center, Discovery & Co. and Cisco Systems, Inc.

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<PAGE>

ADVISORY FEES

As compensation for services rendered by the Adviser under the
Agreements, each Sterling Partners' Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to all of the Sterling Partners' Portfolios' average daily net assets for
the month:

<TABLE>
<CAPTION>
Rate
<S> <C>
Sterling Partners' Balanced Portfolio......... 0.75%
Sterling Partners' Equity Portfolio........... 0.75%
Sterling Partners' Small Cap Value Portfolio.. 1.00%
</TABLE>

For the fiscal years ended October 31, 1995, 1996 and 1997, Sterling
Partners' Balanced Portfolio paid advisory fees of approximately $490,000,
$462,951 and $542,796, respectively.

For the fiscal years ended October 31, 1995, 1996 and 1997, Sterling
Partners' Equity Portfolio paid advisory fees of $137,000, $184,081 and
$266,442, respectively. During these periods, the Adviser voluntarily waived
advisory fees of approximately $60,000, $72,415 and $70,708, respectively.

For the fiscal year ended October 31, 1997, Sterling Partners' Small
Cap Value Portfolio paid advisory fees of $77,649. During this period, the
Adviser voluntarily waived advisory fees of approximately $11,374.

SERVICE AND DISTRIBUTION PLANS

As stated in the Portfolios' Service Class Shares Prospectus, UAM Fund
Distributors, Inc. (the "Distributor") may enter into agreements with broker-
dealers and other financial institutions ("Service Agents"), pursuant to which
they will provide administrative support services to Service Class shareholders
who are their customers ("Customers") in consideration of such Fund's payment of
0.25 of 1% (on an annualized basis) of the average daily net asset value of the
Service Class Shares held by the Service Agent for the benefit of its Customers.
Such services include: