<PAGE>
UAM Funds
Funds for the Informed Investor/sm/
Heitman Real Estate Portfolio
Annual Report December 31, 1998
[LOGO OF UAM APPEARS HERE]
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholders' Letter........................................................ 1
Performance Comparison...................................................... 4
Portfolio of Investments.................................................... 5
Statement of Assets and Liabilities......................................... 7
Statement of Operations..................................................... 8
Statement of Changes in Net Assets.......................................... 9
Financial Highlights........................................................ 10
Notes to Financial Statements............................................... 12
Report of Independent Accountants........................................... 18
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
February 3, 1999
Dear Shareholder:
PERFORMANCE
Since their peak during the 4th quarter of 1997, Real Estate Investment Trusts
(REITs) and other real estate operating companies have shown disappointing
results, many falling well short of the broader market. For the one-year
period ending December 31, 1998, the Wilshire Real Estate Securities Index
(WRESI) was down 17.4%, while the S&P 500 Index (S&P) was up a breathtaking
28.6%. To place these returns in longer-term context, the WRESI five-year
returns for the period ending December 31, 1998 were 9.36% compared to the S&P
at 24.05%. The performance of the Heitman Real Estate Portfolio (the
"Portfolio") for the first six months of 1998 was -6.05% for the Institutional
Class, and -6.35% at net asset value and -10.80%(/1/) at public offering price
for the Advisor Class. The following table compares the Portfolio's
performance versus the indices for the period ending December 31, 1998.
Average Annual Total Returns
<TABLE>
<CAPTION>
Advisor Class Advisor Class Wilshire
Institutional Net Asset Public Offering Real Estate
Class Value Price(1) Securities Index S&P 500
------------- ------------- --------------- ---------------- -------
<S> <C> <C> <C> <C> <C>
3/13/89(2) - 12/31/98 8.33% n/a n/a 4.52% 18.77%
5/15/95(3) - 12/31/98 n/a 13.46% 11.95% 11.05% 29.28%
5 Years Ending 12/31/98 10.14% n/a n/a 9.36% 24.05%
3 Years Ending 12/31/98 12.39% 11.82% 10.02% 10.63% 28.23%
1 Year Ending 12/31/98 -15.12% -15.54% -19.55% -17.43% 28.60%
Quarter Ending 12/31/98 -0.73% -0.87% -5.58% -0.95% 21.28%
</TABLE>
- -----------
(1) Reflects the deduction of the maximum 4.75% sales charge and assumes
reinvestment of all dividends at net asset value.
(2) Inception date of Institutional Class.
(3) Inception date of Advisor Class. Index comparisons begin on 4/30/95.
For those who focus on sectors, only manufactured housing and strip retail
posted positive returns in 1998. Hotels were by far the biggest decliners,
falling an astonishing 45.6%, including -9.1% during the fourth quarter. The
office sector declined 18.0% during 1998, but the fourth quarter may represent
a turning point in this sector. After four consecutive quarters of negative
returns, the office sector posted a 2.5% gain in the fourth quarter. The self-
storage, regional mall, apartment and industrial sectors suffered less than
office and hotel during the year.
The significant decrease in the performance of REITs and real estate operating
companies from 1996 and 1997 levels has principally been the result of
contraction in multiples as opposed to a deterioration in earnings. Cash
Available for Distribution (CAD) multiples grew to more than 13x forward
earnings in 1997, and have recently dropped closer to 10x on 1999 expected
earnings. We expect multiples to stabilize in the 10x to 11x range over the
near term. This contraction in multiples can be partially explained by
comparing trends in recent, current and
1
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
estimated earnings growth. Year over year average company growth in FFO (Funds
from Operations) in 1997 was 11.1%, and estimated growth for 1998 is expected
to exceed 15%. In 1999 we estimate growth will move back closer to 11%. We
believe the market is reacting to this respectable, but lower, growth rate by
pricing REITs at a lower multiple.
REAL ESTATE MARKET
Our view is that the real estate markets remain quite healthy, stabilizing
after the substantial recovery of the post-1992 period. In the apartment
sector, for example, we see conditions generally healthy, with rent growth
exceeding inflation across local markets. Vacancies remain in the 4% to 5%
area for institutionally-held apartments. For the office sector we expect net
absorption in the 50 largest markets to exceed 75 million square feet in 1998,
more than overshadowing the expected 60 million square feet of new
construction. Vacancies remain at the lowest level in almost two decades at
about 9%. For industrial properties the national vacancy rate is now less than
8%, and new construction in 1998 is actually expected to be less than in 1997.
Higher quality regional malls and neighborhood/community shopping centers also
are enjoying increased rents, however lower quality mall and power centers are
showing pockets of weakness.
MARKET CAPITALIZATION
Market capitalization of the WRESI decreased for the first time in its recent
history, reflective of the downturn in market performance and the absence of
new initial public offerings. Consolidation continues to characterize the
market, and we expect more mergers during the course of 1999. Growth in market
capitalization is expected to accelerate in 1999, reflective of the larger
trend of commercial property ownership in the United States gradually changing
from private entities to public companies. We expect this transition to
accelerate again when REIT prices rise, resulting in a more competitive cost
of capital for REITs and other real estate operating companies.
OUTLOOK
We believe the best place to begin a discussion of REITs in 1999 is with
dividend yield. As of January 27, 1999, the weighted average yield on stocks
in the Wilshire REIT Index (WREIT) is 7.1%. To put this in historical
perspective, with the 10-year treasury around 4.7%, REITs are trading at their
highest premium of this decade. Relative to alternative investments, REITs
stack up well from an income (dividend) point of view. During 1998 REIT yields
exceeded yields on the S&P Utility Index by an average of 175 basis points,
approaching the highest spread in the modern REIT era, while the spread versus
the S&P 500 averaged 441 basis points. Currently the yield on the WRESI is 279
basis points ahead of the yield on the S&P Utilities Index.
We also believe the fundamentals of the companies in our universe will
continue to remain strong, although the rate of earnings growth will not be as
strong going forward as we are experiencing in 1998. Disclosure of public real
estate companies, coupled with an abundance of data available to the investor
will have the effect of dampening real estate cycles going forward. As Adviser
to the Portfolio we will
2
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
continue to maintain a cautious eye for companies which no longer meet our
expectations for stable growth in cash flow per share. At the same time, we
will continue to remain loyal to our value style which we interpret as growth
at a reasonable price (GARP).
Sincerely,
/s/ Dean A. Sotter /s/ Timothy J. Pire /s/ Randy Newsome
Dean A. Sotter Timothy J. Pire, CFA
Portfolio Manager Portfolio Manager Randy Newsome
Portfolio Manager
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. The
Portfolio's performance assumes the reinvestment of all dividends and
distributions.
There are no assurances that the Portfolio will meet its stated objectives.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
The Portfolio's holdings are subject to change because it is actively managed.
Portfolio changes should not be considered recommendations for action by
individual investors.
Definition of the Comparative Index/Indices
-------------------------------------------
The Wilshire Real Estate Securities Index is a market capitalization weighted
index of publicly traded real estate securities including real estate
investment trusts, real estate operating companies and partnerships. The index
is used by the institutional investment community as a broad measure of the
performance of public real estate equity for asset allocation and performance
comparison.
The Wilshire REIT Index includes 112 REITs but excludes 7 real estate operating
companies that are included in the Wilshire Real Estate Securities Index.
The S&P 500 is an unmanaged index composed of 400 industrial, 40 financial, 40
utilities and 20 transportation stocks.
The S&P Utilities is a market capitalization weighted index of stocks used to
measure the performance of the utility sector. At the end of 1998 the index
contained 39 companies with a market capitalization over $280 billion.
The comparative index assumes reinvestment of dividends and, unlike the
Portfolio's returns, does not reflect any fees or expenses. If such fees were
reflected in the comparative index' return, the performance would have been
lower.
Please note that one cannot invest in an unmanaged index.
3
<PAGE>
UAM FUND HEITMANSREAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT COMPARED TO THE WILSHIRE REAL ESTATE
SECURITIES INDEX AND S&P 500 INDEX.
- --------------------------------------------------------------------------------
AVEARAGE ANNUAL TOTAL RETURN*
FOR PERIOD ENDED DECEMBER 31st
- --------------------------------------------------------------------------------
Institutional Class Shares Advisor Class Shares+
- --------------------------------------------------------------------------------
Since Inception Since Inception
1 Year 5 Year (3/13/89) 1 Year (5/15/95)
- --------------------------------------------------------------------------------
(15.12)% 10.14% 8.33% (15.54)% 13.46%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Heitman Real EstatWilshire Real E S&P 500 Index
3/13/89* 10000 10000 10000
1989 10481 10665 12030
1990 7743 6963 10917
1991 9256 7822 14319
1992 10598 7999 15904
1993 14599 10620 17970
1994 13837 10045 18630
1995 15444 11386 25625
1996 21323 15585 31506
1997 25827 18670 42016
1998 21922 15416 54033
Periods ended on December 31st
The investment results represent past performance and should not be construed
as a guarantee of future results. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* If the Adviser and/or Portfolio service providers had not waived expenses,
the Portfolio's total return would have been lower.
+ The graph presents the performance of the Institutional Class shares. The
performance of the Advisor Class shares will vary based upon the different
inception date and fees (including 12b-1 fees and sales load) assessed to
that class. The Advisor Class shares' performance also reflects the deduction
of the maximum 4.75% sales charge.
4
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
COMMON STOCKS -- 82.3%
<TABLE>
<CAPTION>
NAREIT (b)
Classification
Shares (Unaudited) Value+
------- -------------- ------------
<S> <C> <C> <C>
Amil Residential Properties Trust........ 53,100 Equity $ 1,181,475
Archstone Communities Trust.............. 215,120 Equity 4,356,180
Arden Realty, Inc........................ 135,800 Equity 3,148,862
Avalonbay Communities, Inc............... 32,900 Equity 1,126,825
Bedford Property Investors, Inc.......... 263,600 Equity 4,448,250
BRE Properties, Inc., Class A............ 42,200 Equity 1,044,450
*Cadillac Fairview Corp.................. 105,500 Equity 1,971,531
CenterPoint Properties Corp.............. 46,200 Equity 1,562,137
Centertrust Retail Properties, Inc....... 327,600 Equity 4,013,100
Chelsea GCA Realty, Inc.................. 55,293 Equity 1,969,813
Developers Diversified Realty Corp....... 172,960 Equity 3,070,040
Duke Realty Investments, Inc............. 39,900 Equity 927,675
Equity Office Properties Trust........... 132,200 Equity 3,172,800
Eastgroup Properties..................... 103,818 Equity 1,914,144
Equity Residential Properties Trust...... 134,266 Equity 5,429,381
Essex Property Trust, Inc................ 140,052 Equity 4,166,547
*Excel Legacy Corp....................... 431,845 Equity 1,727,380
First Washington Realty Trust............ 95,800 Equity 2,269,263
Kilroy Realty Corp....................... 154,800 Equity 3,560,400
Kimco Realty Corp........................ 67,800 Equity 2,690,813
Mack-Cali Realty Corp.................... 185,800 Equity 5,736,575
Meridian Industrial Trust, Inc........... 141,100 Equity 3,315,850
New Plan Excel Realty Trust.............. 169,400 Equity 3,758,563
Pan Pacific Retail Properties, Inc....... 98,000 Equity 1,953,875
Parkway Properties, Inc.................. 143,100 Equity 4,471,875
Philips International Realty Corp........ 181,800 Equity 2,795,175
Prentiss Properties Trust................ 91,100 Equity 2,032,669
PS Business Parks, Inc................... 56,400 Equity 1,346,550
Public Storage, Inc...................... 87,300 Equity 2,362,556
Regency Realty Corp...................... 53,500 Equity 1,190,375
*Security Capital Group, Inc., Class B... 255,200 Equity 3,461,150
Simon Property Group, Inc................ 31,200 Equity 889,200
Sovran Self Storage, Inc................. 72,600 Equity 1,824,075
Storage Trust Realty..................... 57,000 Equity 1,332,375
Taubman Centers, Inc..................... 82,900 Equity 1,139,875
Tower Realty Trust, Inc.................. 342,300 Equity 6,888,788
Trizec Hahn Corp......................... 191,700 Equity 3,929,850
Weeks Corp............................... 66,300 Equity 1,868,831
------------
TOTAL COMMON STOCKS (Cost $99,593,030).......................... 104,049,273
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 14.2%
<TABLE>
<CAPTION>
NAREIT (b)
Classification
Shares (Unaudited) Value+
---------- -------------- ------------
<S> <C> <C> <C>
Equity Office Properties Trust,
8.98%, Series A..................... 80,300 Equity $ 2,047,650
Health Care Property Investors, Inc.,
7.875%, Series A.................... 134,400 Equity 3,225,600
Highwoods Properties, Inc., 8.00%,
Series B............................ 122,700 Equity 3,029,156
ProLogis Trust, 8.54%, Series C...... 24,670 Equity 1,153,569
ProLogis Trust, 7.92%, Series D...... 12,500 Equity 307,813
Taubman Center, Inc., 8.30%, Series
A................................... 153,900 Equity 3,385,800
Vornado Realty Trust, 6.50%, Series
A................................... 99,400 Equity 4,820,900
------------
TOTAL PREFERRED STOCKS (Cost $18,340,565)...................... 17,970,488
------------
RIGHT -- 0.0%
<CAPTION>
Shares Value+
---------- ------------
<S> <C> <C> <C>
*Essex Property Trust, Inc. expiring
11/11/08............................ 140,052 --
TOTAL RIGHTS (Cost $0)............... --
SHORT TERM INVESTMENT -- 3.9%
<CAPTION>
Face
Amount
----------
<S> <C> <C>
REPURCHASE AGREEMENT
Chase Securities, Inc. 4.25%, dated
12/31/98, due 01/04/99, to be
repurchased at $4,939,331,
collateralized by $4,677,203 of
various U.S. Treasury Notes, 5.250%-
8.000%, due 12/31/00-12/31/02,
valued at $4,940,457 (Cost
$4,937,000)......................... $4,937,000 $ 4,937,000
------------
TOTAL INVESTMENTS -- 100.4% (Cost
$122,870,595) (a)................... 126,956,761
------------
OTHER ASSETS AND LIABILITIES (NET) --
(0.4%)............................. (573,939)
------------
NET ASSETS -- 100.0%................. $126,382,822
============
</TABLE>
* See Note A to Financial Statements.
+ Non-income producing security
(a) The cost for federal income tax purposes was $123,273,348. At December 31,
1998, net unrealized appreciation for all securities based on tax cost was
$3,683,413. This consisted of aggregate gross unrealized appreciation for
all securities of $8,297,900 and aggregate gross unrealized depreciation
for all securities of $4,614,487.
(b) NAREIT -- National Association of Real Estate Investment Trusts
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
Assets
Investments, at Cost.............................................. $122,870,595
============
Investments, at Value............................................. 126,956,761
Cash.............................................................. 984
Receivable for Investments Sold................................... 40,303
Dividends Receivable.............................................. 1,026,802
Interest Receivable............................................... 583
Receivable for Portfolio Shares Sold.............................. 389,159
Other Assets...................................................... 2,772
------------
Total Assets..................................................... 128,417,364
------------
Liabilities
Payable for Investments Purchased................................. 1,167,962
Payable for Investment Advisory Fees -- Note B.................... 77,357
Payable for Administrative Fees -- Note C......................... 21,072
Payable for Portfolio Shares Redeemed............................. 600,730
Payable for Trustee Fees -- Note F................................ 969
Other Liabilities................................................. 166,452
------------
Total Liabilities................................................ 2,034,542
------------
Net Assets........................................................ $126,382,822
============
Net Assets Consist of:
Paid in Capital................................................... $124,599,033
Accumulated Net Realized Loss..................................... (2,302,377)
Unrealized Appreciation........................................... 4,086,166
------------
Net Assets........................................................ $126,382,822
============
Institutional Class Shares
Net Assets........................................................ $ 79,717,339
Shares Issued and Outstanding+.................................... 9,245,571
Net Asset Value, Offering, and Redemption Price Per Share......... $8.62
=====
Advisor Class Shares
Net Assets........................................................ $ 46,665,483
Shares Issued and Outstanding+.................................... 5,412,355
Net Asset Value, and Redemption Price Per Share................... $8.62
=====
Offering price Per Share ($8.62/.9525)............................ $9.05
=====
</TABLE>
+ Unlimited Number of Shares Authorized
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
Investment Income
Dividends........................................................ $ 6,655,957
Interest......................................................... 649,714
------------
Total Income.................................................... 7,305,671
------------
Expenses
Investment Advisory Fees -- Note B............................... 1,185,717
Administration Fees -- Note C.................................... 260,996
Custodian Fees -- Note D......................................... 27,960
Distribution Fees -- Note E...................................... 173,096
Shareholder Servicing Fees -- Note E............................. 173,096
Trustees' Fees -- Note F......................................... 29,805
Transfer Agent Fees.............................................. 133,405
Insurance Expense................................................ 112,915
Legal Fees....................................................... 97,944
Printing Fees.................................................... 73,908
Other Expenses................................................... 55,601
Registration and Filing Fees..................................... 40,263
Audit Fees....................................................... 26,950
------------
Total Expenses.................................................. 2,391,656
------------
Net Investment Income............................................ 4,914,015
------------
Net Realized Loss on Investments................................. (1,119,614)
Net Change in Unrealized Appreciation/Depreciation on
Investments..................................................... (32,818,271)
------------
Net Loss on Investments.......................................... (33,937,885)
------------
Net Decrease in Net Assets Resulting From Operations............. $(29,023,870)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income.............................. $ 4,914,015 $ 7,297,226
Net Realized Gain (Loss)........................... (1,119,614) 41,132,067
Net Change in Unrealized
Appreciation/Depreciation......................... (32,818,271) (7,817,181)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting
From Operations.................................. (29,023,870) 40,612,112
------------ ------------
Distributions:
Net Investment Income:
Institutional Class................................ (2,991,800) (4,846,923)
Advisor Class...................................... (1,920,451) (2,450,303)
In Excess of Net Investment Income:
Institutional Class................................ -- (579,274)
Advisor Class...................................... -- (292,845)
Net Realized Gain:
Institutional Class................................ -- (26,273,187)
Advisor Class...................................... -- (15,427,731)
------------ ------------
Total Distributions............................... (4,912,251) (49,870,263)
------------ ------------
Capital Share Transactions: (1)
Institutional Class:
Issued............................................. 25,351,539 37,287,687
In Lieu of Cash Distributions...................... 1,228,296 12,987,988
Redeemed........................................... (62,055,189) (39,743,768)
------------ ------------
Net Increase (Decrease) from Institutional Class
Shares........................................... (35,475,354) 10,531,907
------------ ------------
Advisor Class:
Issued............................................. 17,255,816 66,177,339
In Lieu of Cash Distributions...................... 1,783,126 16,880,394
Redeemed........................................... (43,212,483) (73,443,317)
------------ ------------
Net Increase (Decrease) from Advisor Class
Shares........................................... (24,173,541) 9,614,416
------------ ------------
Net Increase (Decrease) from Capital Share
Transactions..................................... (59,648,895) 20,146,323
------------ ------------
Total Increase (Decrease)......................... (93,585,016) 10,888,172
Net Assets:
Beginning of Period................................ 219,967,838 209,079,666
------------ ------------
End of Period (including undistributed net
investment income of $0 and $0, respectively)..... $126,382,822 $219,967,838
============ ============
(1)Shares Issued and Redeemed:
Institutional Class:
Issued............................................. 2,780,776 3,286,040
In Lieu of Cash Distributions...................... 130,019 1,240,228
Redeemed........................................... (6,508,467) (3,473,055)
------------ ------------
Net Increase (Decrease) in Institutional Class
Shares........................................... (3,597,672) 1,053,213
------------ ------------
Advisor Class:
Issued............................................. 1,747,978 5,824,983
In Lieu of Cash Distributions...................... 189,561 1,613,411
Redeemed........................................... (4,639,720) (6,592,740)
------------ ------------
Net Increase (Decrease) from Advisor Class
Shares........................................... (2,702,181) 845,654
------------ ------------
Net Increase (Decrease) in Capital Shares......... (6,299,853) 1,898,867
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class Shares
-----------------------------------------------------------------
Three-Month Fiscal Year
Years Ended December 31, Period Ended Ended
------------------------------------- December 31, September 30,
1998 1997 1996 1995 1994 1994
------- -------- -------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.49 $ 10.96 $ 8.65 $ 8.30 $ 9.23 $ 10.95
------- -------- -------- ------- -------- --------
Income From Investment
Operations
Net Investment Income.. 0.32 0.40 0.37 0.33 0.10 0.32
Net Realized and
Unrealized Gain
(Loss)................ (1.88) 1.82 2.82 0.53 (0.05) (0.92)
------- -------- -------- ------- -------- --------
Total from Investment
Operations............ (1.56) 2.22 3.19 0.86 0.05 (0.60)
------- -------- -------- ------- -------- --------
Distributions
Net Investment Income.. (0.31) (0.40) (0.37) (0.33) (0.10) (0.31)
In Excess of Net
Investment Income..... -- (0.05) (0.10) -- -- --
Net Realized Gain...... -- (2.24) (0.41) -- (0.77) (0.67)
Tax Return of Capital
(a)................... -- -- -- (0.18) (0.11) (0.14)
------- -------- -------- ------- -------- --------
Total Distributions.... (0.31) (2.69) (0.88) (0.51) (0.98) (1.12)
------- -------- -------- ------- -------- --------
Net Asset Value, End of
Period................. $ 8.62 $ 10.49 $ 10.96 $ 8.65 $ 8.30 $ 9.23
======= ======== ======== ======= ======== ========
Total Return............ (15.12)% 21.12% 38.06% 10.87% 0.65% (5.22)%
======= ======== ======== ======= ======== ========
Ratios/Supplemental Data
Net Assets, End of
Period (Thousands)..... $79,717 $134,746 $129,275 $95,692 $105,569 $116,268
Ratio of Expenses to
Average Net Assets..... 1.22% 1.09% 1.23% 1.29% 1.28%* 1.22%
Ratio of Net Investment
Income to Average Net
Assets................. 3.14% 3.57% 4.09% 3.97% 4.35%* 2.87%
Portfolio Turnover
Rate................... 80% 90% 60% 65% 38%* 90%
</TABLE>
*
Annualized
(a)
Historically, the Portfolio has distributed to its shareholders amounts
approximating dividends received from the REITs. Such distributions may
include a portion which may be a return of capital.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Advisor Class Shares
---------------------------------------------
Years Ended December
31,
-------------------------- May 15, 1995+ to
1998 1997 1996 December 31, 1995
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 10.50 $ 10.98 $ 8.67 $ 8.00
------- ------- ------- ------
Income From Investment Operations
Net Investment Income........... 0.25 0.35 0.31 0.23
Net Realized and Unrealized Gain
(Loss)......................... (1.86) 1.80 2.84 0.80
------- ------- ------- ------
Total from Investment
Operations..................... (1.61) 2.15 3.15 1.03
------- ------- ------- ------
Distributions
Net Investment Income........... (0.27) (0.35) (0.31) (0.23)
In Excess of Net Investment
Income......................... -- (0.04) (0.12) --
Net Realized Gain............... -- (2.24) (0.41) --
Tax Return of Capital (a)....... -- -- -- (0.13)
------- ------- ------- ------
Total Distributions............. (0.27) (2.63) (0.84) (0.36)
------- ------- ------- ------
Net Asset Value, End of Period... $ 8.62 $ 10.50 $ 10.98 $ 8.67
======= ======= ======= ======
Total Return (b)................. (15.54)% 20.44% 37.44% 13.19%
======= ======= ======= ======
Ratios/Supplemental Data
Net Assets, End of Period
(Thousands)..................... $46,665 $85,222 $79,805 $5,520
Ratio of Expenses to Average Net
Assets.......................... 1.73% 1.59% 1.73% 1.99%*(c)
Ratio of Net Investment Income to
Average Net Assets.............. 2.65% 3.14% 3.91% 4.27%*(c)
Portfolio Turnover Rate.......... 80% 90% 60% 65%*
</TABLE>
* Annualized
+ Initial Offering of Advisor Shares
(a) Historically, the Portfolio has distributed to its shareholders amounts
approximating dividends received from the REITs. Such distributions may
include a portion which may be a return of capital.
(b) This result does not include the sales charge. If the charge had been
included, the return would have been lower.
(c) During 1995, the Advisor agreed to reimburse a portion of the Advisor
Shares' expenses. Without reimbursement, the expense ratio would have been
5.34% and the ratio of net investment income to average net assets would
have been 0.92%.
The accompanying notes are an integral part of the financial statements.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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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 Heitman
Real Estate Portfolio (the "Portfolio"), a portfolio of UAM Funds Trust, is a
diversified open-end management investment company. At December 31, 1998, the
UAM Funds were comprised of forty-six active portfolios. The information
presented in these financial statements pertains only to the Portfolio. The
Portfolio currently offers two separate classes of shares--Institutional Class
Shares and Advisor Class Shares. Both classes of shares have identical voting
rights (except Advisor 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 Portfolio's investment
objective is to obtain high total return consistent with reasonable risk by
investing primarily in equity securities of public companies principally
engaged in the real estate business.
On July 1, 1998, the Portfolio, a newly established portfolio of UAM Funds
Trust, acquired the assets and certain liabilities of the Heitman Real Estate
Fund, a series of Heitman Securities Trust (the "Trust"), pursuant to a plan
of reorganization approved by its shareholders. The acquisition was
accompanied by a tax-free exchange of shares of the Portfolio in an amount
equal to the outstanding shares of the Trust. The financial statements of the
Portfolio reflect the historical financial results of the Trust prior to the
reorganization.
Because the Portfolio may invest a substantial portion of its assets in
REITs, the Portfolio may also be subject to certain risks associated with
direct investments in REITs. REITs may be affected by changes in the value of
their underlying properties and by defaults by borrowers or tenants.
Furthermore, REITs are dependent upon specialized management skills, have
limited diversification and are, therefore, subject to risks inherent in
financing a limited number of projects. REITs depend generally on their
ability to generate cash flow to make distributions to shareholders, and
certain REITs have self-liquidation provisions by which mortgages held may be
paid in full and distributions of capital returns may be made at any time. In
addition, the performance of a REIT may be affected by its failure to qualify
for tax-free pass-through of income under the Internal Revenue Code or its
failure to maintain exemption from registration under the 1940 Act.
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
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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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: Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price from the exchange where the security is
primarily traded. If no sales are reported, as in the case of some
securities traded over-the-counter, the market value is determined by
using the average between the last reported bid and the last reported
offer prices quoted on such day. 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 Trustees.
2. Federal Income Taxes: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial
statements.
3. Repurchase Agreements: In connection with transactions involving
repurchase agreements, the Portfolio's custodian bank takes possession of
the underlying security ("collateral"), 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 counterparty 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 agreement. This joint repurchase agreement is covered by the
same collateral requirements as discussed above.
4. Distributions to Shareholders: The Portfolio will normally distribute
all of its net investment income quarterly. Any realized net capital gains
will be distributed annually. All distributions are recorded on ex-
dividend date. The Portfolio's distributions to shareholders may include a
13
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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return of capital received from the REITs as well as returns of capital
attributed to distributions of other income for financial reporting
purposes which was not subject to taxation.
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
recognition of gains and losses on securities and permanent differences
such as the gain (loss) on in-kind redemptions and return of capital
adjustments on REIT distributions.
Permanent book and tax basis differences resulted in reclassifications
for the year ended December 31, 1998, as follows, an increase in paid in
capital of $993,848, an increase in accumulated net realized loss of
$992,084, and a decrease in accumulated net investment income of $1,764.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income for the purpose of calculating net
investment income (loss) per share in the financial highlights.
5. Other: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains or
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 recorded 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 that 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 are shown gross of expense offsets, if
any, for custodian balance credits.
B. Advisory Services: Under the terms of an investment advisory agreement,
Heitman/PRA Securities Advisors, Inc. (the "Adviser"), an indirect wholly-
owned subsidiary of United Asset Management Corporation ("UAM"), provides
investment advisory services to the Portfolio at a fee calculated at an annual
rate of 0.75% of the first $100 million of daily average net assets and 0.65%
of daily average net assets in excess of $100 million.
C. Administration Services: Prior to March 1, 1998, Rodney Square Management
Corporation ("Rodney Square"), a wholly owned subsidiary of Wilmington Trust
Company ("WTC"), which is wholly owned by Wilmington
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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Trust Corporation, a publicly held bank holding company, provided accounting,
administration, dividend disbursing, shareholder servicing, and transfer agent
services to the Portfolio. For accounting services provided, the Portfolio
paid an annual fee of $75,000, plus an amount equal to 0.02% of the
Portfolio's average daily net assets in excess of $100 million, plus any out-
of-pocket expenses. For administrative services provided, Rodney Square
received a monthly administration fee from the Portfolio at an annual rate of
0.10% of the Portfolio's average daily net assets, plus any out-of-pocket
expenses. For the year ended December 31, 1998, Rodney Square received $20,941
for its services as administrator.
Effective March 1, 1998 UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of UAM, assumed administrative, fund accounting,
dividend disbursing, shareholder servicing and transfer agent services to the
Portfolio under an existing agreement with the UAM Funds. The Administrator
has entered into a Mutual Funds Service Agreement with Chase Global Funds
Services Company ("CGFSC"), a corporate affiliate of The Chase Manhattan Bank,
under which CGFSC agrees to provide certain services, including, but not
limited to, administrative, fund accounting, dividend disbursing, shareholder
servicing and transfer agent services.
Pursuant to the Agreement, the Portfolio pays the Administrator a two part
monthly fee:
--a Portfolio-specific monthly fee of 0.06% per annum of the average daily
net assets of the Portfolio which is retained by the Administrator.
--a sub-administration fee ("the Sub-Administration Fee") which the
Administrator in turn pays to CGFSC on a monthly basis, calculated as
0.19% of the first $200 million of the combined aggregate net assets of
the UAM Funds; plus 0.11% of the next $800 million of the combined
aggregate net assets of the UAM Funds; plus 0.07% of the next $2 billion
of the combined aggregate net assets of the UAM Funds; plus 0.05% of the
combined aggregate net assets of the UAM Funds in excess of $3 billion.
The Sub-Administration Fee is allocated among the portfolios of the UAM
Funds on the basis of their relative net assets and is 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 over the same period.
Effective October 23, 1998, the Mutual Funds Service Agreement with CGFSC
was revised to exclude dividend disbursing, shareholder servicing and transfer
agent services. Pursuant to the revised Mutual Funds Service Agreement,
15
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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the Sub-Administration Fee paid by the Portfolio to the Administrator and in
turn paid to CGFSC is calculated as a base fee per Portfolio of $52,500
annually plus $7,500 annually for each additional class of shares; plus 0.039%
of the net assets of the Portfolio.
For the year ended December 31, 1998, UAM Funds Services, Inc. earned
$240,055 from the Portfolio as Administrator of which $129,292 was paid to
CGFSC for its services as Sub-Administrator.
Also, effective October 23, 1998, dividend disbursing and transfer agent
services were sub-contracted to DST Systems, Inc., an affiliate of UAM. The
Portfolio pays dividend disbursing, transfer agent and shareholder servicing
fees to the Administrator who in turn pays them to DST Systems, Inc. and UAM
Shareholder Services Center, Inc., as appropriate. For the year ended December
31, 1998, the Portfolio incurred $15,672 in shareholder servicing fees with
UAM Shareholder Services Center, Inc. This fee is based on the number of
classes and shareholder accounts.
D. Custodian: Prior to March 1, 1998, Wilmington Trust Company served as
custodian for the Portfolio's assets. Effective March 1, 1998, the Chase
Manhattan Bank now serves as custodian for the Portfolio's assets and the
assets are held in accordance with the custodian agreement.
E. Distribution Services: UAM Fund Distributors, Inc., a wholly-owned
subsidiary of UAM, distributes the Institutional class shares of the
Portfolio. UAM Fund Distributors, Inc. does not receive any fee or other
compensation with respect to the Portfolio.
The Portfolio has adopted a Distribution Plan for the Advisor Class Shares
in accordance with Rule 12b-1 under the 1940 Act. Under the provisions of the
Distribution Plan, the Portfolio makes payments to ACG Capital Corporation,
the distributor for the Advisor Class Shares ("ACG" or the "Distributor"), at
an annual rate of 0.25% of the daily net assets of Advisor Class Shares of the
Portfolio, as a distribution fee. The distribution fees are used by the
Distributor to finance activities primarily intended to result in the sale of
Advisor Class Shares of the Portfolio.
The Portfolio has also adopted a Shareholder Servicing Plan for the Advisor
Class Shares. Pursuant to the Shareholder Servicing Plan, the Trust contracts
with service organizations to provide a variety of shareholder services, such
as maintaining shareholder accounts and records, answering inquiries regarding
the Portfolio, and processing purchase and redemption orders. The Portfolio
pays fees
16
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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to the Distributor which are then paid to the service organizations in amounts
up to an annual rate of 0.25% of the daily net asset value of Advisor Class
Shares owned by shareholders with whom the service organization has a
servicing relationship.
Under the Plans, the Portfolio may not incur distribution and service fees
which exceed an annual rate of 0.50% of the Portfolio's net assets without
first obtaining shareholder approval.
F. Trustees' Fees: Each Trustee, who is not an officer or affiliated person,
receives $2,000 per meeting attended plus reimbursement of expenses incurred
in attending Trustees meetings, 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.
G. Purchases and Sales: For the year ended December 31, 1998, the Portfolio
made purchases of $124,468,513 and sales of $174,280,588 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. In-Kind Transactions: For the year ended December 31, 1998 the Portfolio
realized gains of $992,084 from in-kind redemptions.
I. Other: At December 31, 1998, 53% of total Institutional Class Shares
outstanding were held by 2 record Shareholders owning 10% or greater of the
aggregate total Institutional Class Shares outstanding and 40% of total
Advisor Class Shares were held by 2 record shareholders owning 10% or greater
of the aggregate total Advisor Class Shares outstanding.
At December 31, 1998, the Portfolio had available a capital loss carryover
for Federal Income tax purposes of approximately $1,616,313 which will expire
on December 31, 2006.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
UAM Funds Trust and Shareholders of
Heitman Real Estate 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 Heitman Real
Estate Portfolio (the "Portfolio"), a Portfolio of the UAM Funds Trust, at
December 31, 1998, 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 December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 4, 1999
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18
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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Officers and Trustees
Norton H. Reamer William H. Park
Trustee, President and Chairman Vice President
John T. Bennett, Jr. Michael E. DeFao
Trustee Secretary
Nancy J. Dunn Gary L. French
Trustee Treasurer
Philip D. English Robert R. Flaherty
Trustee Assistant Treasurer
William A. Humenuk Michael J. Leary
Trustee Assistant Treasurer
James P. Pappas Michelle Azrialy
Trustee Assistant Secretary
Peter M. Whitman, Jr.
Trustee
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UAM Funds
P.O. Box 419081
Kansas City, MO 64141-6081
(toll free)
1-877-UAM-LINK (826-5465)
www.uam.com
Investment Adviser
Heitman/PRA Securities Advisors, Inc.
180 North La Salle Street
Chicago, IL 60601
Distributor -- Institutional Class Shares
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
Distributor -- Advisor Class Shares
ACG Capital Corporation
1661 Tice Valley Boulevard
Walnut Creek, CA 94595
This report has been prepared for
shareholders and may be distributed
to others only if preceded or
accompanied by a current prospectus.
