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UAM Funds
Funds for the Informed Investor(sm)
Heitman Real Estate Portfolio
Semi-Annual Report June 30, 2000
[LOGO]
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
June 30, 2000
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TABLE OF CONTENTS
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Shareholders' Letter .................................................... 1
Portfolio of Investments ................................................ 6
Statement of Assets and Liabilities ..................................... 8
Statement of Operations ................................................. 9
Statement of Changes in Net Assets ...................................... 10
Financial Highlights .................................................... 11
Notes to Financial Statements ........................................... 13
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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July 14, 2000
Dear Shareholder:
PERFORMANCE
The second quarter of 2000 proved to be a strong one for REITs, with the
Wilshire Real Estate Securities Index (WRESI) turning in its best performance, a
positive 12.1%, since the third quarter of 1997. This second quarter return adds
to a first quarter return of 2.8%, resulting in a year to date return of 15.2%.
By comparison, the S&P 500 Index was down 0.4% year to date and the Russell 2000
was up 3.1% year to date through June 30th.
The performance of the Heitman Real Estate Portfolio (the "Fund") for the first
six months of 2000 was 11.8% for the Institutional Class, and 11.5% at net asset
value and 6.2%(1)at public offering price for the Advisor Class. The Fund has a
long-established performance objective of exceeding the Wilshire Real Estate
Securities Index. Since inception of the Fund - Institutional Class - in March,
1989 through June 30, 2000, Fund performance has been 8.1%, outperforming the
WRESI by 318 basis points. The following table compares the Fund's performance
versus the indices for the period ending June 30, 2000.
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)- 6/30/00 8.15% N/A N/A 4.97% 18.11%
5/15/95(3)- 6/30/00 N/A 11.38% 10.33% 11.08% 24.37%
10 Years Ending
6/30/00 9.93% N/A N/A 6.37% 17.79%
5 Years Ending
6/30/00 11.89% 11.38% 10.30% 10.38% 23.80%
3 Years Ending
6/30/00 2.21% 1.71% 0.08% 1.18% 19.67%
1 Year Ending
6/30/00 4.13% 3.63% -1.30% 4.46% 7.25%
6 Months Ending
6/30/00 11.81% 11.53% 6.24% 15.21% -0.43%
Quarter Ending
6/30/00 10.70% 10.56% 5.31% 12.07% -2.66%
</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.
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All property sectors within the WRESI with the exception of factory outlets
posted positive returns through June 30th, and all sectors, including factory
outlets, had positive return for the second quarter. The hotel sector was the
biggest gainer (6 months), up 25.1%, with the office sector next with a year to
date return of 17.9%. Other sectors posting double-digit year to date gains are
apartments, diversified, industrial, and regional retail.
The strong positive performance of REITs in the second quarter of 2000
represents a significant rebound in values, after two down years in 1998 and
1999. The weighted average REIT Cash Available for Distribution (CAD) multiple
contracted from 14.8x at the end of 1997 to approximately 9.0x at the end of
1999. During the second quarter of 2000 the weighted average CAD multiple
increased to approximately 10.2x.
Market Capitalization
During the first six months of 2000 the market capitalization of the WRESI
increased $9.9 billion, to $123.0 billion. This was a reversal over the previous
year, which saw the WRESI market cap decline by $7.2 billion. The recent
increase in market capitalization has largely been a reflection of REIT price
performance. During the first quarter of 2000 market capitalization remained
stable, however, the market cap increased during the second quarter of 2000 when
REITs rallied. There has been little new equity capital raised thus far in 2000,
with zero raised in the form of initial public offerings and only $1.3 billion
in secondary offerings. We believe that this trend will continue for the
remainder of 2000 as equity remains an expensive source of capital for real
estate companies still trading below net asset value. Consolidation within the
sector should continue and we expect few, if any, new companies coming public in
the near-term. Longer term, we expect the market capitalization of the WRESI to
increase as commercial property ownership in the United States continues its
gradual shift from private to public ownership.
Real Estate Market Conditions
Real estate markets continue to exhibit strong supply/demand fundamentals.
Buoyed by the Goldilocks economy, the demand by end users for all types of real
estate space remains healthy. In addition, the investment demand for real
estate, particularly from large state and corporate pension plans is robust even
in the face of recent modest increases in interest rates. This has allowed the
price of real estate to appreciate in virtual lock step with increasing revenues
at the property level. From a supply perspective recent interest rate increases
along with lender discipline have kept new
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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development in check in the majority of metropolitan areas. In a few markets
where new supply has run ahead of demand, lenders have been quick to reduce the
flow of capital, preventing any major overbuilding.
Looking at the individual property types there is little variation in the
underlying theme of supply/demand balance. In the apartment sector vacancy is
once again trending downward and rent growth continues to outpace inflation.
While upcoming new supply has been running a bit ahead of expected demand in
some markets, new supply appears to have peaked. In addition, rising interest
rates have begun to take some steam out of the ownership housing market, which
benefits the apartment sector. In the office sector demand has reached record
levels over the past two quarters. Some of this has been driven by the rapidly
expanding technology sector, resulting in sharp rent increases in technology
hubs such as Silicon Valley and suburban Washington, DC. New office supply has
remained steady over the past 18 months with interest moving away from suburban
markets toward low vacancy, supply constrained downtown markets. Weakness in the
technology sector could cause a diminution in the rapid rent growth in some
markets but overall office rent growth is likely to outpace the rate of
inflation over the next several quarters. Retail real estate continues to
benefit from bullish consumers and continued expansion among retailers. With
retail sales growth forecast to continue to outpace inflation and with only
limited new supply of new venues in most retail formats, vacancy rates have
declined and rents keep rising. It has also become clear that the internet is no
longer the perceived threat it once was. As many pure E-tailers have struggled,
their more traditional brick-and-mortar rivals have been adopting internet
strategies to compliment rather than replace existing retail outlets. The
industrial sector has exhibited excellent market discipline with a stable 7%
vacancy rate for four years. Rents continue to rise at a moderate pace and there
are few examples of overbuilding. This sector's performance is closely linked
with the performance of the overall economy. The only property type that may
show signs of deteriorating supply/demand fundamentals is the hotel segment. In
many markets there will be a spate of new hotel openings, particularly luxury
hotels, during 2001. This is expected to put pressure on revenue growth in this
sector.
Near Term Outlook
The strong performance of the REIT sector for the six months ending June 30th,
2000 encourages us to believe that investors now consider income and value
stocks to be worthy alternatives to the growth-at-any-price and momentum stocks
that have
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dominated the domestic equity market for the past two years. Continued investor
enthusiasm for income and value stocks would support additional strong
performance for REITs. Even considering how far REITs have moved in the past
quarter REITs do not yet appear expensive on an absolute, relative, or
historical, basis. In fact, as of June 30th, 2000 the average REIT's stock price
represented an approximate 9% discount to the net asset value of the real estate
owned by the REIT.
Given the generally healthy state of U.S. property markets, the outlook for the
fundamental driver of earnings for REITs, increasing market rental rates,
appears favorable. REITs have the potential for continued earnings growth
through active management of core portfolios, through reinvestment of free cash
flow into acquisitions and developments of new real estate assets, and through
capital recycling such as sales of mature properties paired with developments of
new properties. We believe that stabilized REIT earnings growth rate could grow
at approximately 8% per annum.
In this stable growth environment, dividend income will represent a significant
component of REIT total return. As of June 30th, 2000, the dividend yield on the
Wilshire Real Estate Securities Index stood at 6.9% compared with yields of
6.08% on the 10-year Treasury and 3.6% on the S&P Utilities Index (SPXU).
Generally, REIT dividends are secure, representing on average approximately 75%
of REIT cash flow, and growing, since dividends must grow as taxable income
grows in order to maintain compliance with REIT tax regulations.
Capital appreciation will account for the balance of REIT total return. Assuming
stable stock price to earnings multiples, we feel that REIT stock prices should
appreciate as REIT earnings grow. In addition, assuming healthy property markets
such as we have today, we see REIT cash flows growing, thus helping to drive
REIT property values and REIT stock prices higher.
Sincerely,
/s/ Timothy J. Pire /s/ Reagan Pratt /s/ Larry Antonotos
Timothy J. Pire, CFA Reagan Pratt Larry Antonotos
Portfolio Manager Portfolio Manager Portfolio Manager
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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 Comparative Indices
---------------------------------
Standard & Poor's 500 Index is an unmanaged index composed of the 400
industrial, 40 financial, 40 utility and 20 transportation stocks.
Standard & Poor's Utilities Index is a market capitalization weighted index
representing three utility groups and, with the three groups, 43 of the largest
utility companies listed on the New York Stock Exchange.
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 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 directly in an unmanaged index.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
JUNE 30, 2000 (Unaudited)
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PORTFOLIO OF INVESTMENTS
COMMON STOCKS - 92.7%
Shares Value
--------- ----------
AMB Property ........................................... 83,900 $1,913,969
Apartment Investment & Management ...................... 95,900 4,147,675
Archstone Community Trust .............................. 87,420 1,841,284
Arden Realty ........................................... 109,400 2,570,900
Avalonbay Communities .................................. 25,000 1,043,750
Bedford Property Investors ............................. 107,400 1,993,612
Brandywine Realty Trust ................................ 47,300 904,612
CBL & Associates Properties ............................ 75,400 1,880,287
CenterPoint Properties ................................. 45,600 1,858,200
Centertrust Retail Properties .......................... 115,400 584,213
Chateau Communities .................................... 6,500 183,625
Chelsea GCA Realty ..................................... 93,293 3,224,439
Developers Diversified Realty .......................... 66,660 995,734
Duke Realty Investments ................................ 195,030 4,363,796
Eastgroup Properties ................................... 81,218 1,710,654
Equity Office Properties Trust ......................... 221,400 6,102,338
Equity Residential Properties Trust .................... 87,766 4,037,236
Essex Property Trust ................................... 49,352 2,072,784
Excel Legacy* .......................................... 361,245 970,846
Franchise Finance Corp of America ...................... 110,000 2,530,000
General Growth Properties .............................. 118,900 3,775,075
Highwoods Properties ................................... 61,500 1,476,000
Home Properties of New York ............................ 8,700 261,000
Kilroy Realty .......................................... 104,700 2,715,656
Kimco Realty ........................................... 54,800 2,246,800
Liberty Property Trust ................................. 51,500 1,335,781
Macerich ............................................... 32,400 714,825
Manufactured Home Communities .......................... 53,500 1,280,656
Pacific Gulf Properties ................................ 37,800 947,363
Parkway Properties ..................................... 52,500 1,601,250
Philips International Realty ........................... 136,800 2,376,900
Prentiss Properties Trust .............................. 103,300 2,479,200
ProLogis Trust ......................................... 206,470 4,400,392
PS Business Parks ...................................... 60,100 1,442,400
Public Storage ......................................... 107,120 2,510,625
Reckson Assoc. Realty, CL B ............................ 123,329 3,137,181
Regency Realty ......................................... 67,600 1,605,500
Security Capital Group, CL B* .......................... 89,200 1,516,400
The accompanying notes are an integral part of the financial statements.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
JUNE 30, 2000 (Unaudited)
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<TABLE>
<CAPTION>
Shares Value
---------- ----------
<S> <C> <C>
Spieker Properties ............................................... 59,800 $ 2,750,800
Sun Communities .................................................. 52,700 1,762,156
Taubman Centers .................................................. 28,500 313,500
Trizec Hahn ...................................................... 111,300 1,989,488
US Restaurant Properties ......................................... 51,000 455,813
Vornado Realty Trust ............................................. 15,900 552,525
-----------
TOTAL COMMON STOCKS
(Cost $85,116,524) ............................................. $88,577,240
PREFERRED STOCKS -- 5.2%
Health Care Property Investors, 7.875%, Series A ................. 36,900 652,669
Taubman Center, 8.30%, Series A .................................. 82,200 1,541,250
Vornado Realty Trust, 6.50%, Series A ............................ 52,700 2,730,519
-----------
TOTAL PREFERRED STOCKS
(Cost $5,272,744) .............................................. 4,924,438
-----------
SHORT-TERM INVESTMENT -- 2.2%
Face
Amount
------
REPURCHASE AGREEMENT -- 2.2%
Chase Securities Inc. 6.250% dated 06/30/00, due 07/03/00,
to be repurchased at $2,128,107, collateralized by $1,963,419
of a U.S. Treasury Bond valued at $2,178,446 (Cost $2,127,000 .. $2,127,000 2,127,000
-----------
TOTAL INVESTMENTS -- 100.1%
(Cost $92,516,268) (A) ......................................... 95,628,678
-----------
OTHER ASSETS AND LIABILITIES, NET -- (0.1%) ...................... (80,052)
-----------
TOTAL NET ASSETS -- 100.0% ........................................ $ 95,548,626
===========
</TABLE>
* Non-income producing security
Cl Class
(A) The cost for federal income tax purposes was $92,516,268. At June 30, 2000,
net unrealized appreciation for all securities based on tax cost was
$3,112,410. This consisted of aggregate gross unrealized appreciation for
all securities of $6,483,207 and aggregate gross unrealized depreciation
for all securities of $3,370,797.
The accompanying notes are an integral part of the financial statements.
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JUNE 30, 2000 (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
Assets
Investments, at Cost ................................................... $92,516,268
===========
Investments, at Value -- Note A ........................................ $95,628,678
Cash ................................................................... 46
Receivable for Investments Sold ........................................ 1,404,684
Dividends and Interest Receivable ...................................... 789,663
Receivable for Portfolio Shares Sold ................................... 437,398
Other Assets ........................................................... 8,219
-----------
Total Assets ......................................................... 98,268,688
-----------
Liabilities
Payable for Investment Securities Purchased ............................ 2,135,178
Payable for Portfolio Shares Redeemed .................................. 347,706
Payable for Administrative Fees -- Note C .............................. 170,875
Payable for Investment Advisory Fees -- Note B ......................... 59,305
Payable for Distribution and Shareholder Servicing Fees -- Note E ...... 6,998
-----------
Total Liabilities .................................................... 2,720,062
-----------
Net Assets ............................................................. $95,548,626
===========
Net Assets Consist of:
Paid in Capital ........................................................ $93,712,412
Overdistributed Net Investment Income .................................. (4,037)
Accumulated Net Realized Loss .......................................... (1,272,159)
Unrealized Appreciation ................................................ 3,112,410
-----------
Net Assets ............................................................. $95,548,626
Institutional Class Shares
Net Assets ............................................................. $70,930,584
Shares Issued and Outstanding+ ......................................... 8,093,770
Net Asset Value and Redemption Price Per Share ......................... $8.76
=====
Advisor Class Shares
Net Assets ............................................................. $24,618,042
Shares Issued and Outstanding+ ......................................... 2,809,623
Net Asset Value and Redemption Price Per Share ......................... $8.76
=====
Offering Price Per Share ($8.76 / .9525) ............................... $9.20
===========
</TABLE>
+ Unlimited Number of Shares Authorized
The accompanying notes are an integral part of the financial statements.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
FOR THE SIX MONTHS ENDED
JUNE 30, 2000 (Unaudited)
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<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
<S> <C>
Investment Income
Dividends ............................................................... $2,981,729
Interest ................................................................ 91,067
Less: Foreign Taxes Withheld ............................................ (12,335)
-----------
Total Income .......................................................... 3,060,461
-----------
Expenses
Investment Advisory Fees -- Note B ...................................... 346,320
Administrative Fees -- Note C ........................................... 254,426
Distribution and Shareholder Servicing Fees -- Note E ................... 32,889
Transfer Agent Fees ..................................................... 21,309
Custodian Fees -- Note D ................................................ 19,593
Registration and Filing Fees ............................................ 12,926
Audit Fees .............................................................. 11,122
Legal Fees .............................................................. 8,418
Printing Fees ........................................................... 4,255
Insurance Expense ....................................................... 2,442
Trustees' Fees -- Note F ................................................ 1,993
Other Expenses .......................................................... 6,110
-----------
Net Expenses Before Expense Offset .................................... 721,803
Expense Offset -- Note A ................................................ (7,863)
-----------
Net Expenses After Expense Offset ..................................... 713,940
-----------
Net Investment Income ................................................... 2,346,521
-----------
Net Realized Loss on Investments ........................................ (876,361)
Net Change in Unrealized Appreciation (Depreciation) on Investments ..... 8,926,704
-----------
Net Realized and Unrealized Gain on Investments ......................... 8,050,343
-----------
Net Increase in Net Assets Resulting from Operations .................... $10,396,864
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 2000 December 31,
(Unaudited) 1999
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income ................................................... $ 2,346,521 $ 5,955,363
Net Realized Gain (Loss) ................................................ (876,361) 1,906,579
Net Change in Unrealized Appreciation (Depreciation) .................... 8,926,704 (9,900,460)
----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations ....................................................... 10,396,864 (2,038,518)
----------- -----------
Distributions:
Net Investment Income:
Institutional Class ................................................... (1,761,954) (4,360,546)
Advisor Class ......................................................... (588,604) (1,937,600)
----------- -----------
Total Distributions ................................................... (2,350,558) (6,298,146)
----------- -----------
Capital Share Transactions (1):
Institutional Class
Issued .................................................................. 13,302,152 27,423,998
In Lieu of Cash Distributions ........................................... 765,578 2,087,262
Redeemed ................................................................ (14,796,155) (37,909,875)
----------- -----------
Net Decrease from Institutional Class Shares .......................... (728,425) (8,398,615)
----------- -----------
Advisor Class
Issued .................................................................. 1,008,508 4,702,989
In Lieu of Cash Distributions ........................................... 528,995 1,774,948
Redeemed ................................................................ (8,575,489) (20,856,749)
----------- -----------
Net Decrease from Advisor Class Shares ................................ (7,037,986) (14,378,812)
----------- -----------
Net Decrease from Capital Share Transactions .......................... (7,766,411) (22,777,427)
----------- -----------
Total Increase (Decrease) ........................................... 279,895 (31,114,091)
----------- -----------
Net Assets:
Beginning of Period ..................................................... 95,268,731 126,382,822
----------- -----------
End of Period (including undistributed net investment
income of $(4,037) and 0, respectively) ............................... $95,548,626 $95,268,731
=========== ===========
(1) Shares Issued and Redeemed:
Institutional Class:
Issued .................................................................. 1,610,013 3,286,557
In Lieu of Cash Distributions ........................................... 90,239 255,942
Redeemed ................................................................ (1,784,331) (4,610,221)
----------- -----------
Net Decrease from Institutional Class Shares .......................... (84,079) (1,067,722)
----------- -----------
Advisor Class:
Issued .................................................................. 122,432 558,272
In Lieu of Cash Distributions ........................................... 62,657 217,948
Redeemed ................................................................ (1,045,721) (2,518,320)
----------- -----------
Net Decrease from Advisor Class Shares ................................ (860,632) (1,742,100)
----------- -----------
Net Decrease in Shares Outstanding .................................... (944,711) (2,809,822)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Institutional Class Shares
Six Months ----------------------------------------------------
Ended
June 30, Years Ended December 31,
2000 ----------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .......... $ 8.04 $ 8.62 $ 10.49 $ 10.96 $ 8.65 $ 8.30
------- ------- ------- -------- -------- -------
Income from Investment
Operations:
Net Investment Income ........ 0.22 0.43 0.32 0.40 0.37 0.33
Net Realized and
Unrealized
Gain (Loss) ................ 0.72 (0.54) (1.88) 1.82 2.82 0.53
------- ------- ------- -------- -------- -------
Total from Investment
Operations ................. 0.94 (0.11) (1.56) 2.22 3.19 0.86
------- ------- ------- -------- -------- -------
Distributions:
Net Investment Income ........ (0.22) (0.47) (0.31) (0.40) (0.37) (0.33)
In Excess of Net
Investment Income .......... -- -- -- (0.05) (0.10) --
Net Realized Gain ............ -- -- -- (2.24) (0.41) --
Tax Return of
Capital (a) ................ -- -- -- -- -- (0.18)
------- ------- ------- -------- -------- -------
Total Distributions ........ (0.22) (0.47) (0.31) (2.69) (0.88) (0.51)
------- ------- ------- -------- -------- -------
Net Asset Value,
End of Period .................. $ 8.76 $ 8.04 $ 8.62 $ 10.49 $ 10.96 $ 8.65
======= ======= ======= ======== ======== =======
Total Return ................... 11.81%** (1.16)% (15.12)% 21.12% 38.06% 10.87%
======= ======= ======= ======== ======== =======
Ratios and
Supplemental Data
Net Assets, End of
Period (Thousands) ........... $70,931 $65,767 $79,717 $134,746 $129,275 $95,692
Ratio of Expenses to
Average Net Assets ........... 1.40%* 1.25% 1.22% 1.09% 1.23% 1.29%
Ratio of Net Investment
Income to Average
Net Assets ................... 5.28%* 5.12% 3.14% 3.57% 4.09% 3.97%
Portfolio Turnover Rate ........ 31% 49% 80% 90% 60% 65%
</TABLE>
* Annualized
** Not 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.
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FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Advisor Class Shares
Six Months ---------------------------------------
Ended May 15,
June 30, Years Ended December 31, 1995+ to
2000 --------------------------------------- December
(Unaudited) 1999 1998 1997 1996 31, 1995
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ......... $ 8.04 $ 8.62 $ 10.50 $ 10.98 $ 8.67 $ 8.00
------- ------- ------- ------- ------- ------
Income from Investment
Operations:
Net Investment Income ..... 0.20 0.39 0.25 0.35 0.31 0.23
Net Realized and
Unrealized Gain (Loss) .. 0.72 (0.53) (1.86) 1.80 2.84 0.80
------- ------- ------- ------- ------- ------
Total from Investment
Operations .............. 0.92 (0.14) (1.61) 2.15 3.15 1.03
------- ------- ------- ------- ------- ------
Distributions:
Net Investment Income ..... (0.20) (0.44) (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 . (0.20) (0.44) (0.27) (2.63) (0.84) (0.36)
------- ------- ------- ------- ------- ------
Net Asset Value,
End of Period ............... $ 8.76 $ 8.04 $ 8.62 $ 10.50 $ 10.98 $ 8.67
======= ======= ======= ======= ======= ======
Total Return (b) ............ 11.53%** (1.62)% (15.54)% 20.44% 37.44% 13.19%
======= ======= ======= ======= ======= ======
Ratios and
Supplemental Data
Net Assets, End of
Period (Thousands) .......... $24,618 $29,502 $46,665 $85,222 $79,805 $5,520
Ratio of Expenses to
Average Net Assets .......... 1.90%* 1.73% 1.73% 1.59% 1.73% 1.99%*(c)
Ratio of Net Investment
Income to Average
Net Assets .................. 4.59%* 4.64% 2.65% 3.14% 3.91% 4.27%*(c)
Portfolio Turnover Rate ..... 31% 49% 80% 90% 60% 65%
</TABLE>
* Annualized
** Not 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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NOTES TO FINANCIAL STATEMENTS (Unaudited)
UAM Funds, Inc., UAM Funds, Inc. II 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 June
30, 2000, the UAM Funds were comprised of 49 active portfolios. The information
presented in the 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. Additionally, the Advisor Class
Shares have a sales load with a maximum value of 4.75%. The Portfolio's
investment objective is to obtain a 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 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
Real Estate Investment Trusts (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 reported bid
price quoted on such day. Short-term investments with 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 following procedures approved 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 securities ("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
agreements. 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 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.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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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 return of capital adjustments on REIT distributions.
Permanent book and tax basis differences may result in reclassifications to
undistributed net investment income (loss), accumulated net realized gain
(loss) and paid in capital.
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 is 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 recognized on an accrual basis. 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 Advisers, LLC (the "Adviser"), a 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. Administrative Services: UAM Fund Services, Inc. (the "Administrator"),
a wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing, shareholder servicing and transfer agent
services to the Portfolio under a Fund Administration Agreement (the
"Agreement"). The Administrator has entered into separate Service Agreements
with SEI Investments Mutual Fund Services ("SEI"), a wholly-owned subsidiary of
SEI Investments Company, DST Systems, Inc., ("DST") and UAM Shareholder Service
Center ("UAMSSC"), an affiliate of UAM, to assist in providing certain services
to the Portfolio.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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Pursuant to the Agreement, the Portfolio pays the Administrator 0.093% per
annum of the average daily net assets of the Portfolio, an annual base fee of no
more than$94,250, and a fee based on the number of active shareholder accounts.
For the period ended June 30, 2000, the Administrator was paid$254,426, of
which$34,475 was paid to SEI for their services,$59,407 to DST for their
services, and$119,864 to UAMSSC for their services.
D. Custodian: The Chase Manhattan Bank is 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 shares of the Portfolio. At the discretion of
UAM Fund Distributors, Inc., the entire sales charge it receives for
distribution of the Advisor Class Shares may at times be reallowed to authorized
dealers responsible for the sale.
The Portfolio has adopted a Distribution and Service Plan (the "Plan") for
the Advisor Class Shares in accordance with Rule 12b-1 under the 1940 Act. Under
the provisions of the Plan, the Portfolio may not incur distribution and service
fees which exceed the annual rate of 0.50% of the average daily net assets of
Advisor Class Shares' net assets, without first obtaining shareholder approval.
The Portfolio's Advisor Class Shares are currently making payments for
distribution fees at an annual rate of 0.25% of average daily net assets. In
addition, the Portfolio pays service fees at an annual rate of 0.25% of the
average daily net assets of Advisor Class shares owned by the clients of the
Service Agents.
ACG Capital Corporation acts as limited distributor of Advisor Class Shares
by providing certain administrative and support services to those broker-dealer
firms and registered representatives who have offered and sold Advisor Class
Shares prior to March 31, 1999.
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 Trustee 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.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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G. Purchases and Sales: For the six months ended June 30, 2000, the
Portfolio made purchases of $27,995,228 and sales of$36,025,979 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 $0 and $0,
respectively.
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 six months ended
June 30, 2000, the Portfolio had no borrowings under the agreement.
I. Other: At June 30, 2000, 56% 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 1 record shareholder.
At December, 31, 1999, the Portfolio had available a capital loss carryover
for Federal Income tax purposes of approximately $26,026 which will expire on
December 31, 2006.
On June 19, 2000, Old Mutual, plc and United Asset Management Corporation
announced an agreement for Old Mutual to acquire United Asset Management. Old
Mutual is a UK-based financial services group with substantial asset management,
insurance and banking businesses. The closing of the transaction is expected to
take place during the fourth quarter of 2000 and is subject to a number of
conditions. As required by the Investment Company Act of 1940, the portfolio's
shareholders will be asked to approve a new investment advisory agreement with
the adviser, to take effect upon the consummation of the transaction. The new
agreement will be identical to the current agreement in all respects except for
its effective and termination dates. The new agreement will have no effect on
the contractual advisory fee rate payable by the portfolio. No changes are
currently planned which would affect the services being provided to the
portfolio.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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Officers and Trustees
Norton H. Reamer
Trustee, President and Chairman
John T. Bennett, Jr.
Trustee
Nancy J. Dunn
Trustee
Philip D. English
Trustee
William A. Humenuk
Trustee
James P. Pappas
Trustee
Peter M. Whitman, Jr.
Trustee
William H. Park
Vice President
Gary L. French
Treasurer
Robert R. Flaherty
Assistant Treasurer
Robert J. Della Croce
Assistant Treasurer
Martin J. Wolin, Esq.
Secretary
Theresa DelVecchio
Assistant Secretary
--------------------------------------------------------------------------------
UAM Funds
P.O. Box 219081
Kansas City, MO 64121
(toll free)
1-877-UAM-LINK (826-5465)
www.uam.com
Investment Adviser
Heitman/PRA Securities Advisers, LLC
180 North LaSalle Street
Chicago, IL 60601
Distributor
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
---------------------------------
This report has been prepared
for shareholders and may be
distributed to others
only if preceded or accompanied
by a current prospectus.
---------------------------------
