<PAGE>
UAM Funds
Funds for the Informed Investor(SM)
Heitman Real Estate Portfolio
Annual Report December 31, 1999
[LOGO OF UAM(R)]
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
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TABLE OF CONTENTS
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Shareholders' Letter ..................................................... 1
Portfolio of Investments ................................................. 9
Statement of Assets and Liabilities ...................................... 11
Statement of Operations .................................................. 12
Statement of Changes in Net Assets ....................................... 13
Financial Highlights ..................................................... 14
Notes to Financial Statements ............................................ 16
Report of Independent Accountants ........................................ 21
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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February 2, 2000
Dear Shareholder:
PERFORMANCE
The last two years have been difficult ones for investors in real estate
securities. While technology has led a raging bull market, Real Estate
Investment Trusts (REITs) and other real estate operating companies have been
facing two consecutive years of poor performance. The Heitman Real Estate
Portfolio (the "Portfolio") has once again outperformed its benchmark, the
Wilshire Real Estate Securities Index (WRESI) in 1999. WRESI was down -3.19% in
1999. The performance for the Portfolio for the year ended December 31, 1999 was
- -1.16% for the Institutional Class, and -1.62% at net asset value and -6.29%(1)
at public offering price for the Advisor Class.
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) - 12/31/99 7.43% N/A N/A 3.84% 18.94%
5/15/95(3) - 12/31/99 N/A 10.06% 8.90% 8.98% 27.41%
10 Years Ending
12/31/99 8.11% N/A N/A 4.12% 18.20%
5 Years Ending
12/31/99 9.24% N/A N/A 8.30% 28.55%
3 Years Ending
12/31/99 0.54% 0.03% -1.59% -1.43% 27.56%
1 Year Ending
12/31/99 -1.16% -1.62% -6.29% -3.19% 21.04%
Quarter Ending
12/31/99 -1.30% -1.38% -6.04% 0.23% 14.88%
</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.
While investors in real estate securities have not been rewarded with the strong
returns registered by other areas of the stock market, consider the following
attributes of real estate securities:
. The dividend yields of the underlying companies exhibit attractive spreads
to Treasury yields, as well as to yields on the S&P 500.
1
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. Companies are growing their dividends and dividend coverages are falling,
creating a cushion for investors, as seen in Exhibits 1 and 2.
. Real estate markets are healthy and the U.S. economy has shown sustained
strength creating good fundamentals in which companies can continue to grow
cash flows at the property level.
[CHART]
Exhibits 1 and 2
Rate of Growth = 4.8% Rate of Decline = 3.6%
1995 $1.54 1995 83%
1996 $1.60 1996 82%
1997 $1.67 1997 78%
1998 $1.76 1998 74%
1999 $1.85 1999 72%
. Cash flow multiples are the lowest we have seen since the modern REIT era
began in 1992.
. The real estate securities industry is trading at a discount to the underlying
value of the assets.
. Companies are successfully generating strong earnings growth while operating
in capital constrained environments. Selling assets and recycling the capital
into stock buybacks and higher yielding assets is creating value for
shareholders.
. Real estate securities offer diversification benefits when they are used in a
mixed asset portfolio.
Based on the above factors, we believe publicly traded real estate securities
may be poised for a turn around. The late-December rally should give investors
hope. The Portfolio's management team continues to adhere to its philosophy of
investing in companies with long term sustainable growth rates, which are also
reasonably priced. With current valuations in the market, the Portfolio is able
to invest in some of the highest quality publicly traded real estate companies
at very attractive prices.
From a sector standpoint, apartments were the best performing sector for the
year. The Portfolio maintained at least a market weighting in the apartment
sector throughout the year, often times over-weighting this sector, which
contributed additional
2
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return. The Portfolio also maintained an over-weighting in both the office and
industrial sectors. These sectors were the other positive performing sectors in
the WRESI for the year.
The worst performing sector for the year in the WRESI was the regional mall
sector. The Portfolio kept a low exposure to this sector all year long, with a
maximum of 2% of the Portfolio invested in this sector at any time during the
year. Currently, the Portfolio has no regional mall holdings, as we wait for the
potential negative effects of e-commerce to play out. For a second year in a
row, the Portfolio remained out of the hotel sector, due mostly to concerns over
the unfavorable supply and demand dynamics. The hotel sector was the second
worst performing sector in the WRESI during 1999.
REAL ESTATE MARKET CONDITIONS
US property markets continue to exhibit remarkable stability. With the current
economic expansion beyond seven years, the demand for all types of real estate
remains robust. In addition, widespread overbuilding, the culprit of the last
real estate downturn, is not a current threat in any property sector. As
regional markets have recovered there have been some minor episodes of
over-supply in a few markets, but in aggregate the capital markets have not
supplied the funds that would allow real estate markets to become severely
overbuilt. We expect these favorable supply/demand conditions to continue
through 2000 and beyond.
Looking at the various property types, in 1999 REIT investors appear to have
favored property sectors with the most orderly, least volatile development
cycles. The apartment and industrial sectors lead performance in the WRESI in
1999 with returns of 10.5% and 5.5%, respectively. The office sector had the
next best performance in 1999, with a return of 3.2%. While the office sector
has a more volatile development cycle, office enjoyed stronger earnings growth
than most other sectors in 1999 because it was the last sector to fully recover
from the high vacancy of the early 1990s (see chart below). The worst performing
sectors in the Wilshire appear to have been bitten by the internet bug. All
types of retail, (local, regional, and factory outlet), had double digit
negative returns in 1999, despite posting solid earnings. Hotels also
dramatically under-performed the WRESI at -13.3% due to investor concerns over
slowing revenue growth, increased leverage, and significant new development.
3
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[CHART]
National Vacancy Rates
Office, Industrial and Apartment Sector
1992, 1998, 1999 (Q3)
1992 1998 1999
---- ---- ----
Office Suburan 20.9% 9.1% 10.4%
Office Downtown 17.9% 8.7% 8.7%
Industrial 10.4% 7.0% 7.4%
Apartment 6.8% 4.2% 3.9%
Source: Heitman/PRA Securities Advisors LLC and Heitman Capital Management LLC
Looking in more detail at each sector:
. Apartment - Markets continue to enjoy low vacancy with the national vacancy
rate under 4%, and rent growth well ahead of inflation. While new supply has
picked up in the strongest markets, almost three-quarters of the nation's
apartment markets have a vacancy rate below 5%.
. Industrial - The 1990s has been a good decade for owners of industrial
property. Between 1992 and 1997 demand outpaced new supply resulting in a
declining national vacancy rate. As vacancy fell, rent growth accelerated,
peaking in late 1996. More recently, supply has caught up with demand in the
industrial sector causing the vacancy rate to inch up to 7.4% (see chart above).
Still, more than two-thirds of the nation's industrial markets remain below 8%
vacant. As supply has picked up rent growth has also moderated from 6% or better
in 1996-97, to a more sustainable 3-4% in 1998-99.
. Office - During the 1990's the office sector has been a bit of a laggard,
trailing other sectors in the broader real estate recovery. In 1998 the overall
theme was still rapid recovery in most office markets. During 1999 the story
changed, and today US office markets have reached a point of overall balance at
or near a cyclical peak. Now the story is more about balance, encouraging signs
of supply discipline, and continued prospects for solid if not record-setting
rent growth. For the first time since 1991,
4
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during 1999 office supply is estimated to have outpaced demand. Most of the new
supply continues to be in suburban markets and as a result, the downtown vacancy
rate remains stable while the suburban rate has crept up (see chart above). The
increased supply is reflected in moderating rent growth. The 10-15% rent growth
of 1998 settled into a more sustainable 4-6% range during 1999.
. Retail - It was a tale of two markets for retail during 1999. While retail
sales news was stellar and the profitability of REIT-owned assets was strong,
the stock price performance of retail REITs was consistently terrible. For most
of the year, traditional retailers' stock prices suffered along with REITs. As
late as August, the S&P Retail Index was down more than 6%, but as positive
holiday sales news began, the retailer's stocks rallied, while retail REIT
stocks did not. The contrast between retail REIT stock prices and the strength
of retail real estate was principally related to fears about e-commerce. While
the internet is having some impact on existing retailers, the 1999 holiday
season was one of the best in recent memory for traditional retailers, with
sales at the nation's malls up 7.7% over 1998, according to data from the
International Council of Shopping Centers (ICSC). An estimated 1.2 billion
shoppers visited the nation's malls this holiday season. The strong holiday
sales were just a continuation of the strong sales recorded for all of 1999.
Indeed, 1999's strong sales were a continuation of a string of strong sales
since 1996. As a result of strong retail sales the national vacancy rate has
declined steadily since 1992 and rents have risen in concert, since 1993.
[CHART]
US NON-Auto Retail Sales
Year-Over-Year Change
1992 to 1999
1992 4.1%
1993 4.6%
1994 5.7%
1995 3.8%
1996 5.0%
1997 4.2%
1998 7.1%
1999 (Dec) 9.4%
Source: Heitman/PRA Securities Advisors LLC and Heitman Capital Management LLC
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
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. Hotel - The hotel sector was the second worst performing sector in the WRESI
for 1999, down 13.4% for the year. Much of the investor concern regarding hotels
is well grounded. The construction of new hotels in 1999 was roughly 150,000
rooms which makes this the most over-supplied real estate sector. The supply of
new rooms has put pressure on occupancy and room rates, particularly in the
mid-price, economy and limited service segments. Although the sector is
currently suffering from too much supply, demand remains solid as the strong
economy encourages both business and leisure travel. If demand holds up in 2000,
fundamental trends should improve in 2000 and 2001, as we expect material
reductions in new supply.
. Other - The other boutique segments (manufactured housing and self storage) of
the REIT market had mixed results during 1999. Manufactured housing outperformed
the overall market with a decline of 1.9% for the WRESI. The self storage sector
under-performed with a decline of 8.2% for the WRESI. In both cases the stock
price declines were not related to real estate market fundamentals. Manufactured
housing benefits from the same strong demand that apartments do, and there is
very little new supply in this sector, primarily due to difficulties in getting
regulatory (zoning) approval. Supply/demand conditions in the self-storage
sector are also favorable with occupancy near a decade long high and rent growth
well above inflation. Investor concerns centered on slower earnings growth in
2000 related to the cost of developing new facilities and the time required to
lease them up.
NEAR TERM OUTLOOK
We believe there is compelling value in the REIT sector and believe this value
may be realized in 2000. Given the generally healthy state of US property
markets, the fundamental drivers of earnings for REITs remain favorable. REITs
should continue to grow earnings 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 asset sales paired
with stock repurchase programs. Although REIT earnings growth has slowed since
the heady days of 1996 and 1997, we expect REIT growth rates to stabilize at
approximately 7-8% per annum, and expect REIT price to earnings multiples, which
have been contracting since 1997 in expectation of slowing growth, to stabilize
as well.
In this stable but lower growth environment, dividend income will represent a
significant component of REIT total return. As of December 31, the dividend
yield on the WRESI stood at 7.6% compared to yields of 6.4% on the 10-year
Treasury and 4.4% on the S&P Utilities Index. REIT dividends are growing since
dividends must grow as taxable income grows in order to maintain compliance with
REIT tax regulations (Exhibit 1). REIT dividends are also secure, representing
on average approximately 72% of REIT earnings (Exhibit 2).
Capital appreciation will comprise the balance of REIT total return. As of
December 31, 1999, the average REIT stock price represented an approximate 15%
discount to
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the net asset value of the real estate owned by the REIT. We do not expect this
discount to persist. In addition, assuming healthy property markets with
balanced supply and demand dynamics such as we have today, we expect property
cash flows to increase, driving property values and REIT stock prices higher.
As Advisor to the Portfolio we remain loyal to our value investing style which
we interpret as growth at a reasonable price. We will continue to search for
companies which we believe will deliver solid, stable earnings growth and which
we believe are attractively priced relative to this growth.
Sincerely,
/s/ Timothy J. Pire /s/ Larry Antonatos /s/ Reagan Pratt
Timothy J. Pire Larry Antonatos Reagan Pratt
Co-Portfolio Manager Co-Portfolio Manager Co-Portfolio Manager
The investment results presented in this report represent past performance and
should not be construed as a guarantee of future results. A portfolio's
performance assumes the reinvestment of all dividends and distributions. There
are no assurances that a 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. A 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 400 industrial
stocks, 40 financial stocks, 40 utility stocks and 20 transportation stocks.
Standard & Poor's Retail Index is a market capitalization weighted index
representative of the retail component of the Standard & Poor's 500 Index.
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
he institutional investment community as a broad measure of the performance of
public real estate equity for asset allocation and performance comparison.
The comparative indices assume reinvestment of dividends and, unlike a
portfolio's returns, do not reflect any fees or expenses. If such fees were
reflected in the comparative indices' returns, the performance would have been
lower.
7
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[GRAPH]
Growth of a $10,000 Investment
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED DECEMBER 31, 1999
Institutional Class Shares Advisor Class Shares
1 Year 5 Years 10 Years 1 Year Since 5/15/95*
1.16% 9.24% 8.11% -1.62% 10.03%
HEITMAN S&P WILSHIRE
12/31/89 10,000 10,000 10,000
Dec-90 7,784 9,690 6,654
Dec-91 9,618 12,642 7,987
Dec-92 11,337 13,604 8,578
Dec-93 13,615 14,969 9,884
Dec-94 14,024 15,165 10,046
Dec-95 15,548 20,859 11,418
Dec-96 21,466 25,644 15,627
Dec-97 25,999 34,196 18,722
Dec-98 22,068 43,976 15,458
Dec-99 21,812 53,228 14,965
* Beginning of operations.
+ 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 reflects the deduction of
the maximum 4.75% sales charge.
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.
The comparative indices assume reinvestment of dividends and, unlike a
portfolio's returns,do not reflect any fees or expenses. If such fees were
reflected in the comparative indices' returns, the performance would have been
lower.
See definition of comparative indices on page 7.
8
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
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PORTFOLIO OF INVESTMENTS
COMMON STOCKS - 92.1%
Shares Value
-------- -----------
AMB Property 74,500 $ 1,485,344
Apartment Investment & Management 78,200 3,113,337
Archstone Communities Trust 171,820 3,522,310
Arden Reality 126,100 2,529,881
Bedford Property Investors 156,900 2,677,106
*Cadillac Fairview 59,900 1,377,700
CenterPoint Properties 36,400 1,305,850
Centertrust Retail Properties 226,900 2,198,094
Chelsea GCA Realty 82,393 2,451,192
Developers Diversified Realty 99,860 1,285,697
Duke Realty Investments 158,430 3,089,385
Eastgroup Properties 87,718 1,622,783
Equity Office Properties Trust 224,700 5,533,237
Equity Residential Properties Trust 132,666 5,663,180
Essex Property Trust 116,852 3,972,968
*Excel Legacy 384,745 1,274,468
Franchise Finance Corp of America 93,100 2,228,581
Home Properties of New York 57,700 1,583,144
Kilroy Realty 168,200 3,700,400
Kimco Realty 58,500 1,981,687
Mack-Cali Realty 109,400 2,851,238
Manufactured Home Communities 47,700 1,159,706
Parkway Properties 48,600 1,400,288
Philips International Realty 179,300 2,947,244
Prentiss Properties Trust 76,900 1,614,900
ProLogis Trust 197,570 3,803,223
PS Business Parks 41,100 935,025
Public Storage 116,320 2,639,010
Reckson Assoc. Realty, Cl B 224,429 5,105,760
Regency Realty 89,200 1,784,000
*Security Capital Group, Cl B 232,400 2,905,000
Spieker Properties 15,600 568,425
Sun Communities 34,700 1,116,906
Trizec Hahn 228,600 3,857,625
U.S. Restaurant Properties 15,900 227,569
Vornado Realty Trust 11,900 386,750
Walden Residential Properties 85,600 1,851,100
-----------
TOTAL COMMON STOCKS
(Cost $92,214,914) $87,750,113
-----------
The accompanying notes are an integral part of the financial statements.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
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PREFERRED STOCKS -- 6.0%
<TABLE>
<CAPTION>
Shares Value
-------- -----------
<S> <C> <C>
Health Care Property Investors, 7.875%, Series A 36,900 $ 571,950
ProLogis Trust, 8.54%, Series C 24,670 928,085
Taubman Center, 8.30%, Series A 82,200 1,243,275
Vornado Realty Trust, 6.50%, Series A 64,100 2,988,663
-----------
TOTAL PREFERRED STOCKS
(Cost $7,081,466) 5,731,973
-----------
SHORT-TERM INVESTMENT -- 1.2%
<CAPTION>
Face
Amount
----------
<S> <C> <C>
REPURCHASE AGREEMENT
Chase Securities Inc. 3.00%, dated 12/31/99, due 01/03/00,
to be repurchased at $1,120,280, collateralized by 1,033,055
of a U.S. Treasury Bond, valued at $1,120,005
(Cost $1,120,000) $1,120,000 1,120,000
-----------
TOTAL INVESTMENTS -- 99.3%
(Cost $100,416,380) (A) 94,602,086
-----------
OTHER ASSETS AND LIABILITIES, NET -- 0.7% 666,645
-----------
TOTAL NET ASSETS -- 100.0% $95,268,731
===========
</TABLE>
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* Non-income producing security
Cl Class
(A) The cost for federal income tax purposes was $100,786,154. At December 31,
1999, net unrealized depreciation for all securities based on tax cost was
$6,184,068. This consisted of aggregate gross unrealized appreciation for
all securities of $2,482,276 and aggregate gross unrealized depreciation
for all securities of $8,666,344.
The accompanying notes are an integral part of the financial statements.
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UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
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STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
Assets
Investments, at Cost ............................................... $100,416,380
============
Investments, at Value -- Note A .................................... $ 94,602,086
Cash ............................................................... 6,776
Receivable for Investments Sold .................................... 193,116
Dividends Receivable ............................................... 742,643
Interest Receivable ................................................ 923
------------
Total Assets .................................................... 95,545,544
------------
Liabilities
Payable for Portfolio Shares Redeemed .............................. 88,935
Payable for Investment Advisory Fees -- Note B ..................... 59,554
Payable for Administrative Fees -- Note C .......................... 55,930
Payable for Distribution and Shareholder Servicing Fees -- Note E .. 44,371
Payable for Trustees' Fees -- Note F ............................... 250
Other Liabilities .................................................. 27,773
------------
Total Liabilities ............................................... 276,813
------------
Net Assets ......................................................... $ 95,268,731
============
Net Assets Consist of:
Paid in Capital .................................................... $101,478,823
Accumulated Net Realized Loss ...................................... (395,798)
Unrealized Depreciation ............................................ (5,814,294)
------------
Net Assets ......................................................... $ 95,268,731
============
Institutional Class Shares
Net Assets ......................................................... $ 65,766,761
Shares Issued and Outstanding+ ..................................... 8,177,849
Net Asset Value, Offering and Redemption Price Per Share ........... $8.04
=====
Advisor Class Shares
Net Assets ......................................................... $ 29,501,970
Shares Issued and Outstanding+ ..................................... 3,670,255
Net Asset Value, Offering and Redemption Price Per Share ........... $8.04
=====
Offering Price Per Share ($8.04 / .9525) ........................... $8.44
=====
</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 YEAR ENDED DECEMBER 31, 1999
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STATEMENT OF OPERATIONS
Investment Income
Dividends .......................................... $ 7,410,008
Interest ........................................... 188,015
-----------
Total Income .................................... 7,598,023
-----------
Expenses
Investment Advisory Fees -- Note B ................. 858,702
Administrative Fees -- Note C ...................... 360,836
Distribution and Shareholder Servicing Fees-- Note E 195,007
Registration and Filing Fees ....................... 26,002
Printing Fees ...................................... 25,194
Custodian Fees -- Note D ........................... 26,532
Audit Fees ......................................... 22,307
Legal Fees ......................................... 21,089
Insurance Expense .................................. 4,786
Trustees' Fees -- Note F ........................... 3,752
Other Expenses ..................................... 100,894
-----------
Net Expenses Before Expense Offset .............. 1,645,101
Expense Offset -- Note A ........................... (2,441)
-----------
Net Expenses After Expense Offset ............... 1,642,660
-----------
Net Investment Income .............................. 5,955,363
-----------
Net Realized Gain on Investments ................... 1,906,579
Net Change in Unrealized Depreciation on Investments (9,900,460)
-----------
Net Realized and Unrealized Loss on Investments .... (7,993,881)
-----------
Net Decrease in Net Assets Resulting from Operations ($2,038,518)
===========
The accompanying notes are an integral part of the financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income ............................... $ 5,955,363 $ 4,914,015
Net Realized Gain (Loss) ............................ 1,906,579 (1,119,614)
Net Change in Unrealized Depreciation ............... (9,900,460) (32,818,271)
------------- -------------
Net Decrease in Net Assets Resulting
from Operations ................................... (2,038,518) (29,023,870)
------------- -------------
Distributions:
Net Investment Income:
Institutional Class ................................. (4,360,546) (2,991,800)
Advisor Class ....................................... (1,937,600) (1,920,451)
------------- -------------
Total Distributions ............................... (6,298,146) (4,912,251)
------------- -------------
Capital Share Transactions (1):
Institutional Class
Issued .............................................. 27,423,998 25,351,539
In Lieu of Cash Distributions ....................... 2,087,262 1,228,296
Redeemed ............................................ (37,909,875) (62,055,189)
------------- -------------
Net Decrease from Institutional Class Shares ...... (8,398,615) (35,475,354)
------------- -------------
Advisor Class
Issued .............................................. 4,702,989 17,255,816
In Lieu of Cash Distributions ....................... 1,774,948 1,783,126
Redeemed ............................................ (20,856,749) (43,212,483)
------------- -------------
Net Decrease from Advisor Class Shares ............ (14,378,812) (24,173,541)
------------- -------------
Net Decrease from Capital Share Transactions ...... (22,777,427) (59,648,895)
------------- -------------
Total Decrease ................................. (31,114,091) (93,585,016)
Net Assets:
Beginning of Period ................................. 126,382,822 219,967,838
------------- -------------
End of Period (including undistributed net investment
income of $0 and $0, respectively) ................ $ 95,268,731 $ 126,382,822
============= =============
(1) Shares Issued and Redeemed:
Institutional Class:
Issued .............................................. 3,286,557 2,780,776
In Lieu of Cash Distributions ....................... 255,942 130,019
Redeemed ............................................ (4,610,221) (6,508,467)
------------- -------------
Net Decrease from Institutional Class Shares ...... (1,067,722) (3,597,672)
------------- -------------
Advisor Class:
Issued .............................................. 558,272 1,747,978
In Lieu of Cash Distributions ....................... 217,948 189,561
Redeemed ............................................ (2,518,320) (4,639,720)
------------- -------------
Net Decrease from Advisor Class Shares ............ (1,742,100) (2,702,181)
------------- -------------
Net Decrease in Shares Outstanding ................ (2,809,822) (6,299,853)
============= =============
</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
---------------------------------------------------------------
Years Ended December 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ....... $ 8.62 $ 10.49 $ 10.96 $ 8.65 $ 8.30
------- ------- -------- -------- -------
Income from Investment
Operations
Net Investment Income ..... 0.43 0.32 0.40 0.37 0.33
Net Realized and Unrealized
Gain (Loss) ............. (0.54) (1.88) 1.82 2.82 0.53
------- ------- -------- -------- -------
Total from Investment
Operations .............. (0.11) (1.56) 2.22 3.19 0.86
------- ------- -------- -------- -------
Distributions:
Net Investment Income ..... (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 ..... (0.47) (0.31) (2.69) (0.88) (0.51)
------- ------- -------- -------- -------
Net Asset Value, End of Period $ 8.04 $ 8.62 $ 10.49 $ 10.96 $ 8.65
======= ======= ======== ======== =======
Total Return ................. (1.16)% (15.12)% 21.12% 38.06% 10.87%
======= ======= ======== ======== =======
Ratios/Supplemental Data
Net Assets, End of Period
(Thousands) ............... $65,767 $79,717 $134,746 $129,275 $95,692
Ratio of Expenses to Average
Net Assets ................ 1.25% 1.22% 1.09% 1.23% 1.29%
Ratio of Net Investment Income
to Average Net Assets ..... 5.12% 3.14% 3.57% 4.09% 3.97%
Portfolio Turnover Rate ...... 49% 80% 90% 60% 65%
</TABLE>
(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.
14
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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
----------------------------------------------------
May 15,
Year Ended December 31, 1995+ to
---------------------------------------- December
1999 1998 1997 1996 31, 1995
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .......... $ 8.62 $ 10.50 $ 10.98 $ 8.67 $ 8.00
------- ------- ------- -------
Income from Investment Operations
Net Investment Income ........ 0.39 0.25 0.35 0.31 0.23
Net Realized and Unrealized
Gain (Loss) ................ (0.53) (1.86) 1.80 2.84 0.80
------- ------- ------- ------- ------
Total from Investment
Operations ................. (0.14) (1.61) 2.15 3.15 1.03
------- ------- ------- ------- ------
Distributions:
Net Investment Income ........ (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 ........ (0.44) (0.27) (2.63) (0.84) (0.36)
------- ------- ------- ------- ------
Net Asset Value, End of Period .. $ 8.04 $ 8.62 $ 10.50 $ 10.98 $ 8.67
======= ======= ======= ======= ======
Total Return (b) ................ (1.62) (15.54)% 20.44% 37.44% 13.19%
======= ======= ======= ======= ======
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) .................. $29,502 $46,665 $85,222 $79,805 $5,520
Ratio of Expenses to Average
Net Assets ................... 1.73% 1.73% 1.59% 1.73% 1.99%*(c)
Ratio of Net Investment Income
to Average Net Assets ........ 4.64% 2.65% 3.14% 3.91% 4.27%*(c)
Portfolio Turnover Rate ......... 49% 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.
15
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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
December 31, 1999, 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 statements. Generally accepted accounting principles may require
Management to
16
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
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.
17
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
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.
These permanent book and tax basis differences resulted in
reclassifications for the year ended December 31, 1999, as follows, a
decrease in paid in capital of $342,783 and an increase in accumulated net
investment income of $342,783.
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.
18
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
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 December 31, 1999, the Administrator was paid
$360,836, of which $11,617 was paid to SEI for their services, $79,672 to DST
for their services, and $93,767 to UAMSSC for their services.
Prior to November 1, 1999, Chase Global Funds Services Company ("CGFSC")
served as the Portfolio's Sub-administrator. For the period of January 1, 1999
to October 31, 1999, CGFSC was paid $88,838 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.
19
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
G. Purchases and Sales: For the year ended December 31, 1999, the Portfolio
made purchases of $55,500,499 and sales of $75,696,662 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 year ended
December 31, 1999, the Portfolio had no borrowings under the agreement.
I. Other: At December 31, 1999, 59% 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
Adviser 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.
20
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Heitman Real Estate Fund (one of
the portfolios constituting the UAM Funds Trust, hereafter referred to as the
"Fund") at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund'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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 15, 2000.
21
<PAGE>
UAM FUNDS HEITMAN REAL ESTATE PORTFOLIO
DECEMBER 31, 1999
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Officers and Trustees
Norton H. Reamer Peter M. Whitman, Jr.
Trustee, President and Chairman Trustee
John T. Bennett, Jr. William H. Park
Trustee Vice President
Nancy J. Dunn Michael E. DeFao
Trustee Secretary
Philip D. English Gary L. French
Trustee Treasurer
William A. Humenuk Robert R. Flaherty
Trustee Assistant Treasurer
James P. Pappas Robert J. Della Croce
Trustee Assistant Treasurer
- --------------------------------------------------------------------------------
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
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This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
